Mukesh Ambani owned-Reliance Industries' core business Oil to Chemical (O2C) while releasing quaterly results declared that lower fuel cracks, tepid global demand and new refineries are some of the major reasons that impacted the conglomerate in the oil and gas sector.
"The business was impacted by lower fuel cracks with tepid global demand and ramp-up of new refineries. The oil and gas segment continued its growth trajectory with higher production, offsetting lower year-on-year gas price realizations," said Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited.
Reliance is one of the key Indian buyers of Russian oil sold at a discount and has signed an annual oil purchase deal with Russian oil major Rosneft. The Jamnagar complex, which houses two refining plants with a combined capacity of about 1.4 million barrels per day, is at the core of Reliance's oil-to-chemicals (O2C) operations, making it a key profit driver, despite the company's aggressive expansion into retail, telecom and green energy.
Global giants such as Exxon Mobil Corp and BP have also signalled that their earnings would be affected by lower refining margins.
O2C business:
Besides lower transportation fuel cracks or margins, particularly that of petrol which was down 30 per cent, and reduced chemical margins, Reliance also had a higher outgo on depreciation cost, hurting profitability.
Depreciation/amortisation expenses were up 15.5 per cent to INR 13,596 crore due to expanded asset base across all businesses, while there was also a marginal rise in finance cost.
The mainstay oil refining and petrochemicals business, called O2C, posted a 14.3 per cent fall in EBITDA to INR 13,093 crore.
This was "due to lower transportation fuel cracks, particularly gasoline (petrol) cracks which was down 30 per cent year-on-year. Downstream chemical margins were also lower on y-o-y basis", the statement said.
Ambanis incur profit dip
Reliance Industries Ltd on Friday reported a 5 per cent drop in its June quarter net profit as lower fuel cracks and petrochemical margins outdid gains in telecom and retail businesses.
The net profit was also 20 per cent lower quarter-on-quarter when compared to the record INR 18,951 crore earnings in the preceding three months ended March 31.
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