Oil-to-telecom conglomerate Reliance Industries Ltd (RIL) has surprised the street with a better than expected performance in its oil-to-chemicals (O2C) division in October-December 2024 (Q3FY25).
RIL executives attributed it to favourable feedstock sourcing and higher volumes.
However, they also listed cost optimisation and other measures.
Domestic product placement, fuel discounts, and ditching low-margin aromatics for gasoline production are some of the measures under way, said company executives in a post-earnings call last week.
“We continue to focus on some of the things we do … for example, in the case of prioritising transportation fuel versus aromatics.
"And given the environment (subdued margins) for aromatics, it made sense for us to prioritise production of transportation fuel,” said chief financial officer V Srikanth in the call.
The conglomerate’s O2C business posted a 6 per cent rise in revenue Y-o-Y at Rs 1.49 trillion, and earnings before interest, tax, depreciation and amortisation (Ebitda) rose 2.4 per cent to Rs 14,402 crore, scripting a recovery from the weakness seen in the last couple of quarters.
Analysts with Goldman Sachs in a January 17 dated note observed: “The Energy segment reported above our expectations due to stronger O2C earnings.
"Sequential EBITDA growth in refining was potentially higher than expected driven by better capture rates.”
RIL’s O2C comprises refining, fuel-retailing, and petrochemicals.
In terms of fuel retailing, Srikanth added the company had focused more on domestic fuel sales, given the demand.
“RIL’s fuel retail volumes were up 44 per cent year-on-year supported by some specific schemes, like the ‘Happy Hour’ petrol scheme,” the executive said.
According to RIL’s investor presentation, the company’s gasoline retail sales were up 44 per cent and those for diesel were higher 23 per cent from a year ago.
Meanwhile, exports from the O2C division continued to reflect a decline, lower by 9.3 per cent to Rs 67,672 crore.
RIL chairman and managing director Mukesh Ambani in the press statement said the O2C business showcased its innate resilience, registering growth even in this prolonged period of volatility in the global energy markets.
Other cost-optimisation measures under way include “using larger vessels for delivering and for loading and for product placement, the executive said in his presentation.
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