AWL Agri Business Ltd Q4 FY2022 Concall Summary

Key Takeaways

• Volume rebound, price-driven revenue: Q4 volume grew 16% YoY, one of the highest in 12–14 quarters, while operating revenue surged 40% YoY on commodity price escalation.
• Portfolio advantage drove share gains: Edible oil market share rose from 18% to 18.80% as consumers shifted between oils during the price crisis, a dynamic AWL captured because it plays across all segments.
• Food basket crossed a milestone: Full-year food revenue reached ₹2,621 Cr, with Q4 EBIT up 94% YoY on 33% volume growth; the segment is now a material second engine.
• MTM distortion masks underlying profit: Industry essentials EBIT fell 94% YoY on an ~₹80 Cr mark-to-market loss on contracts; the corresponding gain sits in inventory and will reverse in Q1.
• What to watch next quarter: Realization of the ~₹80 Cr inventory gain in industry essentials, the trajectory of edible oil margins after the Indonesia palm oil ban resolves, and whether food basket growth sustains above 40% as seen in April.

Volume Growth & Market Share

• 16% volume growth in Q4, a sharp acceleration after several quarters of single-digit growth, outperforming most FMCG peers who could not show volume growth.
• Edible oil volumes grew ~10% for the full year against an expected total consumption growth of only 1.8% (1% population growth plus 0.7% consumption growth).
• Market share rose from 18% to 18.80% because AWL's portfolio of oils allows it to capture consumers shifting between oils during crises; when one oil becomes unaffordable, the nearest substitute in AWL's basket gains.
• Rural volume growth of 7% in edible oil and 17% in foods was achieved despite inflation and tepid rural sentiment.
• Alternate channels grew strongly: e-commerce up 34% YoY and modern trade up 19% YoY.
• Distribution expanded by approximately 200,000 outlets during the past two years of COVID.
• Consumer pack market overall degrew by 1.2% per Nielsen, but AWL continued to show growth mainly because of its portfolio of oils.

Mallick: "success for AWL's volume growth is because of the portfolio of oils that we handle so when there is a crisis in one oil and consumers shift to a nearest available oil that comparable oil we have an advantage because we are there in all these segments that one can think of"

Commodity Price Environment & Demand Impact

• Edible oil prices moved from $600–$750/tonne at the start of FY2021 to ~$1,200 at the end of FY2021, ~$1,800 at the end of FY2022, and crossed $2,000 as of the call date.
• Sunflower oil consumption fell 50% due to higher prices, with consumers shifting to other available oils; management expects further shift toward mustard and rice bran oil (locally available) in the first half of FY23.
• Per capita consumption may not grow or may be steady due to high prices; FY23 projection is 1.8% growth, with 3% growth only in the second half, as the first half is expected to be slow.
• Indonesia palm oil ban is expected to be temporary since Indonesia is a surplus and exporting nation with 65% of production exported; management expects some solution sooner than later after Eid holidays.
• Branded products advantaged in volatile markets because retailers prefer fast-moving brands they can liquidate quickly if prices fall; unknown brands risk being stuck in inventory.
• Rural demand impacted by inflation and expected to remain tepid in the medium term; a good monsoon is expected to help rural demand pickup, and in the long run rural will do better than urban due to lower market penetration.

Mallick: "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."

Segment Performance

• Full-year edible oil volumes grew 10% YoY (double-digit), revenue up 47%, segment revenue up 26%.
• Full-year food volumes grew 34% YoY; food basket reached ₹2,621 Cr, crossing the ₹2,500 Cr milestone; EBIT broadly flat as the basket is kept at EBITDA-neutral during the growth stage.
• Full-year industry essentials revenue up 42%, EBIT up 57%, but volumes down 11% due to rapeseed meal.
• April food performance showed more than 40% growth, indicating momentum continuing into Q1.

Food Basket: The Second Engine

• Strategic target: grow food from the current ~11%–12% of volume to 20%, then to 25% over the next two years.
• Four core categories driving growth: wheat flour, rice, besan, and nuggets.
• Rice volumes grew 39% in FY22; a new rice mill acquired in Burdwan district, West Bengal, started processing in the last 2–3 days before the call.
• Wheat flour volumes grew 33% in FY22; additional units taken in UP to augment supply chain, and a new Bundi factory (500 tonnes/day) will add volume from October onwards.
• Nuggets had their first full year of Haldia plant operations (started April); business started growing from April onwards.
• Besan grew sub-15% but new capacity was added last year; besan and pulses together expected to grow ~20%–25%.
• Four food categories together expected to add 30%–35% growth for the next year.
• EBITDA-neutral strategy: during the growth stage, spending will continue on distribution, incentives, and entering more markets; profitability will be sacrificed for scale until the basket reaches target share.

Kanhere: "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..."

Capex, IPO & Balance Sheet

• IPO proceeds utilization: repaid ₹940 Crores of long-term borrowing against ₹1,058 Crores; the rest is PAT and being worked on for new projects.
• Capex completed in FY2022: projects worth ₹690 Crores capitalized, including a new oleochemical complex (400 TPD at Mundra, doubling total capacity to 800 TPD) and a soya nuggets plant (50 TPD at Haldia).
• Oleochemical complex at Mundra is now one of the largest at a single location in the country at 800 TPD.
• New product launches: poha (Indori Poha and normal poha), two new variants of khichdi (including pav bhaji khichdi), and a three-in-one blended oil with flaxseed oil called balanced oil.
• Fortune Mart now at 33 locations, also serving as fulfillment centers for the D2C channel Fortune Online and as experimentation/promotion zones.
• Fortune Online D2C now available across 25 cities with more than 1.4 lakh individual customers.

Competitive Advantage & Sourcing

• Wilmar global network provides information advantage on supply and demand, keeping AWL ahead of competition.
• Portfolio breadth across all edible oil segments means when a crisis hits one oil and consumers shift, AWL captures the demand in the substitute oil.
• Brand strength in volatile markets: retailers prefer Fortune because it moves fast; if the market falls by ₹10 a liter, the retailer knows Fortune can be sold even at a ₹2 margin, whereas unknown brands may not sell at all.
• Shift expected from sunflower and soyabean oil toward mustard and rice bran oil in the first half of FY23; company already seeing demand for mustard oil (both Kachi Ghani and pungent).

Mallick: "in this business one has to understand the S&D very, very well and that keeps us ahead of the competition because of the information that we get from Wilmar Global operations."

Guidance & Commitments

Key Metrics