Reliance Industries Chairman's Speech > Engineering - Heavy > Chairman's Speech from Reliance Industries - BSE: 500325, NSE: RELIANCE
Reliance Industries
BSE: 500325|NSE: RELIANCE|ISIN: INE002A01018|SECTOR: Refineries
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Chairman's Speech (Reliance Industries) Year : Mar '14
Dear Fellow Shareowners,
 In FY 2013-14 the global economy showed signs of recovery with growth
 in demand from the developed countries in the second half of the year.
 Emerging markets, including India, had to face multiple challenges of
 rising current account deficit, depreciation of the local currency and
 additional pressure due to capital outflows.
 Despite global and domestic challenges, Reliance continued its growth
 path. Reliance achieved a record revenue ofRs. 4,01,302 crore ($ 67.0
 billion) and net profit of Rs. 21,984 crore ($ 3.7 billion). We became
 the first company in the private sector to record revenues of over Rs.
 4,00,000 crore. Reliance also achieved its highest ever exports ofRs.
 2,75,825 crore ($ 46.0 billion) during the year, contributing a record
 69% of revenues. The continued growth of exports is an indicator of the
 growing demand for our products and services across the world.
 FY 2013-14 was another record- setting year for RIL. Our Refining
 business delivered the highest- ever profits with a sharp recovery in
 gross refining margins towards the end of the year. Petrochemical
 earnings grew significantly with margin expansion across polymers and
 downstream polyester products.
 The vertical integration across the refining and petrochemicals chain is
 a major advantage due to assured feedstock, lower volatility of margins
 and ability to take advantage of the opportunity in each product in the
 Domestic upstream production was lower compared to the prior year due
 to continuing geological complexities. The shale gas business in the US
 grew significantly during the year and has become a material contributor
 to our earnings.
 We are now Indias largest retailer and turned profitable this year.
 We have also accelerated our efforts to roll-out our state-of-the- art
 4G services across the country, which will add an exciting new
 dimension to our consumer facing service offerings.
 Refining & Marketing
 Our Jamnagar refinery complex continued to operate at over 110% of the
 design capacity, processing 68.0 MMT of crude, testament to our
 world-class assets and quality of operations. Global utilisation rates,
 in comparison, were 85% in North America, 76% in Europe and 85% in
 Asia. This was supported by stable middle distillate cracks, favorable
 crude differentials and currency movement. In addition to the market
 dynamics, Reliances performance was driven by its operational
 excellence and well- executed strategies around crude sourcing and
 product placement.  Continuing its emphasis on processing the
 challenging and most advantageous crudes, 64% of the total crude
 processed during the year was advantaged. The ability to operate at
 high utilisation levels and optimise product slate to suit market
 conditions enabled Reliance to capture opportunities in the market.
 As a part of our continuing efforts for energy conservation, we are
 working on the petcock gasification project which is under rapid
 execution. This will provide competitive energy costs for our
 integrated refining complex at Jamnagar and improve profitability.
 Earnings from the Petrochemical business increased by 17.5% on the back
 of strong polymer and downstream polyester margins coupled with
 favorable exchange rate movement. This was partly offset by weak fire
 margins in the second half of the year
 Demand growth in India for petrochemical products during FY 2013-14 was
 at a cyclical low compared to the double digit growth rates seen in the
 prior five and ten year periods. Domestic polymer demand growth was
 particularly weak at 3%. Reliance increased its polymer production by
 2% to 4.5 MMT and maintained its leadership with a market share of 40%
 in the domestic polymer market.
 The margins in the polyester chain were impacted by excess capacity of
 PTA, slow growth in demand for polyester fire and yarn and volatility
 in paraxylene prices. Domestic polyester demand growth was at 6%.
 Reliance commissioned its new PFY facility at Silvassa which is the
 most automated and one of the most environment friendly plants
 globally. This is the first in the series of expansions that have been
 planned. With the economy and consumption being at the bottom of the
 down-cycle, the RIL start-ups would be ideally placed at a time when
 demand would emerge.
 Exploration and Production
 In our domestic upstream business, production from the KG-D6 block
 continued to decline during the year. The fall in production is mainly
 attributed to the geological complexity and natural decline in the
 fields and higher than envisaged water ingress.  Several activities were
 therefore undertaken to sustain production and enhance recovery from
 the existing producing fields. During the year, two significant
 discoveries were made in the KG basin and Cauvery basin. Development
 activities in the two CBM blocks is gathering momentum. The new
 discoveries and the efforts to enhance recovery will strengthen Indias
 energy security.
 Reliance continued to balance its international portfolio by evaluating
 new blocks and assigning existing blocks. Reliances Shale Gas business
 continued on its growth path and has now achieved materiality in many
 respects. Our investments in the US Shale Gas ventures have started
 creating value for our shareholders.  This business achieved record
 revenues and EBITDA for the year with significant growth. Reliances
 share of net sales was at 131 BCFe in CY 2013, a growth of 54% y-o-y on
 account of about 1.6 fold increase in number of wells put on production
 from end of CY 2012.
 Consumer Businesses
 We are delighted that our retail business continues to sustain its
 leadership position across several formats. It has become Indias
 largest retailer by revenues. It achieved the milestone of over 10
 million square feet of retail space during the year. It also achieved
 break-even on a net profit basis during the year. Our retail offerings
 continue to delight our customers reflected in a record number of repeat
 customers and a healthy rate of growth in the same stores.  Each format
 continues its plan of aggressively expanding its footprint as well as
 enhanced product and service offerings in existing stores to improve
 revenues and profits.
 Our ambitious goal of making India one of the global leaders in the
 delivery of digital content continues to gather steam.  Reliance Jio
 Infocomm received Unified Licenses for all 22 service areas across India
 thus becoming the first telecom operator to get a pan India license.
 Several telecom infrastructure sharing arrangements with multiple
 operators were signed during the year. This will help us accelerate the
 roll-out of our 4G services while preserving capital and environment.
 We have a strong balance-sheet to support our ambitious growth plans.
 Reliance is the only Asian company in the oil & gas sector to be rated
 two notches above the sovereign by S&P. Reliance is now rated higher
 than some of its global emerging market peers demonstrating its
 strength and competitive position in the refining and petrochemicals
 sectors. The rating also underpins Reliances position as a leading
 large-scale, integrated and efficient oil refining and petrochemicals
 During the year, Reliance continued to make significant progress on
 strengthening people practices and processes to attract and retain
 world-class talent. Several measures including new performance
 management systems and flexible work hours were put in place.
 Reliance has always prided itself in investing and contributing to
 Indias economic growth. We make a unique contribution to the Indian
 economy as Indias largest exporter, accounting for 14.7% of the
 countrys exports. Reliance has been globally and nationally
 felicitated for creating sustained long-term shareholders value.  We
 are implementing several projects both in the manufacturing domain and
 service sector to continue this tradition of creating significant
 shareholders value.  We are confident that our largest capital
 expenditure cycle will create significant value to all our stakeholders.
 During the year, Reliance Foundation started severa initiatives in new
 geographies in the rural transformation and information service area.
 Reliance Foundations role in relief and rehabilitation efforts in
 Uttarakhand was acclaimed and earned significant respect.  Reliance
 Foundation continues its work in the identified domains of education,
 healthcare, rura transformation, urban renewal and protection of
 Indias arts, culture and heritage.  would like to thank all my
 colleagues in India and around the world for their commitment and
 contribution towards Reliances growth. As we strengthen our core, we
 look at the future eagerly to continue to generate shareholders value.
 am grateful to the Board of Directors for their support and guidance. I
 would like to express my deep gratitude to all our stakeholders for the
 continued faith reposed in Reliance.
 With best wishes, Sincerely,
 Mukesh D. Ambani
 Chairman & Managing Director
 18th April 2014
Source : Dion Global Solutions Limited
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