Edible oil firms suffer big losses on imports surge

SHARPLY SUBDUED LEVELS of edible oil prices in the global markets for nearly a year, coupled with the government's resolve to pass the benefits on to the consumers, have kept consumption high, but hit the bottom lines of domestic companies hard.

- VIVEAT SUSAN PINTO, SANDIP DAS

While sales volumes of top brands have grown by 20-25% in the June quarter, combined sales of 11 listed edible oil companies fell by 8% on year, according data complied by FE. With the sharp drop in price realisation, these companies saw their operating losses of nearly 50% on a combined basis in Q1FY24, while their combined net losses in the period were over 76%.

While this is for the second consecutive quarter that these companies have suffered losses on a combined basis, the extent of the losses was sharper in Q1FY24 over Q4FY23.

Domestic edible oil companies had suffered losses in Q2FY23 as well, but returned to modest profitability in the subsequent quarter as prices firmed up briefly. There has been a marginal increase in prices in the September quarter, but it is unlikely that all companies have turned around during the period.

There has been a surge in edible oil imports, notably refined palm oil.

With the landed cost of refined palm oil being below that of crude palm oil, domestic refining has become unviable, forcing companies to urge the government to introduce a meaningful import duty differential between crude and refined oils.