Reliance Q1 results: O2C business revenue plunges 33% to Rs 25,192 crore; topline from oil & gas dips 45%

Billionaire Mukesh Ambani-led Reliance Industries on Thursday reported a 30.97 per cent year-on-year (YoY) rise in consolidated net profit at Rs 13,233 crore for the first quarter ended June 30, 2020, thanks to exceptional gain of Rs 4,966 crore from stake sale to BP in Reliance BP Mobility. The strong performance by telecom and retail arms helped the company to ride out a tough quarter which was disrupted by COVID-19 induced slowdown. However, the company's oil-to-chemicals (O2C) and oil and gas business were impacted by subdued demand amid global lockdowns.

O2C business, which is set to be split as a separate division, saw revenue declining by 33 per cent YoY to Rs 25,192 crore, primarily due to lower price realisations with disruptions in local and regional markets amid the COVID-19 outbreak. The division has posted a net profit of Rs 37,611 crore in June quarter of 2019.

O2C undertaking of the company comprises entire oil-to-chemicals business of the company consisting of refining, petrochemicals, fuel retail and aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities. The June quarter was very challenging for this division as domestic industry and supply chains virtually came to a halt due to lockdown and both producers and converters had to shut down plants across India.

Segment EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortisation) declined by 49.7 per cent to Rs 4,430 crore as compared to Rs 8,810 crore in April-June period of the last fiscal. EBITDA margin stood at 17.6 per cent, down from 23.4 per cent in Q1 FY20.

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"Weak domestic demand and higher share of exports impacted margins as compared to regional benchmarks. The impact of lower realisation was partially offset by cost optimisation and integration benefits," RIL said in a press release.

RIL said that polyester chain margins were weaker due to decline in PX (paraxylene) and PTA (Polyester Intermediate Prices) margins with significant new supplies. Polyester chain margins were at $540/MT as compared to $668/MT in Q1 FY20. "With sharp fall in feedstock prices, naphtha cracking economics improved vis-a-vis gas cracking aiding polymer chain margins. Polymer chain margins were at $500/MT versus $471/MT in the prior period," the company said.

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Meanwhile, RIL's oil and gas business reported a 45 per cent YoY decline in revenue at Rs 506 crore due to lower production in domestic business post closure of Panna Mukta and D1D3 fields and lower prices. Segment EBITDA for the quarter turned negative at Rs 32 crore with lower volumes and weak realisations.

For April-June quarter of this fiscal, the overall production was 10 per cent higher from previous quarter at 26.3 billion cubic feet (bcfe) and price realisation was at $2.39/mcfe.

Reliance's coal bed methane (CBM) gas production remained stable at 0.95 MMSCMD, with ongoing focus on sustaining and augmenting production.

On Krishna Godavari (KG)-D6 block development, RIL said that the project was on track for commissioning by mid-2020 prior to COVID-19 outbreak. Drilling and sub-sea installation work for all wells have been completed, while offshore works on platform and pre-commissioning requiring mobilisation of critical resources of OEM contractors from global locations are pending due to COVID-19 restrictions.