RIL Q2 results: Profit slips 15% as Covid hits sales

Mumbai: Reliance Industries (RIL) reported a double-digit fall in quarterly net profit as the pandemic hit sales of most of its products but the company said it had bounced back from the June quarter and demand had now recovered in its oil-to-chemicals and retail businesses.

Consolidated net profit fell to Rs 10,602 crore from Rs 11,352 crore a year ago. RIL said net profit attributable to the owners of the company was Rs 9,567 crore, down 15% from a year ago, while the number attributed to ‘non-controlling interest’ was Rs 1,035 crore against Rs 90 crore a year ago. Sales fell to Rs 128,385 crore from Rs 165,228 crore a year ago but were higher than the first quarter’s Rs 100,929 crore.

The telecoms venture Jio was the star performer with a net profit of Rs 2,844 crore, almost three times the year-ago quarter’s Rs 990 crore and 19% higher than June quarter earnings. The company said Reliance Retail had a “V-shaped recovery” after the Covid-ravaged first quarter. Its EBIT jumped to Rs 1,522 crore from Rs 722 crore in June quarter, but was lower than the year-ago quarter’s Rs 2,039 crore. “The business is focused on restoring the momentum to pre-pandemic levels as operating curbs and limitations are relaxed,” it said. RIL’s consumer business accounts for 50% of EBITDA, said a senior company official.

Chairman Mukesh Ambani said the company delivered a strong performance compared to the previous quarter with recovery in petrochemicals and the retail venture along with sustained growth in the digital services business. He said various businesses were returning to normal.

"Domestic demand has sharply recovered across our O2C business and is now near pre-Covid level for most products. Retail business activity has normalised with strong growth in key consumption baskets as lockdowns ease across the country ... We continue to pursue growth initiatives in each of our businesses with a focus on the India opportunity," he said in a statement.

RIL’s debt at the end of the quarter was Rs 279,251 crore but it had Rs 185,711 crore in cash and cash equivalents. "Funds received post quarter-end and balance capital commitment receivables are in excess of quarter-end net debt levels," it said.

The company squarely blamed the pandemic for its muted performance. "The outbreak of coronavirus (Covid-19) pandemic globally and in India is causing significant disturbance and slowdown of economic activity. The group’s operations and revenues during the quarter were impacted due to Covid-19," the company said.

The petrochemicals business did better than the previous quarter with EBIT rising to Rs 4,895 crore from Rs 3,392 crore, but it was lower than Rs 7,620 crore in the same quarter a year ago. Some parts of the business did very well. "RIL achieved highest ever quarterly polymer domestic sales by leveraging domestic supply chain, multimodal logistics and nationwide warehousing facility. RIL placed higher volumes of polyester products in the domestic market with improved operating rates for spinning and texturizing units," it said.

The company’s refining and marketing business suffered as margin and revenue contracted. Gross Refining Margin, or the profit from converting each barrel of crude oil into fuels, fell to $5.7 from $6.3 in the first quarter. The segment’s EBIT fell to Rs 2,000 crore from Rs 2,892 crore in the June quarter and Rs 7,620 a year ago.

V Srikanth, joint chief financial officer, said Jio thrived despite the pandemic. "This is a business that was least affected or not affected in some sense because of Covid. When you look at the numbers, consumer business now accounts for almost 50% of our consolidated business segment EBIDTA," he said.

Srikanth also said business activity in retail was expected to be at pre-Covid levels in the third quarter.