Reliance Industries (RIL) has disclosed a drop in quarterly profit, attributing the lower earnings to a decline in crude oil prices. This drop in prices has had an adverse effect on revenue from fuel sales and has impacted Reliance’s core oil-to-chemicals (O2C) business.
Reliance Industries, led by billionaire Mukesh Ambani, relies heavily on its O2C business for revenue generation. The conglomerate enjoyed a boost in refinery margins last year as it took advantage of cheaper Russian crude and exported refined fuel to Europe. However, this advantage has diminished over time, Reuters news report said.
Reliance noted a significant 14 percent reduction in crude oil prices in comparison to the same quarter the previous year, which led to a decrease in price realization for its products. The company attributed this decline to “macro-economic headwinds on high-interest rates, lower industrial activities, and sentiments shifting from risk premium to fundamentals.”
In the second quarter ending September 30, Reliance’s consolidated profit rose to 173.94 billion Indian rupees ($2.09 billion), up from 136.56 billion rupees in the same period a year earlier.
The company’s revenue from operations did see a modest 1.3 percent increase, reaching 2.35 trillion rupees, but this growth was restricted by a 7.3 percent decline in O2C business revenue.
Reliance Industries revealed that it recorded a capital expenditure of 388.15 billion rupees during the quarter and forecast a “significant decline” in capital expenditure intensity once it concludes its planned 5G network rollout by the end of the year.