Adani Wilmar may report 4% revenue drop in Q4; Find out why Nuvama sees its edible oils & industry essential business disappointing
While Adani Wilmar released its business update for the quarter ended March 31, 2024 earlier this month, stating that it has witnessed double-digit growth in both edible oils and foods businesses, Nuvama Institutional Equities estimated the FMCG firm’s Q4 revenue to dip 4 per cent on-year. Abneesh Roy, Executive Director at Nuvama Institutional Equities, said, “We expect consolidated revenue to dip 4 per cent YoY. However, EBITDA shall surge 43 per cent YoY.”
Per the report, Adani Wilmar’s edible oils business is expected to contract 4 per cent YoY by value due to price cuts in edible oil in the wake of softer RM costs. The Food & FMCG business, it added, is likely to grow 18 per cent YoY, aided by its Kohinoor brand, whereas industry essentials suffered a double-digit decline. Industry essentials posted a decline in volume/value of 21 per cent/ 15 per cent YoY.
EBITDA margin, meanwhile, is likely to improve ~126bp YoY, but shall stay flat QoQ. “Although AWL has been doing well over the years in terms of market share across categories, there is a near-term risk from local players owing to commodity deflation in edible oils,” Nuvama report stated.
In an exchange filing earlier, Adani Wilmar had said that the company benefited from the strong demand during the festive occasion of Holi and the ongoing wedding season. “The company also achieved its highest ever volume during the quarter and it continues to gain market share,” it had stated.
Performance across categories
Edible oils: According to the analysis by Nuvama, the segment registered volume growth of 13 per cent on-year, but value contraction of 4 per cent YoY on a standalone basis. The growth was driven by increased retail penetration in under-indexed markets and the festive season. In FY24, branded sales in edible oils grew at a faster rate of 15 per cent compared with the overall segment growth of 10 per cent YoY. FY24 had lower edible oils prices compared with FY23, leading to lower revenue despite growing volumes, it said.
Food & FMCG: In Q4FY24, the Food & FMCG business posted value/volume growth of 18 per cent/ 10 per cent YoY driven by strong domestic sales, despite the negative impact of continued export restrictions. Nuvama analysts said that revenue from branded products in the domestic market has been growing at over 30 per cent YoY for the last ten quarters. The revenue in this category has nearly doubled to approximately Rs 4.7 billion within two years in FY24.
Industry essentials: This category’s volume/value contracted 21 per cent/ 15 per cent YoY.
Others: Adani Wilmar has made significant improvements to its distribution infrastructure in the southern region. Various initiatives such as regional marketing communications have resulted in market share gains in Sunflower oil. The HORECA segment, meanwhile, crossed Rs 4 billion in revenue in FY24, within a year and a half of setting up a dedicated HORECA distribution channel.
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