Adani Wilmar Q2 profit drops 73%; stock tumbles

Net profit of Adani Wilmar fell 73% year-on-year for the quarter ended September as the edible oil major faced several macro headwinds in the form of high inflation, rising interest rates, delayed monsoon and tepid rural demand.

The company's profit dropped to ₹48.7 crore during the second quarter compared with ₹182 crore in the year-ago period.

Adani Wilmar, a joint venture of Adani Group and Singapore's Wilmar Group, saw a 4% rise in revenue from operations at ₹14,150 crore for the September quarter compared with ₹13,558 crore in the corresponding quarter last year.

Edible oil volumes remained flat due to sluggish demand in the semi-urban and rural markets, according to the company's stock exchange filing. However, sequentially, edible oil business grew by 17% on volumes, suggesting an uptick in demand in Q2FY23.

The company says it witnessed multiple headwinds on the margin front, with the high volatility in edible oil prices, allotment of lower TRQ (tariff rate quota) and inflation impact on operating expenses.

Due to macro factors affecting the demand-supply situation in edible oils, there was a steep decline in prices of palm oil, soyabean oil and sunflower during the quarter. Sharp fall in prices left most of the players with high price inventory in hand. The company also passed on the benefit of lower prices to the consumers. This coupled with currency depreciation impacted margins during the quarter.

The edible oil producer, however, says this is purely cyclical in nature and on account of events that the industry witnessed in the quarter.

"Tariff rate quota (TRQ) announced by the government in July 2022 was a step towards controlling inflation. While this was a welcome move for the industry and consumers, it put the company into a disadvantageous position, given that the quota share allocated to us was lower than both our market share and manufacturing capacity. As a result, cost of sourcing of soyabean oil for us was higher than the competition leading to a disparity in the business," the company says.

Adani Wilmar recorded 9% year-on-year growth in volumes, led by robust growth in food and FMCG (fast moving consumer goods) segments.

"The quarter saw multiple hurdles in the edible oils business. While the volume growth in edible oils was flattish on YoY, it has grown by 17% sequentially on a QoQ basis. The overall performance continues to show an uptrend due to the robust execution of our strategy to grow the Food & FMCG business by driving its penetration through the distribution strength of the edible oil business," says Angshu Mallick, managing director and CEO, Adani Wilmar.

Post the acquisition of Kohinoor brand in May 2022, the company relaunched the entire product range to the markets in August 2022. Fortune Basmati and Kohinoor now have a combined market share of 10%, with Fortune share growing from 5.1% to 8.5%. With the recent relaunch of Kohinoor brand in the market, the company expects further gains in market share.

Shares of the FMCG major fell 2.35% to close at ₹682.30 on the NSE (National Stock Exchange).