Gail pumps it up; net profit up 22% in FY06
Gas pipeline company Gail’s net profit rose 22% during the June ’06 quarter, contrary to analysts’ expectations of a fall due to tariff changes.
Gas pipeline company Gail’s net profit rose 22% during the June ’06 quarter, contrary to analysts’ expectations of a fall due to tariff changes. But profit improvement was mainly due to depreciation, declining by 41% YoY to Rs 141 crore.
Its profit before tax was up by 16.8% to Rs 852 crore, but earning before interest, depreciation, taxes and amortisation (EBIDTA) was down marginally to Rs 942 crore (Rs 947 crore). A change in its depreciation policy, for which the government’s permission was given in August ’05, resulted in a lower charge.
Natural gas transmission, petrochemicals and LPG (and other products) are Gail’s key businesses. During the first quarter, they accounted for over 94% of profit before interest and tax (PBIT). Natural gas transmission contributes 52.8% of segment’s PBIT.
Revenue growth in this segment was marginal but profit growth was high, though that could be partly due to lower depreciation. Revenues from the natural gas transmission business can be expected to remain stable.
The petrochemicals division contributes about a fourth of the segment’s profits. Revenues grew 50%, while profit rose 53%. Petrochemical volumes rose 28.6% to 81,000 tonne during the quarter, and this division is expected to contribute significantly to the sales growth during FY07.
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Among other divisions, margins in the LPG business have fallen. LPG margins can be affected by subsidy payouts to downstream companies. At the overall level, the effect of lower depreciation will disappear in the September quarter, and profit growth will depend more on operating performance.Start a SIP with as low as ₹500 with ET Money App!
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