Reliance Industries reports 46.3% year-on-year rise in consolidated net profit for quarter ended June

Reliance Industries Limited on 22 July reported a 46.3 per cent year-on-year rise in consolidated net profit of Rs 17,955 crore for the quarter ended June, which was below analysts’ expectations of 25,238.8 crore.

The oil-to-telecom giant reported a 54.5 per cent on-year growth in consolidated revenue from operations to Rs 2.23 lakh crore, which was also below Street’s estimate of Rs 2.4 lakh crore.

“Despite significant challenges posed by the tight crude markets and higher energy and freight costs, O2C business has delivered its best performance ever. I am also happy with the progress of our Consumer platforms,” said Chairman and Managing Director Mukesh Ambani in a press statement.

RIL reported a 45.8 per cent year-on-year rise in consolidated operating profit to a record high of Rs 40,179 crore for the quarter ended June.

Refining and Petrochemical

The strength in the company’s June quarter performance came from the refining and petrochemical division which posted its highest ever quarterly revenue aided by a tight global energy market.

The segment reported 56.7 per cent on-year growth in revenues to Rs 1.6 lakh crore aided by strong gross refining margins in the international market.

“Despite significant challenges posed by the tight crude markets and higher energy and freight costs, O2C business has delivered its best performance eve,” Ambani said.

The operating performance of the segment was strong as operating profit jumped 62.6 per cent on-year to Rs 19,888 crore.

The embargo by the European Union on Russian oil products, higher gas to oil switching, strong travel demand and lower product inventory levels resulted in tight fuel markets, RIL said.

Oil & Gas

The vertical performed strongly in the June quarter with revenues rising 183 per cent on-year to Rs 3,625 crore aided by higher administered gas prices for the domestic market.

The company said that KGD6 gas production during the June quarter was at 40.6 billion cubic feet as against 33.1 billion cubic feet in the year-ago quarter. Average gas price realized by RIL for KGD6 gas was at $ 9.72 per mmBtu as against $3.62 per mmBtu in the year-ago quarter.

The segment’s operating profit soared 243.4 per cent on-year to Rs 2,737 crore largely because of higher volumes and realisations in the quarter.

The oil and gas business witnessed higher revenue and earnings before interest, tax, depreciation and amortization driven by higher gas price and production.

RIL said that in its KG D6-MJ Gas and Condensate fields the final offshore subsea production installation campaign is underway and is likely to be completed by the second quarter of FY23. The company is also planning to start drilling for exploration at the KG UDW1 well next year.

“The whole idea is, any resources that we can create, we can monetize the existing infrastructure. So the prospect maturation is underway and we expect to undertake an exploration (for KG UDW1) next year. Once the energy field is commissioned, we should be progressively moving towards delivering more than 1 bcf per day by FY24,” said Sanjay Roy, senior vice-president for exploration and production.

Outlook

RIL pegs oil demand to average 99.2 million barrel per day globally, up1.7 million barrel per day year-on-year.

“There is limited spare refining capacity and the strong oil demand will keep refining margins higher. There is clear recovery in aviation demand because the pandemic is subsiding. There are lower exports from China which are supporting margins,” V Shrikanth, joint chief financial officer said. He added that certain petrochemical products may see range bound margins due to capacity overhang.

He said that transport fuel demand globally is likely to remain strong. Polymer and polyester demand is likely to pick up with the upcoming festival season.

“On the challenges side, we have been seeing the whole concern of recession, slowdown on the back of both higher prices as well as the responses by various central banks all over the world wanting to take interest rates up to curb inflation…Any duty on exports you know will have an impact on overall realization that we have,” Shrikanth said.

Jio Platforms

The consumer technology business, which houses the telecom operations, reported a 23.8 per cent on-year growth in revenue from operations to Rs 23,467 crore.

Net subscriber addition witnessed a strong rebound to 9.7 million in the June quarter driven by continued strength in gross additions at 35.2 million and reduced SIM consolidation impact, the company said.

Average revenue per user saw 4.8 per cent sequential rise to Rs 175.7 as the company benefited from the tariff hikes undertaken last year.

The segment’s operating profit jumped 28.5 per cent on-year to Rs 11,424 crore on healthy subscriber addition and realisations.

Reliance Retail

The first COVID-19 restriction free quarter helped RIL’s organised retail business to thrive as footfalls improved even though ongoing inflationary environment capped performance.

The segment reported a 53.7 per cent on-year rise in revenue from operations to Rs 51,582 crore in the reported quarter. “Consumer spending got a boost as families indulged in leisure activities, socializing, festivities and shopping as COVID situation improved though sentiments remained cautious due to inflationary concerns,” RIL said.

RIL said that footfalls were recorded at 175 million for the June quarter, which was 19 per cent above pre-COVID levels as consumers returned to stores.

“Consumer sentiments remain positive, though a bit cautious on the discretionary spend due to the inflation concerns,” said Gaurav Jain, head (strategy and business development) at Reliance Retail.

The segment’s operating profit jumped 180.4 per cent on a year-on-year basis to Rs 3,897 crore aided by a low base of the year-ago quarter, which was disrupted by second wave of the COVID-19 pandemic.

Reliance Retail’s operating margisn improved sharply to 7.6 per cent in the reported quarter from 4.1 per cent in the year ago quarter and 7.1 per cent in the previous quarter.

The strong demand environment and expansion of store saw net profit of the retail segment rise 114.2 per cent on a year-on-year basis to Rs 2,061 crore in the reported quarter.

Earlier today, shares of RIL ended 0.7 per cent higher at Rs 2,502.95 on the National Stock Exchange.

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