Patanjali Foods Q1 profit down 64% to Rs 87.75 crore

Patanjali Foods Q1 profit down 64% to Rs 87.75 crore

Patanjali Foods Ltd, an edible oils firm, reported a significant 64% decrease in its net profit for the first quarter of the current fiscal year, reaching Rs 87.75 crore. This decline in profitability can be attributed to a drop in prices of cooking oils. In the same quarter of the previous fiscal year, the company had achieved a net profit of Rs 241.25 crore.

However, despite the decline in net profit, Patanjali Foods Ltd witnessed an increase in its total income. The company’s total income for the April-June quarter of 2023-24 rose to Rs 7,810.50 crore, as compared to Rs 7,370.07 crore in the corresponding period of the previous year. This data was reported in a regulatory filing.

The edible oil segment of Patanjali Foods Ltd played a significant role in contributing to the company’s total income. Sales from the edible oil segment reached Rs 5,890.73 crore during the mentioned period.

It’s worth noting that the decline in net profit was primarily driven by the fall in cooking oil prices, which likely impacted the company’s profit margins. Despite this, the increase in total income indicates that the company’s overall business operations and other segments may have contributed positively to its financial performance during the quarter.

In spite of experiencing a decrease in revenue from the edible oil segment, Patanjali Foods Ltd managed to achieve a noteworthy increase in sales volume. The sales volume of edible oils witnessed a growth of 35.80% year-on-year, equivalent to an additional 1.4 lakh tonnes of products sold. This rise in sales volume indicates a positive consumer demand and acceptance of Patanjali’s edible oil products.

The edible oil industry as a whole faced challenges during this period due to a significant drop in prices. This sudden decline in prices had a dual impact on the industry. Firstly, it led to a surplus of high-priced inventory that the companies held. This means that the edible oil firms had stocked up on oils at higher costs, and when prices fell suddenly, their inventory value declined, affecting their profitability.

Secondly, the industry also had stock in transit, which refers to products that were in the process of being transported or delivered to various destinations when the price drop occurred. The lower prices likely caused financial complications for these companies as they may have had to adjust their pricing strategies or absorb losses due to the price mismatch between inventory value and market prices.

Despite these challenges, Patanjali Foods Ltd was able to grow its sales volume significantly, indicating effective demand management and an ability to attract consumers even in a challenging market environment. This growth in sales volume might have helped the company mitigate some of the negative impacts caused by the lower prices and high inventory.

It’s important to note that while revenue from the edible oil segment may have decreased due to lower prices, the growth in sales volume showcases the company’s ability to adapt and capitalize on market opportunities, potentially setting a foundation for improved financial performance in the future.

In addition to the challenges posed by the sudden drop in prices and the resultant impact on inventory, Patanjali Foods Ltd highlighted the adverse effect of government intervention on its profitability during the quarter. The government’s decision to lower prices, despite the fact that the industry held high-priced inventory, contributed to a negative impact on the company’s profitability. This suggests that external factors, such as government policies and interventions, played a role in shaping the company’s financial performance during the quarter.

Patanjali Foods Ltd acknowledges that the negative impact on profitability is likely a cyclical phenomenon. This implies that the challenges faced by the company, including the price drop and government intervention, are part of a broader economic cycle that the industry experiences periodically. Such cycles can be influenced by a variety of factors, including supply and demand dynamics, market trends, and external regulatory changes.

Founded in 1986, Patanjali Foods Ltd, formerly known as Ruchi Soya Industries Ltd, has established itself as a prominent player in the edible oils segment. However, the company’s aspirations extend beyond this sector. Patanjali Foods has set its sights on becoming a significant player in the fast-moving consumer goods (FMCG) and fast-moving home goods (FMHG) industries as well. This suggests a strategic diversification plan aimed at expanding its product portfolio and market presence.

The FMCG sector encompasses a wide range of consumer products that are typically sold quickly and at relatively low cost. These products include items like packaged foods, personal care products, and household items. On the other hand, the FMHG sector involves products used within homes, such as home appliances, furnishings, and other household goods.

Patanjali Foods’ ambition to enter these sectors indicates a strategic intent to broaden its business scope and capitalize on opportunities beyond edible oils. This diversification could potentially provide the company with additional revenue streams and a more resilient business model that is less reliant on the fluctuations of a single market segment. It also showcases the company’s vision for sustained growth and expansion in the consumer goods industry.

Patanjali Foods Ltd markets its products under various brand names, including Patanjali, Ruchi Gold, and Nutrela. The company’s Food & FMCG (Fast-Moving Consumer Goods) segment has been meeting its performance targets, showcasing a healthy growth trajectory. The CEO of Patanjali Foods, Sanjeev Asthana, expressed confidence in the segment’s growth and emphasized that the introduction of new products will play a crucial role in further driving this growth.

Asthana highlighted the strategic significance of the Food & FMCG segment, anticipating that it will play a major role in contributing both to the company’s revenue and profit margins. This underscores the company’s focus on diversifying its product offerings within the consumer goods sector and leveraging its existing brand recognition to capture a larger share of the market.

The mention of “new product launches” indicates that Patanjali Foods is actively engaged in product innovation and expansion. Launching new products can attract new customers, retain existing ones, and potentially tap into emerging consumer trends. This approach aligns with the company’s broader vision of becoming a more substantial player in the FMCG industry and further solidifying its position in the market.

Asthana’s optimistic outlook for the Food & FMCG segment suggests that Patanjali Foods is positioning itself for sustained growth, potentially reducing its reliance on any single product category and enhancing its overall business resilience. It also reflects the company’s commitment to adapting to market dynamics and consumer preferences to ensure continued success in the competitive consumer goods landscape.