AWL — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

- ADANI WILMAR LIMITED · Management

adani wilmar For B heBlthy growing nBtlon Adani Wilmar Limited May 02, 2022

Abneesh Roy

look at for the food and FMCG where the volumes we are growing at 34% and this is what we are driving as far as the food is concerned.

The EBIT or segment revenue is more or less flat as we said that EBITDA neutral basket as of now and we are happy to conclude this year with a food basket of plus of 2500 Crores so food basket of 2621 Crores is a very encouraging story for us and that is how we will. continue to grow from here.

Industry essential again 42% up on revenue, 57% up on EBIT, volume of course is down by 11 % back of the rapeseed meal which we have not done because of the disparity.

This is all from my side as far as the performance and financial aspects of the company is concerned and now I can request operator to open the floor for the question and answer we will be happy to answer.

Thank you very much.

We will now begin the question and answer session.

The first question is from the line of Abneesh Roy from Edelweiss.

Please go ahead.

Thanks Sir.

My first question is on the rice market share, is there a typo because in Q3 your market share was much higher at 11.7% and in Q4 it seems to have dropped to 6.5%, and is there any typo here in terms of market share?

You are referring to the quarterly thing where we have grown on a quarter-to-quarter to reach at 11.

7 but that is exit for that month, but when we talk of MAT that is moving average from April to March our market share is at 6.5 that is because of the 12-month average but when you look at only the quarter our Q4 performance has been much better and in Q4 maximum the growth we have got in terms of volume.

So to get like-to-like numbers is it possible to comment on exit market share data so that we can know what is like-to-like data?

Exit market share data I can give you.

MAT is 6.49 but when it comes to Q4 exit I will just get back to you Abneesh.

We generally work on MAT because exit is always higher if the performance of Q4 is high, your March exit will show very high number, but when you look at average April to March it will come down so we generally look at average April to March, but I will give you exit March also, just give me little time.

Sure Sir I will take it offline I was just referring to the rice market share in Q3 you had shared, if you could report there also MAT data or rather than exit so that like-to-like comparison can be made.

Sir my second question is on the commentary you made on volume growth for the industry in FY2023 in the edible oil, so now there are two parts to this.

One is of course every edible oil is going up so how do you see consumption patterns adani wilmar For B healthy growing nation Adani Wilmar Limited May 02, 2022

Angshu Mallick

changing because rice bran and mustard maybe the availability in domestic sourcing can be better versus sunflower and palm oil so do you see these two gaining market share at least in first half of FY2023 and how are you placed in rice bran and mustard if this shift happens at the consumer level?

One Abneesh, we are seeing surely reduced consumption, so the high prices are surely impacting the consumption that is for sure, so the per capita consumption may not grow or may be steady that is why we have projected 1.8 and next year going forward 3%, but 3% also will happen after the second half, the first half is going to be slow because the present prices are high now.

When the market of sunflower and soyabean will go up and there is a shift surely mustard and rice bran are two local oils where there is bound to be shift, we are already seeing demand from mustard oil both Kachi Ghani or pungent mustard oil as well as refined mustard oil.

Let me tell you Fortune is number one brand in mustard oil at 12.2% market share number one.

Number two is that we have seen much higher growth in mustard oil in Q4 and in this month also we have seen, so April, May, June also we will see very high volume growth in mustard oil so that is for sure.

Second rice bran oil also Fortune being number one brand of rice bran oil any shift happening towards rice bran oil we are surely going to get some benefit.

Now all this is because when you have a portfolio of oil it is at least easy to catch the consumer when they shift from one category to another category.

Thanks Sir that is all from my side.

Thank you.

The next question is from the line of Latika Chopra from JP Morgan.

Please go ahead.

Thanks for the opportunity.

I wanted to get some color on the seasonality impact on edible oil so if we look at revenue per metric tonne for edible oil and if you look at EBIT per metric tonne for edible oil it seems the revenue per metric tonne is up about 4% on a Q-o-Q basis, but EBIT per 1metric tonne is about 60% roughly on a Q-o-Q basis, we are just trying to understand and when I calculate the base quarter also I see this big jump in the fourth quarter, so if you could explain the reason for this and on an aggregate basis as we look towards FY2023 and clearly we talked about consumption being impacted due to higher prices, but clearly you are gaining market shares, what is your assessment of your targets on edible oil volume growth for FY2023?

Thank you.

I will answer the second part first meanwhile Shrikant can tell you the answer on the first question.

Because of the high prices there is cut in demand that is one that is cut in consumption.

I am talking of average at an all India household.

Now when it comes to a adani wilmar For II healthy growing nation Adani Wilmar Limited May 02, 2022

Latika Chopra

Shrika~t Kanhere:

particular oil, particular brand a brand may do much better than the market because in this type of scenario what we are seeing very clearly is demand for brands where the retailer can exit fast, suppose tomorrow the market falls by Rs.

IO a liter he knows that Fortune I can sell and even if I make Rs.2 but I can manage it, but if it is unknown brand consumers may not buy and I will have to hold that that is creating the issue as far as the advantage is that we have been growing our market share, we have actually grown our market share and we hope to continue this market share growth in FY2023 also.

Our projection is that even if the country grows at 3% volume growth we should grow at anything at 6% to 8%.

On your first question as far as the revenue comparison to the EBIT growth is concerned, you have a question specifically for edible oil or you have a question for generally as a whole?

I wanted to first cover the edible oil part, I do have some questions on industry essentials, but this question is specifically first to address the edible oil seasonality or why this big variance and actually Shrikant we should think about EBIT per metric tonne growth I think for the whole FY2022 you did about 13% or 15% right if I am not mistaken, so how should one think because there are a lot of volatility and I understand that you think more on profit per tonne basis right, so how should one think about in FY2023 I know prices will keep moving up and down, but how should one look at that, so we will restrict it to edible oil for now?

So edible oil yes clearly was an exceptional quarter for us when you look at Q4 and when we say in our business what happens is you have a dynamic way of looking at mark-to- markets which keeps moving from one quarter to another quarter and therefore for particular cutoff of any quarter you may hold some of the mark-to-markets on the balance sheet date, which gets reflected either in the next quarter or which gets reflected in the same quarter, so therefore in our business when you look at exactly quarter-on-quarter it may not be a right way of looking at it, it should be a full year basis, but yes having said that it is not the only mark-to-market which is getting reflected in Q4 but for Q4 we have been able to get better realization whether it is a sunflower, whether it is a soya or whether it is a mustard oil and that is something which are getting reflected in the margin more than the improvement in the sales realization.

Shrikant how should one think about it, your EBIT per metric tonne typically is going to make teens kind of a growth, is that something you would anticipate to still kind of keep that momentum on despite wherever the upper price table goes? adani wUmar For a healthy growing natl on Adani Wilmar Limited May 02, 2022

Moderator · Conference Operator

Generally in our industry if you are properly hedged and if you have been able to put across a proper risk management policy in place you should not be showing too much of volatility quarter-over-quarter, the quarter-over-quarter should be more or less similar, this is the only exceptional quarter where we have been able to showcase, but as we move forward I think the margins should be in a range bound given the fact that most of the positions held by the company are hedged and unless of course there is no too much of volatility which may happen in a particular quarter which may for some reason either dent that quarter number or either make that number looks very, very high, but having said that ideally going forward we should have range bound numbers for every quarter coming in.

Alright and my second part sorry just to get this straight was on industry essentials I could not understand when you were explaining what happened to the profitability of this business in this quarter, if you could share more details on what happened to a bit of industry essentials and how will QI be impacted account of that?

Thank you.

That is exactly how the hedging mechanism works, so when you hedge any particular commodity against a purchase contract typically you go and sell the material on the exchange and that is how you hedge and therefore whenever market moves up or down you either lose on contracts, if you lose on contract you have a corresponding gain sitting in the inventory and vice versa if you gain on the contract you have a loss sitting in the inventory, now typically what happens in the first situation which I explained when you have a loss in the contracts because of the markets going up usually you have a corresponding gain sitting in the inventory and that is what actually has happened as far as the Oleo is concerned and therefore what we are saying is because of this when you take a cutoff because you need to make a balance sheet by taking a cutoff of a particular date, so you had to book those losses and the inventory gains remains outside the books, which ideally gets reflected in the next quarter and therefore in such scenario if you look at two quarters back-to-back for a particular business you will see that there is no impact as such.

What is that quantum in this quarter Q4?

So the quantum in this quarter for Oleochemicals is around Rs.80 Crores.

Alright.

Thank you and I will get back in the queue.

Thank you.

The next question is a followup from the line of Latika Chopra from JP Morgan.

Please go ahead. adani wUmar For a healthy growing natl on Adani Wilmar Limited May 02, 2022

Shrikant Kanhere

Sir, I wanted to check if you could share the breakup for your food business in terms of the key contributors, wheat flour, rice, soya chunks, besan, any kind of for FY2022 full year what is the kind of volume growth you registered here and now with the acquisition of this rice mill what kind of upside you anticipate for the rice business going forward?

When we talk about the food four basic products which are basically driving the entire food basket for the company, which is wheat flour, rice, besan, nuggets, these are the four basic categories and for last year we have been able to showcase 30% plus growth on both rice as well as wheat flour and then that is where we are saying that we will continue to grow on both whether it is a wheat flour or whether it is a rice.

So when you look at our volume growth in besan last year it was sub 15% but we have just added capacities for besan last year plus we are also putting up some projects in IPO, so this 15% should again go to the next level.

Nuggets we are consistently growing on the volumes which should continue.

So these four categories should add anywhere between 30% and 35% of the growth for next year Mr. Mallick can add further.

When you look at each of these categories say rice we have added a volume of 39% increase in volume in one year between FY2021 and FY2022 we expect to continue at this kind of volume growth this year also, we have added one factory at Burdwan which has already started processing since last two, three days so that plant can process roughly around 4000 tonnes of paddy a month and we expect to do at least 35000, 40000 tonnes paddy.

Like that we have plans to hire more plants in south to add our non-basmati rice volumes so rice should continue to grow at 35%, 40%.

Wheat flour we have grown at 33% last year, we expect to continue the growth this year because by October we will add a new factory that we are making at Bundi that is 500 tonnes per day so we expect to add that volume from October onwards plus we have taken one or two more units in UP to augment our supply chain because the demand is higher.

Nuggets, last year was the first year for Haldia plant because it was just started in April, this year the plant is now ready to work and so the business has started growing from April onwards.

We expect 20% to 25% growth in nugget volumes.

Besan I am sure besan and pulses put together will grow at around 20% to 25%.

April performance if I tell you will be more than 40% growth, so food wise this is the type of growth that we are looking at.

Thank you and just on profitability for food, how are you thinking about the roadmap there?

As we said food basket currently is sitting at Rs.2600 Crores turnover which is good and which is what we actually had planned for FY2022 exit, we are almost there.

It is still a EBITDA neutral business and as we said earlier also this is a focus area and we will keep adani wilmar For D healthy growing nDtlo.n Adani Wilmar Limited May 02, 2022

Moderator · Conference Operator

growing this basket and the whole focus is to improve this basket currently around 11 %, 12% of the volume coming in from the food, we want to take it to the level of 20% and then 25% by next two years, so till the time this is in the growth stage I think we will keep this at a EBITDA neutral level by spending more and more on distribution, incentives and ensuring that we enter more markets even though we may have to spend little more to achieve this target and that is what the outlook which we are looking at as far as the food business is concerned.

Thank you.

As there are no further questions from the participants I now hand the conference over to Mr. Angshu Mallick for closing comments.

Thanks to everyone who has joined in and we have tried to explain how things have happened in the last quarter and this financial year and looking at the things overall the inflationary trend and consumption might had impacted, but not only edible oil including wheat, rice, these prices have also gone up a bit, but brand wise, the brand is strong, the growth is continuing and we expect to garner more and more market share in all the categories that we are (audio cilt)-43:·oi1.

Thank you once again to all.

Thank you.

On behalf of Adani Wilmar Limited that concludes this conference, Thank you for joining us and you may now disconnect your lines,