Adani Wilmar Q4 Update: Edible Oil Sales Volume Declines

Adani Wilmar Ltd.'s oil sales were dragged down in the fourth quarter due to lower demand from the bakery and frying industry.

While branded oil sales volume grew 4% on account of consumer demand amid softened edible oil prices, the overall sales declined in mid-teens, it said in its quarterly business update filed with the exchanges on Thursday.

Supplies of imported edible oils have been smoother during the quarter under review in comparison with the earlier part of the year. Prices have cooled off from historically high levels and have been stable, stimulating higher consumer demand, particularly in the rural population, the maker of Fortune Oil said.

Mustard, which is a key domestic oilseed, is expected to harvest a record bumper crop in fiscal 2023 at close to 11 million tonnes, 5% higher than the previous year. Improvement in distribution as well as gaining market share in the under-indexed region will be key volume levers for the edible oil segment.

The food and the fast-moving consumer goods lifted the overall show. The segment saw 40% growth in volume and 60% revenue growth during the fourth quarter.

In the foods segment, wheat prices started soaring from July 2022, prompting the government to release wheat stocks in the market to increase supply, resulting in the normalisation of prices.

"In foods, we have been making good progress in all enablers like sourcing, manufacturing, distribution, brand building, and strengthening the teams for the new products," Adani Wilmar said. In fiscal 2023, the company achieved revenue of Rs 3,800 crore, up 55% in value terms and 40% in volumes.

"We expect the strong growth to continue in both the products—wheat and rice—for multi-years, given the large headroom in the kitchen essential products," according to Adani Wilmar.

The retail penetration of its wheat business is currently below 10% in the total universe of outlets for packaged flour. In the March quarter, Adani Wilmar also benefited from lower competitive intensity due to high prices of wheat as local players reduced operations to limit the risk of stocking high-cost inventory.

The industry essentials business reported 60% volume growth and value growth in the low teens, according to the company.

"Our B2B business of selling industrial products for various industry applications has been gaining market share and making progress in the journey of adding value-added products," the company said.

Despite the decline in export volume of castor oil for the industry, Adani Wilmar's overall castor business grew in double digits in volume terms.

The company expects the demand for packaged oils and staple foods to remain healthy despite the various macroeconomic and geopolitical events.

"With our expertise in commodities and strong sourcing partnerships, we will continue to navigate the price volatilities and any supply disruptions," it said. However, it warned that the chances of the occurrence of El Nino in May or June 2023 might cause the weakening of the south-west monsoon and could cause a heatwave and drought in India, negatively impacting the crops.

Other key monitorables include biodiesel mandates by Brazil, Malaysia, and Indonesia, which may impact the crude edible oil prices of soyabean and palm. There are concerns over an unprecedented drought in 60 years in Argentina—the world's top exporter of soy and number three for corn—that has resulted in sharp cuts to the soybean and corn harvest forecasts.

During the quarter, the alternate channels like e-commerce, modern trade, and e-B2B serving general trade have been growing at a faster clip and have registered strong volume growth of 23% year-on-year for the combined portfolio of oil and foods, contributing Rs 2,700 crore of revenue in the last fiscal.

The company is focusing on bringing more rural towns under direct coverage. It aims to reach 1 million retail outlets directly from its current reach of 0.6 million in the coming years. "Our rural (below 1 lakh population) saliency is around 30% in both oil and foods, wherein more than three-fourths of the population resides," the company said.

On a standalone basis, the company expects volume growth in the high teens and value growth to decline in the high single digits during the fourth quarter. For the full year, it is expected to report a volume growth of close to 14% with mid-single digit value growth of Rs 55,000 crore, the company said.

Shares of Adani Wilmar closed 3.34% higher on Thursday, compared with a 0.24% gain in the benchmark Nifty.

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