RIL Q3 Results: Profit Misses Estimates, Margin Contracts As Chemicals Weigh

Reliance Industries Ltd. reported a modest sequential rise in profit for the December quarter, but fell short of market expectations as margin pressure persisted despite stronger performance in its core oil-to-chemicals business.

The oil-to-telecom conglomerate's bottom line stood at Rs 18,645 crore during October-December period, a rise of 3% from the sequential quarter, according to its notification to the exchanges on Friday. That compared with Rs 19,271 crore that analysts tracked by Bloomberg had estimated.

Reliance Industries Q3 Results Highlights (Consolidated, QoQ)

• Revenue rose 4% to Rs 2.65 lakh crore versus Rs 2.54 lakh crore (Bloomberg estimate: Rs 2.57 lakh crore)
• Ebitda increased 0.3% to Rs 46,018 crore versus Rs 45,885 crore (Estimate: Rs 47,997 crore)
• Ebitda margin contracted 60 basis points basis points to 17.4% versus 18% (Estimate: 18.7%)
• Profit up 4% to Rs 18,645 crore versus Rs 18,165 crore. (Estimate: Rs 19,271 crore

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Core Performance

The oil-to-chemicals, or O2C, business led operating performance during the quarter, supported by stronger fuel cracks, even as weakness in downstream chemicals continued to cap gains.

O2C segment revenue increased 1% quarter-on-quarter to Rs 1.62 lakh crore. Segment Ebitda rose 10% to Rs 16,507 crore, lifting margins to 10.18% from 9.35% in the preceding quarter.

"The supply disruptions and sustained demand tightened fuel markets during the quarter, while the chemicals segment remained under pressure due to ongoing oversupply, the company said in its investor presentation, adding that the divergence resulted in higher O2C earnings, but limited margin expansion at the consolidated level.

Exploration and production performance weakened during the quarter. Oil and gas segment revenue declined 4% sequentially to Rs 5,833 crore, while Ebitda fell 3% to Rs 4,857 crore. The company attributed the decline to lower volumes and prices.

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Energy Business

Performance in the exploration and production business weakened during the quarter. Oil and gas segment revenue declined 4% sequentially to Rs 5,833 crore, while Ebitda fell 3% to Rs 4,857 crore. The company attributed the decline to lower volumes and prices.

The contrasting trends across the energy portfolio meant gains from O2C did not fully translate into higher consolidated profitability, as weakness in chemicals and upstream operations weighed on overall performance.

Higher finance costs and depreciation also constrained profit growth during the quarter, widening the gap between operating earnings and the bottom line.

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