O2C biz revenue declined 17.7% to Rs. 1,33,031 crore
Reliance Industries Ltd (RIL) announced its April-June quarter results for the current fiscal after the demerger of its financial services arm a day before. RIL’s net profit declined 10.8% to Rs. 6,011 crore, while revenue from operations fell 4.69% to Rs. 2,31,132 crore.
EBITDA increased by 5.1% Y-o-Y to Rs. 41,982 crore. EBITDA growth was led by consumer and upstream businesses, which offset decline in O2C earnings.
O2C earnings were lower due to a sharp fall in fuel cracks from exceptionally high levels in 1Q FY23. Higher subscriber base and customer engagement led revenue and profitability growth for Digital Services. Retail earnings reflect expanded footprint and improved profitability with operating leverage. Higher production and realizations contributed to growth in Oil & Gas EBITDA.
According to the release issued by the company, O2C segment delivered a resilient performance despite short-term macro challenges. Demand was impacted by destocking on recessionary fears and high interest rates, as well as slower than expected ramp-up in China markets. Y-o-Y comparisons are skewed due to historic high fuel cracks in 1Q FY23, with dislocation in energy markets.
The oil-to-chemicals (O2C) arm's revenue declined 17.7% to Rs. 1,33,031 crore in the quarter under-review, compared to Rs. 1,61,715 crore in the year-ago period. Reliance said the lower O2C revenue was ‘’primarily on account of sharp reduction in crude oil prices and lower price realisation of downstream products. This was partially offset by higher volumes.''
Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited said: “Reliance’s strong operating and financial performance this quarter demonstrates the resilience of our diversified portfolio of businesses that cater to demand across industrial and consumer segments…O2C business delivered a resilient performance despite continuing global macro headwinds. Commencement of MJ field operations during the quarter will enhance India’s energy security, with total production from KGD6 block rising to ~30 MMSCMD in the coming months."
During the quarter, impact of Cyclone Biparjoy was minimized by depleting inventory in the processing unit. Planned shutdown of FCC feed hydrotreater at Jamnagar and Dahej Cracker was completed. Arbitrage feedstock sourcing was preferred and increased over regional crudes that were available at higher differentials. ATF production was maximized with improved regrade. Gasoline netback was maximized by supplying to US market to capture improved arbitrage with summer demand. Aromatics production was optimized based on netback for alternate product (PX vs gasoline). High gasifier availability was ensured to eliminate LNG sourcing and minimize energy cost by optimizing fuel mix.
Meanwhile, global oil demand in 1Q FY24 rose by 2.8 mb/d Y-o-Y to 101.4 mb/d, due to higher demand mainly from China, Middle East, and Asia. Jet/Kero and gasoline posted strong demand growth Y-o-Y, while diesel demand remained flat. Crude oil benchmarks fell Y-o-Y due to macro-economic headwinds on high interest rates and lower industrial activities in US and EU. Continued Russian oil supply despite EU ban and production cuts announced by OPEC+ countries did not impact production, keeping market in surplus in 1Q FY24. Dated Brent averaged $ 78.4 /bbl in 1Q FY24, lower by $ 35.5 /bbl Y-o-Y and by $ 2.9 /bbl Q-o-Q.
Global refinery throughput was higher by 1.9 mb/d Y-o-Y and fell by 0.1 mb/d Q-o-Q at 81.8 mb/d in 1Q FY24. Quarterly domestic demand of HSD, MS & ATF increased by 8.1%, 6.8% and 13.3% Y-o-Y respectively. India’s polymer and polyester demand during 1Q FY24 improved by 16% and 5% Y-o-Y respectively.
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