India’s Reliance reports drop in Q2 profit on weaker fuel margins

INDIA’S Reliance Industries reported a drop in second-quarter profit on Monday, hurt by weak fuel refining margins and lower demand for petrochemicals.

The Mukesh Ambani-led conglomerate posted a consolidated profit of 165.63 billion rupees (S$2.6 billion) in the quarter ended Sep 30, down 4.8 per cent from a year earlier.

This was in line with the 165.61 billion rupees expected by analysts, according to LSEG data.

Revenue from Reliance’s oil-to-chemicals (O2C) operations rose about 5 per cent to 1.56 trillion rupees, which the company said was impacted by higher supply and lower demand.

Asian refiners’ margins have fallen around 31 per cent so far this year due to lower demand for petroleum products and an increase in companies’ refining output which boosted supplies of petrol, which is called petrol in India, and diesel.

“Unfavourable demand-supply balance led to sharp ~50 per cent decline in transportation fuel cracks and continued weakness in downstream chemical Deltas,” Reliance, India’s most valuable company, said in a statement.

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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 O2C operations, making it a key profit driver.

While the company has diversified into other businesses such as retail, telecom and green energy, its O2C operations comprises two-thirds of total revenue.

Reliance chairman Mukesh Ambani had said at a shareholder meeting in August that he expects its new energy business to be as large and as profitable as its O2C vertical in the next five to seven years.

Revenue at Reliance’s retail business fell 1 per cent, while its telecom business Reliance Jio Infocomm reported a 23 per cent jump, driven by higher subscriptions and higher tariffs. REUTERS