If the impact of the SAED-related costs were taken out, the company claimed that net profit would have increased by 20% year over year.
Even while demand is currently high, energy company Reliance Industries has issued a warning that future sluggish growth, high inflation, and interest rates could weigh on global energy demand.
The country’s largest company by market capitalization reported a net profit of Rs 15,512 crore on October 21 for the second quarter of 2022–23 (FY23), which was flat year over year due to market volatility in the oil–to–chemicals (O2C) sector and expenses associated with the special additional excise duty (SAED). If the impact of the SAED-related costs were taken out, the company claimed that net profit would have increased by 20% year over year.
The poor demand for downstream chemical products and the unfavourable profitability environment are reflected in the results of our O2C business. Although much lower sequentially, transportation fuel margins were better than last year, according to chairman and managing director Mukesh Ambani.
Special additional excise duties that were applied during the quarter to ensure a constant supply and prevent volatility in the domestic market,” the speaker said, “also had an influence on segment performance.
The company’s management informed reporters in a briefing following the results that it anticipates the average daily oil consumption to increase by 1.9 million barrels (mb/d) to 99.6 million barrels (mb/d). Refiners from Asia and the Middle East will have the chance to fill the gap created by the European Union’s ban on Russian exports starting in February.
Due to the high gas costs in the European Union and the increased demand brought on by the winter, the company anticipates middle distillate cracks to continue firm. In addition, the management anticipates that the opening of the Chinese economy and declining feedstock prices will boost polymer margins.
Volatile prices in the second quarter of FY23 affected demand for downstream petrochemicals, and domestic polymer and polyester consumption only increased by 1-2 percent. During that time, the price of crude fluctuated from $85 to 125 per barrel, while the cost of liquified natural gas (LNG) fluctuated from $35 to 71 per metric million British thermal units (MMBtu).
Future fuel demand is expected to be stable as economies fully benefit from opening up and the holiday season boosts petrochemical demand.
Challenges
The overall slowdown in GDP growth, inflation, monetary policy, and interest rates are all cause for concern, yet rates are still high. The market would remain adequately supplied thanks to the Chinese export quota, according to Joint Chief Financial Officer Srikanth Venkatachari.
The business added that freight costs for both crude and product tankers continue to be high.