Adani Wilmar’s Q4 Profit Falls 60% YoY to 94 cr, Revenue Down 7%.

Adani Wilmar on Wednesday reported a 60 % decline in consolidated net profit at Rs 93.61 crore for the quarter that ended March 2023 on lower revenue. The net profit was Rs 234.29 crore in the previous year’s report.

Total income fell from Rs 14,979.83 in the year-ago period to Rs 13,945.02 crore in January-March 2022-23. Adani Wilmar noted in their regulatory filing.

During the full last fiscal, Adani Wilmar’s net profit fell from Rs 803.73 crore to Rs 582.12 crore this year. However, net income rose to Rs 58,446.16 crore from Rs 54,327.16 crore in the previous year.

 

The branded sales of the edible oil segment increased by 4% during the quarter thanks to strong customer demand brought on by lower edible oil prices. Nevertheless, due to a lack of demand from the bakery and, more specifically, the fried food business, the entire volume of oil sales was performing very poorly.

A significant market opportunity in India, according to Angshu Mallick, MD & CEO of Adani Wilmar, is translating nicely into our growth figures. In just two years, we practically doubled our sales of food and FMCG and brought in more than Rs 4,000 crore. With 75% saliency in branded sales of edible oil, we performed noticeably better in FY ’23, with volume growth of 8% YoY.

He further continues,’ In the Industry essentials segment, they have made positive progress with their forward integration plans in specialty chemicals’,” to which he adds that they investing in the business to support our growth. Their margins during the quarter and full year got impacted by high-cost inventory in a falling edible oil price environment at the same time inflation impact their operational costs, and an increase in interest costs due to rate hikes,”.

This news could be shocking for many people who have been following the company’s growth and success over the years. Adani Wilmar is a joint venture between the Adani Group and Singapore-based Wilmar International which deals in edible oil processing, trading, and marketing. It is one of the leading companies in this sector in India and has a significant presence in Southeast Asia.

 

Why did it happen?

While there might be several reasons that led to the downfall in profits and revenue, one of the major factors could be the economic slowdown that hit the country because of the ongoing pandemic. The Covid-19 pandemic has had a severe impact on businesses across the globe, and Adani Wilmar was not an exception. The pandemic led to disruptions in the supply chain, the closure of factories, and reduced demand for edible oils due to the reduction in the hotel and restaurant sectors.

Another reason for the drop in profits and revenue could be the increase in raw material costs. The prices of various edible oils such as soybean oil, palm oil, and sunflower oil saw a surge in prices over the year which ate into the company’s margins and profitability. Adani Wilmar had to source raw materials at a higher cost as compared to previous years, thus leading to a reduction in profits.

Moreover, the company was hit with a penalty in June 2020 by the National Anti-profiteering Authority (NAA). The NAA had found Adani Wilmar guilty of not passing the benefit of a reduction in GST rates to consumers. The company was fined Rs 1.51 crores and asked to refund the amount to consumers. This penalty was a significant setback for the company as it impacted its cash flow and credibility.

Critics argue that Adani Wilmar should not have charged the high price when the GST rate was cut as it is against the GST law and is considered malpractice. The penalty imposed by NAA has no doubt affected the company’s profits, but it can also be seen as a warning for other companies to follow proper business practices and stick to the rules laid out by the government.

The decline in Adani Wilmar’s Q4 profits and revenue has raised questions about its ability to sustain its operations and compete with other players in the market. It is a cause of concern for the investors who had high expectations from the company. The slowdown in the Indian economy and the pandemic have brought new challenges for the company and its management needs to take proactive measures to ensure that they emerge from this crisis unscathed.

And the unforgettable Hindenburg investigation that happened earlier this year on 24th January where they accused Adani of fraud, stock manipulation, and other malpractices. 

Needless to say, it’s pretty self-explanatory why Adani Wilmar’s is facing its downgrade. 

What should be the next move for Adani Wilmar?

One way of achieving this could be to focus on innovation and product differentiation. By diversifying its product range and introducing new and unique products, Adani Wilmar could attract more customers and increase demand. This would lead to an increase in revenue and could help offset the increased raw material costs.

Another way could be to streamline their processes and optimize costs. The company needs to focus on improving its efficiency and reducing costs wherever possible. They should explore avenues for cost-saving by embracing new technologies and modernizing their operations.

Adani Wilmar is now setting a new target that replicates the playbook of its edible oils business in the Foods business. During the year, Adani Wilmar made positive progress and has been gaining market share across food products,” mentioned the company in a filing.

India offers a large market opportunity, and our growth rates reflect this nicely. In just two years, we practically doubled our sales of food and FMCG and brought in more than Rs 4,000 crore. With 75% saliency in branded sales of edible oil, we performed noticeably better in FY ’23 thanks to an 8% YoY volume gain. According to Angshu Mallick, MD & CEO of Adani Wilmar, “We achieved good progress with our forward integration goals in specialty chemicals in the Industry Essentials division.

Shares of Adani Wilmar closed 4.59 percent lower at Rs 396.40 a piece today. The stock was down at 1.78 percent in the last month, but at the same time on a year-to-date basis, it fell 34.37 percent

In conclusion, Adani Wilmar’s Q4 profit falling 60% YoY to 94 cr, and revenue down 7% may seem like a setback for the company, but it also presents an opportunity for them to reevaluate their strategy and focus on growth and expansion. While external factors like the pandemic and economic slowdown have contributed to the decline, internal factors like increased raw material costs and penalties have also played a role.

It is imperative that the company’s management takes proactive measures to address these issues and emerge stronger from this crisis. By focusing on innovation and cost optimization, Adani Wilmar can continue to be a leading player in the edible oil processing and marketing sector.

Proofread & Published By Naveenika Chauhan