RIL Q1 takeaways: Petchem, Jio come to aid as retail ops suffer sequentially


MUMBAI: reported a sturdy performance for the quarter ended June despite challenges posed by the second wave of Covid-19 pandemic for its retail and refining businesses.

While the company’s consolidated net profit declined over 7 per cent year-on-year due to significant rise in tax expenses, it still managed to beat Street’s estimate. The topline of the company saw strong 58 per cent year-on-year growth aided by the low base of the year-ago quarter.

“The company has delivered robust growth despite facing a highly challenging operating environment caused by the second wave of the Covid pandemic,” RIL said.

The sturdiness of RIL’s performance was visible in its operating numbers. Consolidated operating profit of the company grew 27.6 per cent on-year, and nearly 4 per cent sequentially, to a record high of Rs 27,550 crore in the reported quarter.

Here are the major takeaways from the company’s first quarter of the new financial year:

Petchem performance key highlight

Prior to the company’s June quarter earnings, analysts had highlighted that the recovery in global petrochemical demand and margins will boost RIL’s performance. And, the company did not disappoint.

Revenues of the oil-to-chemical segment surged 75 per cent on-year as the company used the buoyancy in demand in the export market to its advantage. With the second wave wreaking havoc on the local economy, RIL quickly shifted its refining and petrochemical products slate to focus on the export markets as reflected in the 72 per cent jump in exports.

The surge in polyethylene, polypropylene and PVC prices during the quarter aided the petrochemical business, while higher global crude oil prices were beneficial for the refining segment. “Downstream margins continued to remain strong with product deltas near or above 5-year averages,” RIL said.

Jio’s customer additions surprise

Jio Platforms, which houses RIL’s telecom operations, had a stellar quarter with beats on almost all metrics. The vertical’s revenues and profit grew 4 per cent each and were slightly ahead of estimate, while average revenue per user came in-line with Street’s expectations.

However, investors will be pleased to see the better-than-expected net addition of subscribers in the quarter which signals a return to the old times for the company. Reliance Jio’s total users stood at 440 million in the June quarter, as against analysts’ estimate of around 435 million.

Retail business suffers due to Covid

On a year-on-year basis, retail operations of RIL showed sturdy growth in revenues, profit and operating profit. On a sequential basis, though, the story is painful as revenues slumped 19 per cent affected by localized lockdowns and apprehension among customers to visit physical stores due to the second wave.

Footfalls at Reliance Retail stories plummeted to 46 per cent of pre-COVID levels while operating efficiency collapsed due to curbs. There were some positives for the retail business in the shape of strong recovery in apparel and consumer electronics sales due to less severe restrictions during the second wave.

RIL said its ability to open new stores was dented by the second wave in the June quarter but the company indicated that more than 700 stores will be commissioned once restrictions ease.

Oil & gas business finds its feet

RIL’s second attempt at reviving its oil and gas business in partnership with BP is starting to bear fruits as ramp-up in natural gas production at R-cluster and KG-D6 blocks helped the segment deliver strong growth.

The segment more than doubled quarterly revenues aided by a near 30 per cent jump in production. The segment is also benefiting from pick-up in global natural gas prices due to an extended winter in parts of the Northern Hemisphere during the quarter. RIL said KG-D6 production is now well ahead of plans.

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