Palm oil prices trading higher despite cut in customs duty: Prataap Snacks

Amit Kumat, MD and CEO of Prataap Snacks said despite the government cut the base import tax on crude palm oil to 2.5 percent from 10 percent, prices have been extremely high for the last one year; trading at historic highs.

“In last quarter, the average palm oil price was almost 65 percent higher year-on-year (YoY),” he said.

“The prices used to be around Rs 70 per kilogram for many years, currently it is trading around Rs 120 per kilogram. The impact of palm oil is very high. A Rs 5 increase in palm oil prices reduces our EBITDA margin by 1 percent,” he added.

Pros and cons of government's push for palm oil

The company has done many changes, which have mitigated the impact of palm oil prices.

The company has done direct distribution cutting one channel in between, which has improved its margin by nearly 3 percent.

For deeper penetration, the company is directly calling the retailers and taking orders, which has increased the company’s penetration to a bigger extent in the few areas.

Also Read: Govt approves Rs 11, 040-crore scheme to boost palm oil production

He expects to have better margins from Q2, Q3 and Q4. “Q2, Q3 and Q4 will be much better than Q1,” he said.

In terms of in-home and out-of-home consumption mix, he stated, “It used to be around 5 percent, the bigger packs that we sell, currently it is more than 10 percent and we are trying our best to probably increase that to 20-25 percent.”