BENGALURU, July 21 (Reuters) – Reliance Industries (RELI.NS), India’s most valuable company, reported a wider-than-expected drop in first-quarter profit on Friday, as its flagship oil-to-chemicals (O2C) business was hurt by weak demand and a steep fall in refining margins.
Reliance’s O2C business is still its main growth engine that powers both profit and revenue, despite the company’s aggressive expansion into retail, telecom and green energy.
“(O2C) demand was impacted by destocking on recessionary fears and high interest rates, as well as slower than expected ramp-up in China markets,” Reliance said in a statement.
The O2C business, which grew at a robust clip post the pandemic on higher demand for fuels, has now seen refining margins fall from record levels hit last year.
The profit on refining a barrel of crude oil in Asia plunged about 41% to $3.44 a barrel in the April-June period, according to Refinitiv data.
Fuel margins have fallen about 60-70% from last year’s highs, Chief Financial Officer V. Srikanth said in a post-earnings presentation.
Reliance stopped providing updates on gross refining margins a few quarters ago.
The billionaire Mukesh Ambani-led conglomerate said consolidated profit fell to 160.11 billion rupees ($1.95 billion) in the quarter ended June 30 from 179.55 billion rupees a year earlier.
Analysts expected the company to report a profit of 168.42 billion rupees, according to Refinitiv data.
Revenue from operations fell 5.4% to 2.11 trillion rupees, primarily driven by a 17.7% drop in sales at the oil-to-chemicals segment, which took a hit from weak crude prices and lower price realization of downstream products.
Reliance said earnings before interest, taxes, depreciation, and amortization, a key profit metric, for the retail division rose 33.9% during the quarter.
Telecom unit Reliance Jio reported its slowest profit and revenue growth in six quarters on Friday, hit by higher expenses and a lack of recent tariff hikes.
Investors are now focused on the annual general meeting of the company for details on the listing of Jio Financial Services (JFS), a demerged entity from Reliance, which is valued at about $20 billion.
JFS is seen as the conglomerate’s expansion into the lucrative financial services sector.
($1 = 82.0375 Indian rupees)
Reporting by Sethuraman NR in Bengaluru; Editing by Anil D’Silva
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