RIL Q1 Results: Profit Drops 18%, Margin Contracts By 120 Basis Points

Reliance Industries Ltd.'s net profit declined in the quarter ended June and the oil-to-telecom conglomerate's margin contracted by 120 basis points.

Net profit of the Mukesh Ambani-led conglomerate dropped 17.9% sequentially to Rs 17,445 crore for the April-June period, compared with the Bloomberg estimate of Rs 17,654.9 crore.

• Revenue fell 1.9% to Rs 2.31 lakh crore. The Bloomberg estimate was Rs 2.32 lakh crore.

• Operating profit declined 8.8% to Rs 38,765 crore. Analysts at Bloomberg had estimated Rs 39,789.7 crore.

• Operating margin contracted to 16.7% versus 17.9%. The Bloomberg estimate was 17.1%.

Mukesh Ambani, chairman and managing director of Reliance Industries, said the consolidated Ebitda for the quarter improved year-on-year on account of strong contributions from consumers and upstream businesses, offsetting the weak oil-to-chemicals operating environment.

“The deep integration and flexibility built into our O2C business model helped mitigate the impact of a challenging operating environment," he said in the statement. "The business was impacted by lower fuel cracks, tepid global demand and the ramp-up of new refineries.”

Also, the oil and gas (exploration and production) segment continued its growth trajectory with higher production, offsetting lower year-on-year gas price realisations, Ambani said.

The company has made significant progress on the implementation of new energy gigafactories. “On completion, these projects will provide India with a world-class, integrated green energy ecosystem that can propel the next leg of sustainable growth,” he said.

The company's net debt fell 11.27% over a year ago to Rs 1,12,341 crore. Net debt-to-Ebitda was 0.66 times higher than 0.76 a year ago. In the previous quarter, net debt was Rs 1,16,281 crore and net debt-to-Ebitda stood at 0.62 times.

Cash and cash equivalents rose to Rs 1,92,596 crore from Rs 1,92,064 crore in the year-ago period. In the previous quarter, the metric was Rs 2,08,341 crore.

Shares of RIL closed 1.92% lower on the BSE compared with a 0.91% drop in the benchmark S&P BSE Sensex.

Oil-To-Chemicals Business

Although segment revenue for the first quarter increased to Rs 1.57 lakh crore primarily on account of higher product prices on the back of 9% increase in Brent crude oil prices, and higher volumes supported by strong domestic demand, "Segment Ebitda dropped 22% sequentially as fuel cracks corrected sharply due to ramp up of new refineries and subdued demand," Sanjay Roy, head of RIL's Oil and Gas vertical said in a conference call.

Oil & Gas

On quarter-on-quarter basis the oil and gas segment reported a muted performance. Revenues dropped 4.5% to Rs 6,179 crore, while Ebitda was down 7.1% QoQ to Rs 5,210 crore. Ebitda margin also fell 240 basis points to 84.3%.

"Around 44% increase in KG D6 gas production was partly offset by lower price realisations during the quarter that fell 2.7% sequentially and 14.2% year-on-year," RIL's Chief FInancial Officer Srikanth Venkatachari said.

The company produced 28.7 million metric standard cubic meters of natural gas during the quarter. Average production of oil condensate around 21,640 barrels per day.

According to the company, geopolitical tensions in the Middle East, Russia, Ukraine and the disruptions in the red sea have kept the markets volatile, and in the short-term rising supplies from new refiners and the comeback capacities after the shutdown will impact the spreads.

In the last two years two-and-half million barrels of refining capacity got added. "There will be surges in this kind of capacity going ahead, so we'll actively watch them," Venkatachari said.