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RIL's Petrochemicals Business Q2 revenue down 11.9% YoY

Posted On: 2019-10-20 09:48:44

2Q FY20 revenue from the Petrochemicals segment decreased by 11.9% Y-o-Y to Rs. 38,538 crore ($ 5.4 billion) reflecting fall in prices of petrochemical products. Segment EBIT decreased by 6.4% Y-o-Y to Rs. 7,602 crore ($ 1.1 billion) mainly due to weaker petrochemical product margins offset by record petrochemical production and cost optimization through light-feed cracking. There was a significant decline in margins for major products - MEG (-53%), PX (-37%), PE (-25%) and PP (-21%) as a result of new capacity, inventory overhang and global demand slowdown.

RIL - Petrochemical Business - Q2 FY 2019-20

On Q-o-Q basis, Asian naphtha prices were down by 9% tracking crude prices and cracker turnarounds in Asia. US ethane prices also fell by 19% Q-o-Q on the back of increased NGL production.

Ethylene prices remained soft amid ample availability post start-up of new crackers in China. Propylene prices remained firm amidst regional turnarounds. On Q-o-Q basis, Ethylene prices softened 5% and Propylene prices strengthened by 8%.

PP and PE prices softened by 6% and 9% on Q-o-Q basis respectively. Well supplied global markets and weaker economic activity led to subdued operating rates and overall decline in prices. PP margins over propylene reduced by 44% on Q-o-Q basis to $ 170/MT. PE margins over naphtha weakened by 9% on Q-o-Q basis to $ 419/MT due to persistent softness in PE. PVC prices strengthened by 4% during the same period. PVC margins regained significantly to $ 499/MT, up by 29% Q-o-Q due to softening of EDC prices following high global production.

Strength in infra and consumer related segments supported polymer demand in India. On Y-o-Y basis, domestic polymer demand increased by 5% during 2Q FY20. PP and PE demand were up by 4% and 7% Y-o-Y. PVC demand remained stable due to heavy rainfall in various parts of the country. RIL's polymer production was up by 5% Y-o-Y and 2% Q-o-Q during the quarter to 1.48 MMT driven by reliable operations. RIL maintained its pre-eminent position in domestic polymer market.

Polyester Chain

During 2Q FY20, continuing US-China trade dispute and feedstock price volatility impacted polyester chain markets.

PX prices fluctuated in line with trends in the crude and PTA futures markets. Moreover, concerns on additional supplies from China capped the uptrend in prices. Consequently, Q-o-Q PX prices dipped 11% and PX-Naphtha margins declined 13% to $306/MT - below the 5 year average.

PTA markets during 2Q FY20 remained healthy with stable demand from downstream polyester segment. During the quarter, unplanned shutdowns tightened PTA markets, limiting the downtrend in PTA prices PTA-PX delta remained well above the 5 years average despite weakening of prices by 12% Q-o-Q and margins declining by 16% Q-o-Q to $179/MT.

MEG markets rebounded with weak naphtha prices and stable prices throughout the quarter due to depleting port inventories. Chinese port inventory dropped 28% towards the quarter end mainly due to reduced shipments from ME following Saudi supply disruption. The MEG margins surged 10% Q-o-Q to $224/MT despite 2% Q-o-Q drop in MEG prices.

Polyester markets remained on a roller-coaster during 2Q FY20. The volatility in raw material prices at the beginning of the quarter led to limited downstream buying. However, towards the later part of the quarter polyester producers' sales efforts to off load stocks before the Golden Week in China led to increased polyester sales. During the quarter, PFY prices declined 6% and margin firmed 8% on Q-o-Q basis to $308/MT. PSF prices and margin dipped 10% each on Q-o-Q basis.

Global PET witnessed healthy seasonal demand. Fluctuations in PTA and MEG prices throughout the quarter limited the uptrend in PET prices. On Q-o-Q, PET prices slipped 11% and margins weakened by 17% to $155/MT.

Domestic polyester markets grew by 9% Y-o-Y. Filament demand grew 6% Y-o-Y ahead of seasonal demand and improved buying appetite due to low filament prices. Staple Fibre demand slipped 1% Y-o-Y with increased imports from China and ASEAN countries. PET demand grew by31% Y-o-Y as extended summer improved the beverage consumption.

Reliance Fibre intermediate production during 2Q FY20 surged 4% Y-o-Y and 27% Q-o-Q to 2.9 MMT as during 1Q FY20 there were planned shutdowns. Polyester production remained stable at 0.73 MMT.

Shares of RELIANCE INDUSTRIES LTD. was last trading in BSE at Rs.1415.3 as compared to the previous close of Rs. 1396.15. The total number of shares traded during the day was 629451 in over 20580 trades.

The stock hit an intraday high of Rs. 1428 and intraday low of 1399.7. The net turnover during the day was Rs. 891730305.

Source: Equity Bulls

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