India’s RIL Q1 oil-to-chems earnings jump 63%; cracker rates fall to 87%

SINGAPORE (ICIS)–Reliance Industries Ltd’s (RIL) oil-to-chemicals net profit increased by around 63% year on year in its fiscal first quarter ending June 2022 on the back of higher oil and product prices.

Indian rupee (Rs) 10,000,000	Apr-June 2022	Apr-June 2021	% change
Oil-to-chemicals gross revenue	161,715	103,212	56.7%
Oil-to-chemicals EBITDA*	19,888	12,231	62.6%

*Earnings before interest, tax, depreciation and amortization

“Downstream chemical profitability was stable with strong paraxylene (PX), purified terephthalic acid (PTA) and polyethylene terephthalate (PET) deltas offsetting weak polymer and downstream polyester deltas on year-on-year basis,” the Indian conglomerate said on 22 July.

RIL’s cracker operating rate fell to 87% in April-June 2022 compared with 95% in the same period a year earlier, resulting in lower polymer production during the quarter.

Polymer demand during the period improved by 9% year on year and was 8% above pre-COVID level driven by the agriculture, consumer durables, automotive, e-commerce food packaging and infrastructure sectors, RIL said.

However, the company’s polyethylene (PE) margin averaged $415/tonne during the quarter, down from $508/tonne in the same period a year earlier, amid the sharp increase in naphtha prices.

Its polypropylene (PP) margin averaged $421/tonne in the quarter, down from $652/tonne in the corresponding period in 2021, weighed by higher feedstock prices.

On the polyester front, RIL noted that the volatility in feedstock prices and high inflation concerns led to a slowdown in global intermediates and polyester markets during the period.

Margins along the polyester chain averaged $593/tonne during April-June this year, down from $622/tonne in the same period of 2021.

“Downstream polyester margins were impacted by volatile raw material prices and lower downstream demand in China,” it said.

RIL’s oil-to-chemicals business accounted for about half of the company’s overall EBITDA for the fiscal first quarter.

Energy giant Saudi Aramco was previously eyeing a 20% stake in the Indian conglomerate’s oil-to-chemicals business, but the two companies mutually agreed in in November 2021 to call off the deal, which would have been worth $15bn.

RIL’s overall first-quarter net profit was up by 46.3% year on year to Rs180bn ($2.26bn) for the quarter ending 30 June, with a higher EBITDA margin of 12.3% compared with 11.9% in the previous corresponding period.

Rs10,000,000	April-June 2022	April-June 2021	% change
Gross Revenue	242,982	158,862	53.0%
EBITDA	40,179	27,550	45.8%
Net income attributable to shareholders	17,955	12,273	46.3%

The conglomerate’s finance cost, however, increased by 17.7 % during the period, mainly due to higher interest rates and the depreciation of the rupee against the US dollar.

The rupee briefly traded above Rs80 to the US dollar on Monday before easing to Rs79.75 at 04:28GMT, according to currency data information provider xe.com.

“Geopolitical conflict has caused significant dislocation in energy markets and
disrupted traditional trade flows,” said Mukesh Ambani, chairman and managing director of RIL.

“This along with resurgent demand has resulted in tighter fuel markets and improved product margins,” he added.

Global oil demand in March-June 2022 rose by 1.6m bbl/day year on year to 97.8m bbl/day, due to strong demand recovery in Asia, improved air travel demand in Europe and US alongside seasonal demand, RIL said.

Easing of lockdown restrictions in China in later part of quarter also contributed to demand recovery, it added.

Focus article by Nurluqman Suratman

($1 = Rs79.80)

Thumbnail image: A Reliance fuel station in Birohi, West Bengal, India on 3 August 2021. (By Soumyabrata Roy/Pacific Press/Shutterstock)

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