Decline in edible oil costs hits Adani Wilmar’s profitability

AHMEDABAD: Due to a high-cost inventory triggered by a decline in edible oil prices, FMCG major, Adani Wilmar Limited posted a net loss of Rs 79 crore during the first quarter of FY 2024, according to the company’s regulatory filing on Wednesday. This is against a profit of Rs 194 crore during the corresponding quarter of FY 2023. The company’s annual revenues also declined 12% to Rs 12,928 crore from Rs 14,724 crore during the same period.

Margins took a big hit with falling edible oil prices and this reflected in the company’s Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) which dropped 71% from Rs 443 crore to Rs 130 crore. This is despite the 25% rise in volumes from 11.9 lakh metric tonne (LMT) to 14.9 LMT during the quarter.
Besides dropping edible oil prices, the company also said that the disalignment of its hedges without corresponding gain in physical trade was one of the key reasons for the profitability to get impacted.

“The disparity in tariff rate quota continued during the quarter as well. Moreover, the interest expenditures increased on a year-on-year basis with an increase in the benchmark rates backed by hike in the Fed rates. On the other hand, the company’s wholly owned subsidiary in Bangladesh incurred losses of Rs 21 crore during the quarter thanks to price caps by the government on edible oils, local currency-related issues, and unavailability of counterparty forex hedging, all of which resulted in lower consolidated PAT,” Adani Wilmar said in a statement.
Angshu Mallick, MD & CEO, Adani Wilmar Limited said, “We have regained the momentum in our edible oil business with the decline in the edible oil prices. The soft prices of edible oil are expected to augur well for the industry. Our margins during the quarter got impacted by high-cost inventory in a falling edible oil price environment and dis-aligned hedges compared to spot prices of physical commodities.”