Adani Wilmar sees 15% decline in sales on fall in edible oil prices in Q1

It seems like Adani Wilmar, a major Indian company in the edible oil sector, is experiencing a mix of positives and negatives in their first-quarter report. While the volume of sales experienced a robust increase of 25% year-on-year, this was offset by a 15% decline in sales value due to falling edible oil prices.

The decrease in edible oil prices, triggered by lower consumer demand in developed economies, an increase in supply from the Black Sea region, and high oilseed production, has been affecting the company’s sales value. Despite the price drop, it appears the company managed to experience growth in terms of volume, indicating strong consumer demand.

Adani Wilmar highlighted in their filing that even though the volume growth was strong, the decrease in sales value reflects the impact of the decline in edible oil prices. This scenario is an example of how external market forces, such as commodity prices and global supply-demand dynamics, can impact a company’s performance even when it’s experiencing strong internal growth.

In this case, it would be interesting to see how Adani Wilmar responds to these challenges moving forward. They might have to look for strategies to mitigate the impact of falling prices, such as diversifying their product portfolio or improving operational efficiency, while capitalizing on the strong consumer demand for their products.

Despite the challenges of declining edible oil prices, Adani Wilmar demonstrated significant growth in their food and Fast-Moving Consumer Goods (FMCG) segment. With a revenue growth of 30% year-on-year (YoY), the company crossed ₹1,000 crore in sales for the quarter on a standalone basis. This marks the eighth consecutive quarter where the company has seen over 20% volume growth and over 30% revenue growth in the food and FMCG segment.

Their edible oil business also demonstrated strength with a 25% YoY volume growth. This was driven by strong consumer demand and a weak comparison base from Q1FY23, a period disrupted by high edible oil prices due to the Russia-Ukraine conflict. Sequentially, the volume growth from Q4’23 to Q1’24 also remained robust.

This information highlights the resilience of Adani Wilmar in managing its portfolio amidst challenging market conditions. It showcases the company’s ability to capitalize on the growing demand for its products in both the edible oil and FMCG sectors. This performance might be a positive indicator for investors, showing that the company is capable of maintaining growth even during periods of external pressure on commodity prices. However, the company will likely need to maintain this balancing act between high volume growth and declining sale values until the global edible oil market stabilizes.

Adani Wilmar’s food business has demonstrated strong growth, with revenues in this segment rising by 30% YoY to ₹1,000 crores for the quarter. This growth has been driven largely by the sale of branded food products in the domestic market. Most of these products recorded a volume increase of over 25% for the quarter, with new products launched in the past 1-2 years showing even faster growth.

However, the company saw a decrease in volume for its non-basmati rice exports due to continued restrictions and a 20% export duty.

Adani Wilmar’s industry essentials business experienced a 20% YoY increase in volume for the first quarter. But the segment’s revenue declined by 15% YoY due to steep price corrections in oleo and castor products, which make up around 70% of this segment’s revenue.

Despite these mixed results, the company’s shares ended slightly lower by 0.20% at ₹406.95 on the BSE on Tuesday.

The report shows that while Adani Wilmar is facing challenges in some areas, particularly in relation to declining commodity prices, there are also significant areas of growth, particularly in its branded food products. This suggests that the company has some strong assets and is capable of driving growth, despite external market conditions. However, continued declines in prices for key products like oleo and castor oils could pose a challenge for the company going forward.