Adani Wilmar shares drop 4% after Q2 profit warnings

Shares of Adani Wilmar tumbled 4% in early deals on Thursday after the FMCG major issued a profit warning for the September quarter, expecting revenues and volumes to grow at low single digits during the period under review. In comparison, the BSE benchmark Sensex was trading 355 lower at 57,270 levels, with 21 of its constituents floating in negative terrain.

Reacting to the quarterly business update, shares of Adani Wilmar declined as much as 3.87% to hit an intraday low of ₹681 on the BSE. The stock has been losing for the last four sessions and has declined 7.85% during this period.

In a quarterly business update, the Adani Group company said that its overall revenue is expected to grow at a low single digit during the September quarter (y-o-y), whereas H1 revenues and volumes are expected to register a low double digit growth, citing multiple macro challenges. The sharp fall in prices of edible oils – palm oil, soyabean oil and sunflower – during the July-September quarter also impacted its earnings.  

“Multiple macro challenges continued to impact the business in the quarter gone by owing to domestic and global cues, continued geo-political standoff, rising interest rates, slow uptick in the rural demand and delayed withdrawal of monsoon in major parts of India,” Adani Wilmar said in a post-market hour release on Wednesday.

“We could also see some positive signs of recovery, with softening commodity prices and higher foodgrain production estimates for FY22 announced as part of fourth advance estimates. In the edible oil context, the second quarter essentially absorbed the market shocks of high inflation followed by sharp decline in prices,” it added.

As per the company, food & FMCG basket continued its growth trajectory similar to previous quarters, registering a growth over 40%, leveraging the pan-India distribution of edible oil business. “Edible oil business witnessed higher volume growth in the masstige category rather than premium category as a result of downtrading that continued during the quarter. Industry essential business also grew close to 20% during the quarter and H1 both. Business remained positive on a growth trajectory riding on the Food & FMCG and Oleo chemicals business,” it said.

The company said that the prices of edible oils, namely - palm oil, soyabean oil, and sunflower - sharply declined in the quarter and are now trending more or less at pre-covid levels, which has left most of the players with high price inventory in hand. The fall in edible oil prices coupled with currency depreciation will have an impact on margins for this quarter.

“We saw the prices of Palm oil and Soyabean oil drop sharply from the highs of US$1,750 and US$1,850 in June to US$850 and US$1,100 a ton by the end of September 2022,” it added.

Adani Wilmar, a 50:50 joint venture between billionaire Gautam Adani-led Adani group and Singapore’s Wilmar group, had cut cooking oil prices by up to ₹30 per litre in September to pass on the benefit of falling global prices to its consumers. Before that, the company, which sells products such as Fortune, King's, Bullet, Raag, had cut edible oil prices by up to ₹10 in July.

Going ahead, the company remains hopeful of sequential improvement in demand trends with easing retail inflation and good monsoon. “The consumption may see an uptick in H2 FY23 on the back of festivities and softening of prices across food categories,” it said.