1 / 47

Reliance Industries Limited Financial Presentation July 20, 2000

Reliance Industries Limited Financial Presentation July 20, 2000. Index. Operating and Financial Highlights Operating Environment Financial Review Business Review New Infocom Initiatives Summary. Operating Highlights for Q1 2000-01.

aneko
Download Presentation

Reliance Industries Limited Financial Presentation July 20, 2000

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Reliance Industries Limited Financial Presentation July 20, 2000

  2. Index Operating and Financial Highlights Operating Environment Financial Review Business Review New Infocom Initiatives Summary

  3. Operating Highlights for Q1 2000-01 • All time record production volume of 2.63 mn tonnes - increase of 38% over Q1 FY2000 • All plants, including new PX / PP facilities at Jamnagar, operated at rated capacity throughout the quarter • Feedstock costs higher by 40%-85% during the quarter, without matching improvement in product selling prices • Acquired control over DCL Polyester’s PFY capacity of 40,000 tpa - RIL is now world’s 4th largest PFY producer • Announced open offer for BSES, India’s largest utility - equity stake raised to nearly 27%

  4. Financial Highlights for Q1 FY2001 Sales Rs 6,615 crores $ 1,481 mn + 72 % Gross Profit Rs 1,235 crores $ 276 mn + 37 % Cash Profit Rs 937 crores $ 210 mn + 31 % Net Profit Rs 612 crores $ 137 mn + 20 % • 41 consecutive quarters with increased sales and profits - 10 year CARG of 27% for sales and 39% for net profits • Reliance continues to lead the Indian private sector with highest sales, profits, net worth, and assets

  5. Operating Environment

  6. Positive Demand Environment in Asia Asia is expected to register GDP growth of over 5% in 2001

  7. Stable Macro Economic Environment • GDP growth in India for the year 2000-01 is likely to be in the 6% - 7% range • Inflation rates are marginally higher than the previous year, but still in the 6% - 7% band • Long term interest rates have declined significantly - the 10 year Treasury rate is around 10.90% per annum • Short term volatility in the Indian rupee - broader outlook remains stable with FX reserves over $ 36 bn The macro-economic environment in India remains stable, despite short term volatility in interest rates and FX markets

  8. Crude Price Trends (Brent) High 31.9 Current 28.56 $ per barrel Low - 9.6 International crude prices are generally forecast to remain in the $25 plus range during the year 2000

  9. International Feedstock Price Trends (US$ / T ) Avg. Q1 Avg. Q1 % July FY 2000 FY 2001 Change 2000 price Crude ($/bbl) 15.42 26.49 +72 32.16 Naphtha 163 229 +41 251 EDC 232 428 +85 385 Feedstock prices increased 40%-85% during the quarter, tracking higher crude prices

  10. International Product Price Trends (US$ / T ) Avg. Q1 Avg. Q1 % July 2000 FY2000 FY 2001 Change prices POY 890 1067 +20% 970 PSF 700 893 +28% 870 PTA 342 502 +47% 460 MEG 391 592 +52% 560 PE 574 653 +14% 675 PVC 536 715 +33% 660 PP 514 581 +13% 620 The 20%-50% increase in international product selling prices did not match the higher increase in feedstock costs

  11. Domestic Product Price Trends ( Local prices in Rs. / kg ) Avg. Avg. % July 2000 Q1 FY 2000 Q1 FY 2001 Change prices POY 57.5 59.6 +4% 57.8 PSF 45.3 54.7 +21% 53.5 PTA 24.2 32.1 +33% 32.7 MEG 23.2 35.4 +53% 35.4 PE 39.9 46.0 +15% 47.0 PVC 33.0 41.0 +24% 41.0 PP 35.7 38.2 +7% 38.9 Domestic product selling prices moved broadly in line with international prices

  12. Financial Review

  13. Income Statement Cash Profits have increased 31% to Rs. 937 crores ($ 210 mn)

  14. Improved Quality of Earnings • Other Income declined 48% from Rs. 150 crores ($ 35 mn) in Q1 2000 to Rs. 78 crores ($ 17 mn) in Q1 2001 • Full interest and depreciation expenses charged to the income statement • No interest capitalisation in Q1 2001 against Rs. 121 crores ($ 28 mn) in Q1 2000 • More than 60% of assets being depreciated under the more aggressive Written Down Value method - conservative accounting practice Income statement takes into consideration full charge of interest and depreciation

  15. US GAAP Reconciliation The difference is on account of foreign exchange variations

  16. Income Statement - After Removing Extraordinary Items 13% growth in profit from operations, on trailing quarter

  17. Business Mix Reliance remains focused on the petrochemicals businesses

  18. Growth in Production and Sales • Sales revenue growth of 72%, contributed by: • Impact of sales volume growth 45% • Impact of increase in average product selling prices 27% • Net external sales up 91 % for the quarter • 86% of production sold within India (excluding merchant exports) • Strong 740% growth in exports Production volume increased 38% to a record level of 2.63 million tonnes during the quarter

  19. Stability in Operating Margins Operating margins (excluding merchant exports) remained stable at 19% This was the result of : • Strong volume growth • Higher product prices mitigating higher operation costs • Gains from productivity, cost control, and efficiencies • Higher degree of integration and value addition Stability in operating margins despite consistently higher levels of feedstock costs

  20. Profitability Ratios RIL’s market price discounts cash earnings barely 10 times

  21. Liquidity Ratios Conservative liquidity ratios reflect RIL’s financial strength

  22. Exponential Growth in Exports • RIL’s total exports increased 740% from Rs. 156 crores ($ 36 mn) to Rs. 1,311 crores ($ 293 mn) • Manufactured exports increased 433% from Rs. 156 crores ($ 36 mn) to Rs. 832 crores ($ 186 mn) • Focus of exports on the quality conscious markets of Europe and the US with an emphasis on speciality grades • During the quarter, RIL exported Rs. 479 crores ($ 107 mn) of petroleum products sourced from RPL Exports offer attractive overall returns due to related tax incentives and RIL’s ability to cater to premium markets

  23. 2000-01 Exports to be nearly $ 1 billion • Export revenues likely to be nearly $ 1 billion (Rs. 4,500 crores) during current year • RIL to have substantial net foreign exchange earnings in current year due to commissioning of Jamnagar Complex • RIL emerges as India’s largest manufacturer exporter • Export revenues alone provide nearly 10 times cover for RIL’s FX denominated interest liability Growing export revenues reflect global competitiveness and international quality of products

  24. Export Revenues Trends RIL’s exports have grown by over 50 times in last 5 years

  25. Conservative Financial Management • Top end domestic AAA credit rating - international ratings constrained by sovereign ceiling • RIL’s cash flows for less than 2 years are sufficient to extinguish its entire net debt • RIL’s increased export revenues provide adequate foreign exchange risk cover • Dollar revenues from oil and gas provide additional cover • External debt of $ 1.3 billion has weighted average maturity of 22 years - no short term pressures RIL has achieved quantum growth in the scale of its operations, while pursuing conservative financial policies

  26. Reliance increases stake in BSES • Reliance has increased its equity stake in BSES, India’s leading utility, to nearly 27 % • Enhancement of stake through an open offer conducted transparently in accordance with SEBI guidelines • Reliance’s total investment for acquiring the BSES stake is nearly Rs. 800 crores • RIL will consolidate BSES’ financials from the current financial year, under the equity accounting method • Consolidation will add approximately Rs. 100 crores to RIL’s income statement RIL’s investment in BSES is an important strategic step, in the pursuit of growth opportunities in power and telecom

  27. Business Review

  28. Leading Market Shares RIL’s market share Q1 2000 Q1 2001 % change Polyester 45% 51% +6% (PFY, PSF, PET) Fibre Intermed. 85% 81% -4% (PTA, MEG, PX) Plastics 55% 55% 0% (PE, PP, PVC) • Polyester market share expansion driven by acquisitions • Decline in Fibre Intermediates market share only reflects impact of commissioning of Mitsubishi’s PTA plant

  29. Business Review - Polyester • Demand down in April and May : 12% growth in June • RIL’s polyester volumes increased faster than industry - 200,000 tpa of capacity acquired over the last 2 years

  30. Business Review - Plastics • Demand growth strong at 13% - PP demand grew at 23% • Excise duty cuts and opening up of the huge foodgrains packaging markets, to support future demand growth

  31. Outlook on Import Tariffs • Import tariffs on PFY and PSF cut by 15% to WTO bound rates of 20% - no further reduction likely • Import tariffs on polymers may only gradually decline by 3%-5% per annum over the next 5 years • Consistent policy of pricing products at 10-15% discount to import parity levels provides adequate flexibility • Operating margins for RIL maintained in the 20% range over last 7 years through drastic cuts in import tariffs • Impact of import tariff cuts will be largely offset by the ongoing depreciation of rupee - historically at 5%/ year Further tariff cuts likely to be gradual, as import duties represent 25% of Indian government’s revenues

  32. Business Review - Oil and Gas • RIL awarded 14 exploration blocks, becoming the No. 1 E&P player in the Indian private sector • Exploration acreage exceeds 100,000 sq. kms - deep water blocks awarded for the first time

  33. Reliance Telecom - Update • Cellular services operating in 40 cities, with the subscriber base growing from 69,000 to 90,000 in Q1 • Expanding service to more than 90 cities, with subscriber base expected to cross 150,000 in the current year • Cellular operations currently EBITDA positive, and likely to be cash positive by end of next financial year • Fixed line service commissioned in Jamnagar in the state of Gujarat, now extending reach to other cities • Broadband optic fibre network across Gujarat, expected to be completed in the next financial year Reliance Telecom is achieving fast growth in subscriber numbers and revenues

  34. Reliance Petroleum - Update • Commenced commercial production during the quarter • All facilities operating at rated capacities • RPL declaring results for Q1 2001 on July 29, 2000 • RIL will consolidate RPL’s financials, under the equity accounting method, from the next financial year - fully reflecting the value of RIL’s investment in RPL RIL and RPL to emerge as the top 2 companies in the Indian private sector in the current financial year

  35. New Infocom Initiatives

  36. Reliance’s Infocom Initiatives • Reliance to build a state-of-the-art, world-class, internet infrastructure in India • Nationwide broadband network connecting India’s top 115 cities, representing over 50% of GDP • Terabit bandwidth, and next generation technologies, for meeting future demand • All optic fibre and internet protocol based network • Network to be leveraged for providing the entire range of value added services Building a nationwide internet infrastructure in the first phase for acquiring sustainable competitive advantage

  37. Reliance’s Infocom Initiatives • Focus on value added voice, data, and image offerings over broadband networks • Will provide media-casting, web hosting, e-commerce, data centres, and managed software services • Network and bandwidth to be used for own businesses, as well as to be offered to other service providers • Global alliances under discussions with world leaders in new economy sectors • Investments to be completed over next 24 months Targeting the complete range of business opportunities presented by the Indian infocom revolution

  38. Strategy for Leadership • Harness opportunities across the digital value chain • Leverage Reliance’s demonstrated strengths in financial engineering and in executing complex projects, to attain leadership in integrated broadband services • Ability to participate in national and international long distance telephony, and voice over internet, as these sectors are deregulated • RIL to be the lead investor in all infocom initiatives • Sustaining growth momentum and enhancing shareholder value are key objectives Strategy in place for delivering superior returns to shareholders through infocom investments

  39. Summary and Outlook

  40. Highest ROE in Asian Chemicals Cos. • RIL ranks amongst the top 3 chemicals companies globally in ROE terms - highest in Asia • Capital Work in Progress at lowest levels in 10 years at Rs. 60 crores ($ 13 mn) - higher returns and ROE • Free cash flows rising strongly as profits grow and capex declines - capex to cash profits ratio has declined from 240% in 1995, to less than 25% in current year • Capex unlikely to exceed 3%-4% of total assets in current year, compared with 30% 5 years ago • Capex for the current year will be more than fully covered by depreciation alone ROE likely to show consistent improvement as relative capex spending declines, and investments generate returns

  41. Global Competitiveness Supports High ROE • Economies of scale and project management strengths, lead to 30%-50% capital cost advantage • RIL’s employee cost at less than 3% of net sales is nearly 1/6th of the typical cost for the global peer group • Selling and distribution cost at below 3% of net sales is 1/5th of the typical cost for the global peer group • Globally competitive power costs - all manufacturing complexes run on 100% captive power facilities • Financing mobilised at competitive terms, from the domestic and international markets Reliance’s sustainable competitive strengths translate into the highest returns and profitability ratios for the company

  42. Superior Price Performance - Local Shares % change Period Price RIL Sensex Current 353 Calendar YTD 234 51 -8 1 year 186 90 -2 2 year 149 137 33 3 year 174 102 12 5 year 138 156 37 10 year 49 624 390 RIL stock price has consistently outperformed the Sensex over all time frames - 9% outperformance over Q1 2001

  43. Returns to GDR/FCCB Investors % change Issue Date Issue Current ($) Absolute Sensex Price ($) Price GDR 1 May 1992 8.17 21 157 3 GDR 2 Feb 1994 11.75 21 79 -17 FCCB Nov 1993 9.18 21 129 24 The RIL GDR is trading at US$ 21, translating into a stock price of over Rs. 470 per share, and representing a premium of nearly 33% to the underlying domestic stock price

  44. Approvals in place for Share Buyback • Shareholder approval for India’s largest stock buyback of Rs. 1,100 crores ($ 250 mn) - open market route • Maximum share buyback price of Rs. 303 is EPS/ROE accretive, and is shareholder value enhancing • Under SEBI regulations, RIL can not make a fresh offer of equity shares for 2 years • RIL has achieved exponential growth in past 6 years without any fresh equity offerings - RIL would not have issued equity for 8-9 years The buyback demonstrates RIL’s confidence in future growth prospects, and perception of stock under-valuation

  45. Promoters Increase Stake in RIL • RIL’s promoters have increased their total equity stake to over 40%, under SEBI’s creeping acquisition guidelines • Room for further acquisition of 3% stake i.e. 3 crore shares in the current year, taking stake to over 43% • Voting rights on GDRs of 7% vest with company management, as in most Indian GDRs • Promoters will control total voting power of at least 51% in RIL - making it the only such company in India of this size and scale Creeping acquisition of shares, combined with buyback by RIL, may potentially exceed Rs. 4,500 crores ($ 1 bn) in a year

  46. Summary and Outlook • Stable outlook for core petrochemicals businesses - production volumes likely to exceed 10 million tonnes • Speciality grades already contributing 15%-60% across major products, resulting in 5%-15% premium pricing • Export revenues likely to touch $ 1 billion (Rs. 4,500 crores) during current year • Strong growth in free cash flows - driven by higher profits and declining capex levels • Infocom initiatives for capturing new opportunities • Consolidation of affiliates’ financials under equity accounting will unlock true value of RIL’s investments RIL will achieve its stated growth targets, and enhance shareholder value by pursuing its core business strategies

  47. Reliance Industries Limited India’s World Class Corporation

More Related