Reliance Industries Limited · NSE:RELIANCE
Reliance Industries — Q2 FY2006 Earnings Presentation
37 slides from Reliance Industries's earnings presentation, Oct 27, 2005
Slide 1: Q2 FY 2005-06 Results
Q2 FY 2005-06 Results Reliance Industries Limited October 27, 2005 Forward Looking Statements This presentation contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other wo
Slide 2: Contents
Contents Economic EconomicOverview Overview Financial FinancialPerformance Performance Business BusinessReview Review Summary Summary 3 Economic EconomicOverview Overview
Slide 3: Global Economic Trends - GDP
Global Economic Trends - GDP 2004 2005 E 2006 E Global 3.8 3.0 3.0 US 4.2 3.5 3.3 Japan 2.6 2.3 2.3 Euro Area 1.8 1.2 1.3 Q1 GDP China 9.5 8.5 8.0 Growth 8.1% India 6.9 7.2 7.0 Source: J P Morgan Estimates Global economy continues to grow at a reasonable pace despite high energy prices. India blazes
Slide 4: Indian Economy Growing at Record Pace
Indian Economy Growing at Record Pace Sector Q1FY06 Q4FY05 Q3FY05 Q2FY05 Q1FY05 Agriculture, Forestry & Fishing 2.0% 1.8% -0.5% 0.0% 3.8% Mining & Quarrying 3.2% 2.5% 4.5% 4.7% 6.9% Manufacturing 11.3% 8.6% 10.5% 9.6% 7.9% Electricity, Gas & Water Supply 7.9% 2.6% 4.4% 9.1% 6.1% Industry 10.1% 7.3%
Slide 5: Trend in Commodity Prices
Trend in Commodity Prices C RB Index B rent 330 65 320 60 310 55 300 50 290 45 280 40 270 35 260 30 250 25 May-04 May-05 Oct-04 Mar-04 Apr-04 Mar-05 Apr-05 Aug-04 Nov-04 Feb-04 Feb-05 Jan-04 Jun-04 Sep-04 Jan-05 Jun-05 Jul-04 Jul-05 Dec-04 FY04-05 Q1 FY 05-06 Q2 FY 05-06 Commodity prices rallied d
Slide 6: Strong Results for Q2 FY06
Financial FinancialPerformance Performance Strong Results for Q2 FY06 Q2 Q1 Q2 % change wrt (in Rs crore) FY05 FY06 FY06 Q2 FY05 Q1 FY06 Revenues 17,864 19,884 22,893 28.2% 15.1% Net Profit 1,752 2,310 2,481 41.6% 7.4% Cash Profit 2,866 3,277 3,462 20.8% 5.6% EPS (Rs) 12.5 16.6 17.8 42.4% 7.2% CEPS
Slide 7: Strong Results for H1 FY06
Strong Results for H1 FY06 H1 H1 % change (in Rs crore) FY05 FY06 Revenues 33,610 42,777 27.3% Net Profit 3,189 4,791 50.2% Cash Profit 5,419 6,739 24.4% EPS (Rs) 22.8 34.4 50.9% CEPS (Rs) 38.8 48.3 24.5% Annualised EPS of nearly Rs 70 and Cash EPS of nearly Rs 100 13 Revaluation Of Assets In orde
Slide 8: Return on Equity
Return on Equity ROE (%) 23% 22.7% 22.3% 22% 21% 20.4% 20% 19% FY05 Q1 FY06 Q2 FY06* * Excluding impact of revaluation. ROE 18.1% including revaluation ROE has improved compared to trailing quarter and previous financial year 15 Return on Capital Employed ROCE (%) 32% 30.5% 30% 27.5% 28% 26% 24% 21.
Slide 9: Key Revenue Drivers – Q2 FY06
Key Revenue Drivers – Q2 FY06 Revenue up 28% due to - – Volume growth of 5% – Impact of increase in product selling prices 23% Growth during the quarter driven primarily by higher selling prices. 17 Growth in Net Profit – Q2 FY 06 Other Income -74 Interest 212 Net Profit for the quarter up by Rs 7
Slide 10: Business Mix for Q2 FY06
Business Mix for Q2 FY06 Revenues Q2 FY06 EBIT Q2 FY06 Others Petrochemicals Others 8% Petrochemicals 30% 2% 42% Refining 68% Refining 50% Refining & Petrochemicals contribute 98% of revenues 19 Exports USD Bn 1.6 1.8 2.0 Refining 1.5 1.1 contributes 75% 1.0 Petrochem at 0.5 25% - Q2 FY05 Q1 FY06 Q2
Slide 11: Production
Production 10.00 8.03 7.92 7.95 8.00 6.00 4.00 3.10 3.22 3.31 2.00 0.00 Petrochemicals Crude Processed Q2 FY05 Q1 FY06 Q2 FY06 Production / Crude processed in Million Tonnes Petrochemicals production increased 6.6% on y-o-y basis, while crude processed declined marginally 21 Capex (in Rs crore) H1 F
Slide 12: Segment Results
Segment Results (in Rs crore) Q2 Q1 Q2 % Change wrt FY05 FY06 FY06 Q2 FY05 Q1 FY06 Refining Revenues 12,980 16,095 18,595 43.3% 15.5% EBIT 1,249 1,787 1,532 22.7% -14.3% EBIT (%) 9.6% 11.1% 8.2% (in Rs crore) Q2 Q1 Q2 % Change wrt FY05 FY06 FY06 Q2 FY05 Q1 FY06 Petrochemicals Revenues 7,189 6,670 8,
Slide 13: Liquidity Ratios
Liquidity Ratios Ratios FY05 Q1 FY06 Q2 FY06 Gross Debt : Equity 0.45 0.42 0.37 Net Debt : Equity 0.26 0.21 0.18 Net Gearing 20% 17% 16% Interest Cover 6.0 9.2 7.7 RIL’s leverage is conservative from historic perspective and in comparison with global peers 25 Conservative Debt Profile 30-Sep-05 Weig
Slide 14: Business Review: Exploration & Production (E&P)
Business BusinessReview Review Exploration Exploration&&Production Production(E&P) (E&P)
Slide 15: E&P Portfolio
E&P Portfolio Producing Assets - Panna- Mukta & Tapti Exploration Blocks - 34 blocks in India and one each in Yemen and Oman Exploration Acreage - about 340,000 sq.km. Coal Bed Methane - 5 blocks (4,000 sq.km.) A diversified and balanced portfolio of offshore and onshore blocks 29 Exploratio
Slide 16: Highlights
Highlights Carried out exploration program with acquisition of 45, 000 LKM of 2D & 35,000 sq km of 3D Drilled 32 wells within a time span of less than 4 years. Drilled 19 core holes and 10 test wells in the CBM Blocks additionally RIL now invests US$ 400-500 million annually towards exploratio
Slide 17: Status – Panna-Mukta and Tapti
Status – Panna-Mukta and Tapti Total Oil production for the quarter was at 365,052 MT and Gas was at 8,54,134 MTOE - marginal increase of 1% over previous quarter Crude price continued to be high - Average realization for the quarter is around $59 per bbl as against first quarter of around $51 p
Slide 18: Status – Coal Bed Methane
Status – Coal Bed Methane GIP estimates of 3.65 TCF concurred by DGH for Sohagpur East and West Blocks Work program and budget for Phase II activity at Sohagpur East and West Blocks approved by DGH Exploration activity is currently in progress for Sonhat and Rajasthan Blocks Development Plan i
Slide 19: Overseas Assets
Overseas Assets Yemen: – Development Plan approved by Yemen Government – Approval to produce up to 10,000 bbls of oil per day – Approval to drill further exploratory wells - Hiswah 7,8,9 &10 received – Installation of early production system in progress – Plan to commence production by March 2006
Slide 20: Global Oil – Remains Stronger
Global Oil – Remains Stronger 70 Brent Dated ($/barrel) Dubai Crude Price - Ligh/Heavy Spread ($/barrel) 60 16 50 12 40 8 30 4 20 0 1-M ay -05 1-Jul-04 1-Nov-04 1-Jan-05 1-M ar-05 1-M ay-05 1-Jun-05 1-Jul-05 1-N ov -04 1-M ar-05 1-Aug-04 1-Sep-04 1-O ct-04 1-Dec-04 1-F eb-05 1-Apr-05 1-Aug-05 1-Sep-
Slide 21: Global Refining Operating Rates
Global Refining Operating Rates N. America Europe Asia 98% 96% 96% 94% 94% 93% 92% 92% 91% 90% 90% 90% 90% 89% 89% 88% 88% 88% 88% 87% 86% 86% 84% 82% 80% 2004 Q3 Q4 2005 Q1 Q2 Q3 Source: ESAI July-Sept quarter saw lower operating rates in N. America due to Katrina and Rita : impact - Higher product
Slide 22: Highlights : RIL Performance
Highlights : RIL Performance Crude processed – 7.95 million tons in Q2 – 96% capacity utilisation Capacity utilisation for the secondary processing units continues to be high Domestic sales contribute 68% of overall volumes during Q2 GRM continues to be in double digit 43 Demand Growth in Indi
Slide 23: Refinery Product Sales
Refinery Product Sales (in million tonnes) Q2 FY05 Q1 FY06 Q2 FY06 PSU 2.65 1.87 1.65 Captive 1.69 1.60 1.65 Retail 0.11 0.56 1.01 Others 1.04 1.30 1.34 Exports 2.23 2.46 2.71 Total 7.72 7.80 8.36 Significant growth in own retail marketing – 850 retail outlets in operation. Retail throughput over 4
Slide 24: Refinery Expansion - Progress
Refinery Expansion - Progress Project renamed as Jamnagar Expansion Refinery Project (JERP) Environmental clearance for JERP obtained Selection of technology licensor for all major units done UOP to be the Managing Licensor Bechtel to be appointed as Managing Contractor with single point r
Slide 25: Petrochemicals Operating Rates
Petrochemicals Petrochemicals Operating Rates North America Operating Rate Asia Operating Rate 96% 96% 94% 94% 92% 92% 93% 93% 93% 92% 90% 92% 89% 88% 88% 84% 84% 84% 80% 80% 2004 Q3 Q4 2005 Q1 Q2 Q3 2004 Q3 Q4 2005 Q1 Q2 Q3 Sources – ICIS LOR Ethylene operating rates declined in the North America d
Slide 26: Ethylene Cash Margins
Ethylene Cash Margins US Ethylene Margins ($/MT) Asia Ethylene Margins ($/MT) 500 1000 400 800 300 600 200 400 100 200 0 0 Jul-04 Nov-04 Jun-05 Jul-05 Aug-04 Jan-05 May-05 Aug-05 Jul-04 Nov-04 Jun-05 Jul-05 Sep-04 Oct-04 Dec-04 Feb-05 Mar-05 Apr-05 Sep-05 Aug-04 Jan-05 May-05 Aug-05 Sep-04 Oct-04 De
Slide 27: International Prices
International Prices (US$/MT) Q2 FY05 Q2 FY06 Change Q1 FY06 Q2 FY06 Change PE 1013 1048 3.5% 989 1048 6.0% PP 1056 1100 4.2% 1043 1100 5.5% PVC 900 784 -12.9% 764 784 2.6% POY 1263 1267 0.3% 1363 1267 -7.0% PSF 1107 1113 0.5% 1213 1113 -8.2% PTA 791 801 1.3% 752 801 6.5% MEG 1047 824 -21.3% 790 824
Slide 28: Polyester - Business Environment
Polyester - Business Environment Polyester domestic demand increase driven by filaments and PET resin International cotton prices showing signs of improvement due to un-seasonal rains in China Major disruptions in global trade due to hurricane Katrina and Rita - substantial shut down in petro-
Slide 29: Domestic Demand - Polyester
Domestic Demand - Polyester Polyester ('000 MT) 457 460 430 403 400 370 Q2 FY05 Q2 FY06 Polyester ('000 MT) 457 Demand for Polyester is up 460 439 430 13.5% on Y-o-Y basis and 400 4% on sequential basis 370 Q1 FY06 Q2 FY06 57 Polyester Production Polyester (in '000 MT) Polyester (in '000 MT) 320 320
Slide 30: Polyester Intermediates Deltas
Polyester Intermediates Deltas PTA (Rs / kg) MEG (Rs / kg) 41.5 17.2 32.6 14.3 26.9 14.2 Q2 FY05 Q1 FY06 Q2 FY06 Q2 FY05 Q1 FY06 Q2 FY06 PTA delta flat as lower PTA prices offset by lower raw material prices MEG margins weak due to higher Naphtha price and lower MEG price 59 Polyester Deltas POY (Rs
Slide 31: Polymer – Business Environment
Polymer – Business Environment Crude and Naphtha prices attained peak in 1H’FY2005-06 Petchem Prices meltdown in Apr/May’05 Æ Recovery in Jun’05 Buoyant US and European markets Hurricanes – Katrina & Rita effected 19% of US olefins capacity leading to strong push in feedstock prices Intern
Slide 32: Polymer – Domestic Growth
Polymer – Domestic Growth Trailing All polymers showing ~ 22% - 29% Y-o-Y Polymer Y-o-Y Quarter growth PP 22% 25% PE 29% 24% PP and PE showing >20% growth over LDPE 27% 10% trailing quarter PVC 25% 10% Restocking by downstream sector Total 25% 19% 60% Month wise Growth Negative growth in Apr
Slide 33: Polymer Deltas
Polymer Deltas PP - Propylene (Rs / kg) PE (Rs / kg) 18.1 37.8 20 38 14.3 36 15 12.9 33.4 34 32.3 10 32 5 30 0 28 Q2 FY05 Q1 FY06 Q2 FY06 Q2 FY05 Q1 FY06 Q2 FY06 • PP delta improve due to higher PVC (Rs / kg) PP and lower Propylene price 32 29 • PVC deltas improve due to 25.6 26 24.3 lower EDC price
Slide 34: IPCL - Strong Earnings Growth
IPCL - Strong Earnings Growth Q2 Q1 Q2 % change wrt (in Rs crore) FY05 FY06 FY06 Q2 FY05 Q1 FY06 Revenues 2,108 2,266 2,337 10.9% 3.1% Net Profit 138 225 303 119.6% 34.7% Cash Profit 333 311 388 16.5% 24.8% Exports 268 366 313 16.8% -14.5% Production (mmt) 1.3 1.3 1.4 7.7% 7.7% Improvement in financ
Slide 35: Summary
Summary Summary Summary Stable outlook for both major businesses Strong operating performance expected to continue Refining capacity to double with investment of $ 6 bn at Jamnagar – full benefit from FY 2009-10 E&P targeted to make significant contribution to earnings from FY09 Future cas
Slide 36: Valuations – RIL v/s Global Peers
Valuations – RIL v/s Global Peers Median PE P/BV EV/EBITDA Global Chemical Majors 7.4 1.8 4.9 Global Energy Majors 8.3 2.6 4.6 BSE Sensex 15.0 3.8 8.4 Reliance 11.6 2.6 7.8 Source – Research Reports RIL valuation favorable to international chemical and energy companies due to sum-of-the-parts valuat
Slide 37: Demerger Update
Demerger Update RIL board approves the scheme of demerger on 05 Aug 05 Scheme details - on a 1:1 ratio, all shareholders of RIL to receive shares of Reliance Communications Ventures Limited Reliance Energy Ventures Limited Reliance Capital Ventures Limited Global Fuel Management Services
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