Reliance Industries Limited · NSE:RELIANCE
Reliance Industries — Q1 FY2009 Earnings Presentation
42 slides from Reliance Industries's earnings presentation, Jul 24, 2008
Slide 1: 1Q FY 2008-09 Results
1Q FY 2008-09 Results July 24, 2008
Slide 2: Forward Looking Statements
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 words of similar meaning. All statements that address expectations or
Slide 3: Financial Results – 1Q FY09
Financial Results – 1Q FY09 4Q FY08 (in Rs. Crore) 1Q FY09 1Q FY08 % Change 38,697 Turnover 43,050 31,290 37.6% 6,308 PBDIT 6,347 5,870 8.1% 3,912 Net Profit 4,110 3,630 13.2% 26.9 EPS (Rs.) 28.3 25.0 Stable operating performance in volatile conditions www.ril.com 3
Slide 4: Segment Results - 1Q FY09
Segment Results - 1Q FY09 4Q FY08 (in Rs. Crore) 1Q FY09 1Q FY08 % change Refining 28,686 Revenues 32,587 22,328 45.9% 2,839 EBIT 3,040 2,557 18.9% 9.9% EBIT (%) 9.3% 11.5% Petrochemicals 14,119 Revenues 14,871 13,213 12.5% 1,466 EBIT 1,579 1,845 -14.4% 10.4% EBIT (%) 10.6% 14.0% Oil and Gas 828 Rev
Slide 5: Segment EBIT Bridge – 1Q FY09 Vs 1Q FY08
Segment EBIT Bridge – 1Q FY09 Vs 1Q FY08 Net Impact EBIT Variance Rs. Crore Rs. 428 Crore 483 (266) 213 (2) 5,131 4,703 1Q R& M Petchem Oil & Gas Others EBIT 1Q EBIT EBIT EBIT FY09 FY08 • R&M earnings boosted by higher throughput, reduced costs due to thrust on exports and weaker Rupee • Petchem imp
Slide 6: Net Profit Bridge – 1Q FY09 Vs 1Q FY08
Net Profit Bridge – 1Q FY09 Vs 1Q FY08 (Rs crore) Net Profit 1Q FY08 3,630 Operating Profit 448 Net Profit up by Other Income 29 Rs 480 crore compared to Interest 1 previous year Depreciation (26) Tax 27 Net Profit 1Q FY09 4,110 Growth driven by higher contribution from key businesses www.ril.com 6
Slide 7: Business Mix - 1Q FY09
Business Mix - 1Q FY09 Revenues EBIT Oil & Gas Others Oil & Gas Others 1.6% 0.3% 9.8% 0.2% Petchem 30.5% Petchem Refining Refining 30.8% 59.2% 67.6% Refining and petrochemicals contributed 98% of revenues and 90% of EBIT www.ril.com 7
Slide 8: Financial Ratios
Financial Ratios Ratios 1Q FY09 4Q FY08 Net Debt : Equity 0.38 0.35 Net Gearing 25% 24% Interest Cover 8.2 10.8 ROCE (%) * 25.7 24.6 ROE (%) (Adjusted) * 24.6 24.9 * Annualised Strong financials, Conservative balance sheet, Ratings reaffirmed www.ril.com 8
Slide 9: Exploration & Production – Oil and Gas
Exploration Exploration&&Production Production––Oil Oiland andGas Gas www.ril.com 9
Slide 10: E&P Environment
E&P Environment Energy demand driven by secular growth PIRA’s Finding and Development Costs in $/bbl – OECD slowdown mitigated by demand from Middle East and Emerging Economies Energy supply challenge - production from existing fields declining at 5% Energy prices to remain firm – Era of Easy
Slide 11: KG - D6 : A Transformational Initiative
KG - D6 : A Transformational Initiative KG-D6 D1 and D3 with capacity of 550,000 boe / day equals 40% of India’s current production Production of 80 MMSCMD from D1 D3 will constitute amongst the world’s largest and most complex deepwater facilities Production from KG-D6 will double India’s gas
Slide 12: RIL – Domestic Portfolio
RIL – Domestic Portfolio Domestic Portfolio Description No. of Acreage - Deepwater Blocks '000 Sq KM Acreage % PMT 2 2.7 Pre NELP 4 15.5 Nelp 1 5 36.0 60% Nelp 2 2 14.6 Nelp 3 9 113.5 99% Nelp 4 1 25.6 100% CBM Blocks Nelp 5 5 51.5 99% Nelp 6 7 76.1 100% CBM Blocks CBM 5 3.9 40 339.4 84% Onland Shal
Slide 13: Reliance - International Portfolio
Reliance - International Portfolio (3) Farmed in 3 blocks in Peru Block Name Country Location Acreage - Sq KM Operator Farmed out 25% interest in Block K East Timor Deep water 2,384 Reliance Block 9 Yemen 2,234 Block 18 Oman Onland Deep water 21,140 Calvalley Reliance East Timor Block K to OIL R
Slide 14: Panna-Mukta and Tapti Update
Panna-Mukta and Tapti Update Panna-Mukta: Crude production down 30% Q-o-Q to 0.3 Mn Tonnes and Gas production down 27% to 353 MMSCM Lower production due to a shutdown in the PPA Process Platform in June 2008 Increase in oil and gas prices offset loss of production Tapti: Gas production up 97
Slide 15: D1-D3 : Project on Track for First Gas by 2H 08-09
D1-D3 : Project on Track for First Gas by 2H 08-09 Drilling & Well Offshore Onshore Completions Subsea, CRP Terminal ■ All major equipments, hardware ■ Hookup and pre-commissioning ■ Civil works for on-shore terminal are and packages has been delivered activities at control-cum riser almost fully co
Slide 16: MA - Project on Track for First Oil by 2H 08-09
MA - Project on Track for First Oil by 2H 08-09 Drilling & Well Offshore FPSO Completions Subsea ■ Drilling of two production wells ■ Sub-sea supply, logistic and ■ Floating Production Storage and one gas injection well installation work has been fully and Offloading vessel (FPSO) completed. complet
Slide 17: Refining & Marketing
Refining Refining&&Marketing Marketing www.ril.com 17
Slide 18: Global Business Environment
Global Business Environment Demand slowdown due to moderation in global economic growth and the ensuing credit crisis 2008 oil demand forecast revised downwards by IEA from 1.7% to 1.1% Crude oil prices breach new highs − Crosses $ 140 per barrel in June 2008 − Growth of over 40% during the qu
Slide 19: Crude at a New High
Crude at a New High 150 $/BBL NYMEX WTI SUPPLY CONCERNS 140 130 Daily Closing Prices _ Geopolitical concerns 120 110 _ No significant increase in OPEC supplies 100 90 80 _ Non-OPEC supply outlook disappointing 70 60 _ Strike by Chevron workers, Force 50 8 8 7 7 8 08 07 8 07 07 0 0 0 0 -0 0 Majeure o
Slide 20: Oil to Gas Ratio
Oil to Gas Ratio Oil to Gas Ratio 12 11 10 9 8 7 6 5 4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Reference: WTI Crude vs. Henry Hub Gas Price Gas prices lagging crude prices; Oil-Gas ratio at historic high www.ril.com 20
Slide 21: Regional GRM Trends
Regional GRM Trends US$ / bbl Period US NY Rotterdam Mediterranean Singapore Benchmark WTI Brent Ural Dubai Crude Avg. Q1 FY09 7.19 9.47 6.28 8.14 Avg. Q4 FY08 4.56 4.13 3.70 6.95 Avg. Q3 FY08 3.59 5.25 4.60 7.73 Avg. Q2 FY08 8.64 3.53 3.75 6.38 Avg. Q1 FY08 18.81 6.64 7.22 9.51 Source: Reuters Marg
Slide 22: Regional GRM - Crude Ratio
Regional GRM - Crude Ratio GRM as % of average price of Benchmark Crude Period US NY Rotterdam Mediterranean Singapore Benchmark WTI Brent Ural Dubai Crude Avg. Q1 FY09 5.8 7.7 5.4 7.0 Avg. Q4 FY08 4.7 4.3 4.0 7.6 Avg. Q3 FY08 4.0 5.9 5.4 9.3 Avg. Q2 FY08 11.5 4.7 5.2 9.1 Avg. Q1 FY08 28.9 9.7 11.1
Slide 23: Petroleum Product Cracks
Petroleum Product Cracks Source: Reuters; Merrill Lynch Reports Margin difference between fuel oil and middle distillates widened to historic highs - simple refiners under severe pressure www.ril.com 23
Slide 24: Key Drivers: Product Crack Volatility
Key Drivers: Product Crack Volatility Marked slowdown in gasoline demand, especially in the US due to: − Weak economic activity and reduced consumer confidence − High retail prices − High inventories and low operating rates US Gasoline cracks drop from $ 10/bbl to $ 0.42/bbl in 1QFY09; similar v
Slide 25: Margin Benchmarking
Margin Benchmarking RIL Singapore Complex US NY Harbour Rotterdam Mediterranean 20 15 (US$/bbl) 10 5 - Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY08 Q1 FY09 Cracking margins Source: Reuters / Company Data Continued out-performance over all global benchmarks www.ril.com 25
Slide 26: RIL Refining Business EBIT Trends
RIL Refining Business EBIT Trends (Rs crore) 3200 3,040 3000 2,839 2800 2,614 2,557 2600 2400 2,321 2200 2000 1Q FY08 2Q FY08 3Q FY08 4Q FY08 1Q FY09 Sustained profitability despite volatile market conditions www.ril.com 26
Slide 27: Refining Operating Rates
Refining Operating Rates 100 (%) 95 90 85 80 75 70 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY08 Q1 FY09 N.America Europe Asia-Pacific RIL Source: Reuters / Company Data RIL’s significant operating leverage over global peers – processed 8.13 Mn tonnes and exported 5.3 Mn tonnes during the quarter www.ril.com 27
Slide 28: RPL Project Progress Update
RPL Project Progress Update Overall implementation progress at 94% Procurement activities in the close-out mode already Construction progressing to meet pre-commissioning requirements All major equipment installed Start-up planning in place; operations preparedness achieved Pre-commissio
Slide 29: Petrochemicals
Petrochemicals Petrochemicals www.ril.com 29
Slide 30: Business Environment - Polymers
Business Environment - Polymers Prices at a historic high in Q1 on back of cost push Naphtha based producers impacted negatively as increase in feedstock cost could not be fully passed on No new cracker capacities on-stream Q1 FY09 High capital cost and long project gestation leading to canc
Slide 31: Price Scenario - Feedstock and Products
Price Scenario - Feedstock and Products Asia FY 2007-08 Q1'08 Q4'08 Q1'09 % Change Q1FY09 vs. $/Mt Q4FY08 Crude Dubai 562 472 662 845 28% Naphtha 727 654 830 989 19% Ethylene 1194 1143 1271 1394 10% Propylene 1184 1142 1318 1550 18% EDC 426 404 434 457 5% HDPE 1403 1267 1551 1678 8% PP 1383 1281 149
Slide 32: Polymer Deltas
Polymer Deltas PP - Propylene US$ / MT HDPE - Naphtha US$ / MT 200 1000 5 year 5 year average average $ 100/mt $ 561/mt 150 172 800 173 139 600 100 721 689 400 613 50 200 1Q FY 08 4Q FY 08 1Q FY 09 0 1Q FY 08 4Q FY 08 1Q FY 09 600 PVC - EDC US$ / MT 5 year average $ PE and PP deltas stable – well
Slide 33: Ethylene Operating Rates
Ethylene Operating Rates US Effective Operating Rates* 100% SE Asia Effective Operating Rates 98% 96% 100% 95% 95% 98% 94% 93% 93% 98% 92% 96% 95% 92% 96% 95% 95% 90% 94% 1Q'07-08 2Q'07-08 3Q'07-08 4Q'07-08 1Q'08-09 92% 90% 1Q'07-08 2Q'07-08 3Q'07-08 4Q'07-08 1Q'08-09 Source : CMAI US effective op
Slide 34: Domestic Consumption Growth 1Q FY09
Domestic Consumption Growth 1Q FY09 15% 10% 10% 8% 3% 5% 0% PP PEs PVC Polymer -5% -10% -15% -12% PP PE Growth in the Raffia sector (Cement / HDPE - growth in Pipe (telecom FIBC), automotive and appliances ducts) and carry bags PVC LLDPE – growth in Flexible / Bulk Industry imports down by 6
Slide 35: Business Environment - Polyester
Business Environment - Polyester Robust domestic demand despite record high prices High feedstock cost impacting margins of polyester producers Weak economic environment impacting textile exports to US & EU Expansions delayed in China with credit norms tightening and payment cycle lengthenin
Slide 36: Product Price Environment
Product Price Environment % change Q1FY09 vs. Product ($/MT) FY 2007-08 Q1FY08 Q4FY08 Q1FY09 Q4FY08 Naphtha 727 654 830 989 19% PX 1,157 1,238 1,167 1,455 25% PTA 885 929 867 1,058 22% MEG 1,192 940 1,174 1,102 -6% POY 1,523 1,423 1,609 1,705 6% PSF 1,410 1,310 1,493 1,444 -3% PET 1,334 1,286 1,388
Slide 37: Fibre Intermediates Margin Environment
Fibre Intermediates Margin Environment US$/MT 800 120 PTA-PX 585 PX-Naphtha 97 83 80 600 466 90 338 400 60 200 30 0 0 1Q FY08 4Q FY08 1Q FY09 1Q FY08 4Q FY08 1Q FY09 PTA delta at historic low MEG-Naphtha 720 626 Fibre Intermediates margins under 508 540 449 pressure due to high feedstock cost 36
Slide 38: Polyester Margin Environment
Polyester Margin Environment US$/MT 540 POY-PTA-MEG 360 PSF-PTA-MEG 357 247 360 236 211 180 126 101 180 0 0 1Q FY08 4Q FY08 1Q FY09 1Q FY08 4Q FY08 1Q FY09 360 PET-PTA-MEG 215 230 182 Unusual quarter wherein both 180 standalone and integrated producers witnessed margin pressure 0 1Q FY08 4Q FY08 1Q
Slide 39: Domestic Demand Growth – 1Q FY09
Domestic Demand Growth – 1Q FY09 Demand Growth in Apr-Jun FY ‘0809 (Y-o-Y) 27% 13% 13% 11% PSF PFY PET Total Record cotton prices and lower availability leading to substitution Textile consumption at 1 – 1.5 x of GDP growth – leading to higher consumption of finished products Demand for PET co
Slide 40: Summary
Summary Summary www.ril.com 40
Slide 41: Summary
Summary RIL sustains growth and profitability despite unprecedented challenges arising out of high crude prices, volatile product margins and weakening economies FY 2008-09 poised to be a landmark year for RIL RPL refinery project on track for early completion Commencement of production of o
Slide 42: Thank You
Thank ThankYou You
Reliance Industries — Q1 FY2009 Earnings Presentation on 6ix