Adani Wilmar posts ₹131 cr loss in Q2; shares drop

Shares of Adani Wilmar Ltd fell as much as 3% on Wednesday as the edible oil maker reported ₹131-crore loss in the quarter ended September compared with ₹49 crore profit in the year-ago quarter. The Adani Group company's stock dropped to ₹316 apiece on the National Stock Exchange (NSE) after the earnings announcement.

Revenue of Adani Wilmar slipped 13% year-on-year to ₹12,267 crore in the second quarter as against ₹14,150 crore in the corresponding period last year. The decline in revenue was due to a steep correction in the prices of edible oils, the company says.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at ₹144 crore, down by 43% year-on-year from ₹254 crore in Q2 FY23.

"Profitability was adversely impacted due to loss in the edible oil segment, which was partially offset by better margins in the Food & FMCG and industry essential segments. Edible Oil losses are primarily driven by divergent trends in the spot (physical) and future prices, resulting in hedging losses," the maker of Fortune edible oil says.

"The quarter continued to remain challenging for the edible oil segment. While the quarter was less volatile as compared to previous quarters, the segment continued to witness divergent trends in the spot (physical prices) and future prices. The quarter also witnessed record imports by the industry, that anticipated an early festive demand. The prices of edible oils fell further by 3% to 6% during the quarter and continued to remain range-bound in the sub-$1000 per ton levels," the edible oil producer says.

Adani Wilmar recorded 11% volume growth in the September quarter. The edible oil segment grew by 4% on volumes in Q2, dragged by lower volumes in B2B sales. However, the branded sales grew by 12% on volumes in Q2. The segment registered a revenue of ₹9,038 crore, a decline of 19% in Q2, due to the fall in prices of edible oils.

The growth in edible oils segment was primarily led by sunflower oil and mustard oil, which have been growing faster than the industry due to strong brand equity, it says.

The Food & FCMG segment, which includes products such as wheat flour, rice, pulses, besan, sugar, poha and soap continued to outperform. During the quarter, the segment revenues grew at 26% year-on-year.

“Restrictions on exports of basmati and non-basmati rice continued during the quarter. Wheat prices surged upwards on the back of a strong demand, vis-à-vis the tight supply chain. However, the government stepped in to release wheat under the Open Market Sale Scheme (OMSS) to control the prices. In spite of the macro challenges, the Company continued its volume growth trajectory,” says Adani Wilmar.

In Q2, Food & FMCG contributed 10% to the sales revenue and 18% to the sales volume. The growth in foods business moderated to 20% levels, due to the export curbs on rice. However, the domestic foods business grew by over 50% during the quarter.

“Going forward, given that the gap between spot & future prices has narrowed, the Company expects the profitability of Edible Oils to come back to normal levels in terms of Gross Margin and EBITDA per ton. Food & FMCG and Industry Essentials are expected to continue its profitability momentum,” it says.

“The company gained market share across most of the edible oil & food categories, given the immense focus on expanding our direct reach and rural town coverage. We see a huge potential for packaged oils & foods in the rural markets. Today, 30% of our sales come from rural towns, wherein more than 70% population resides,” says Angshu Mallick, MD & CEO, Adani Wilmar.