Refined sunflower oil sales may drop 10% this fiscal

Mumbai: India's refined sunflower oil sales volume is expected to decline about 10 per cent in the current fiscal due to supply-chain disruptions triggered by the Middle East conflict and rising prices that are likely to drive consumers towards cheaper alternatives, a report said on Thursday.

Indian refined sunflower oil volume is poised to decline 10 per cent in the current fiscal, due to twin headwinds that will dampen demand, Crisil Ratings said in a report.

Firstly, supply-chain disruptions triggered by the Middle East conflict, and secondly, higher prices resulting from the pass-through of increasing logistics costs, will likely lead consumers to switch to cheaper substitutes such as rice bran and soybean oils, it said.

Revenues are, however, expected to remain flat during the year, as higher realisations would offset the volume drop, it added.

Crisil Ratings said that profitability of sunflower oil refiners will also remain stable with inventory gains from previously acquired low-cost inventory largely offsetting negative operating leverage from the volume dip.

Increasing crude prices and supply-side bottlenecks will tighten the inventory levels of domestic sunflower oil refiners in the short term, said the report. However, this will also lead to a temporary release of working capital that will aid cash flows.

Moreover, strong balance sheets will help keep credit profiles stable for domestic sunflower oil refiners.

According to the report, refined sunflower oil accounts for 12-14 per cent of India's annual edible oil consumption of 25-26 million tonnes.

The industry depends heavily on imports of crude sunflower oil, making it vulnerable to global trade disruptions and geopolitical developments.

A large portion of the imports is from Ukraine and Russia and with the ongoing conflict in West Asia, vessels are taking longer routes, such as around the Cape of Good Hope, increasing voyage distance and transit time.