Dhampur Sugar Mills
BSE: 500119 | NSE: DHAMPURSUG | ISIN: INE041A01016 | Sugar
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Chairman's Speech | Year : Sep '08 |
A view from the senior management It would be futile to sugar-coat the reality of a challenging 2007-08, when we were required to manage politically motivated raw material pricing on the one hand and enhance value for shareowners on the other. Given this reality, our performance was creditable: a net profit of Rs. 3.60 cr, following a net loss after tax of Rs. 60.48 cr in 2006-07. Given this industry inflection point, shareholders would be most likely seeking answers to not only what transpired in 2007-08, but also what they can now expect. This report communicates our optimism about an imminent improvement in sugar realisations, the growing choice of bagasse as an alternative energy source as well as an increasing preference for cane-derived ethanol and other value-added chemicals. Rise in sugar realisations We write to you from a point of optimism because sugar prices that were depressed for the large part of 2006-07 and a part of 2007-08 appear to have climbed out of an extended trough. Since Dhampur Sugar derives 70.91 percent of its realisations from sugar, any improvement in the sweeteners realisation will lift the corporate average. Historically, sugar prices have been inversely linked with sweetener production. Lower cane acreage in SY 2008-09 will result in a lower production of sugar from around 26 million tonnes in SY 2007-08 to below 20 million tonnes for SY 2008-09. Once you factor in a projected domestic consumption of around 23 million tonnes for SY 2008-09, the reality is that a large proportion of the incremental demand will be met by the sugar inventory. There will be a significant moderation in the closing stock to around six million tonnes, estimated at a little more than three months of consumption. The net result is that realisations had strengthened in October 2008, compared with the corresponding period in the previous year. Bagasse as an exciting fuel Over the years, we consciously invested in bagasse-centric power generation for important reasons: we transformed an available commodity surplus into a product with a growing deficit, assured sale at protected, realisations and an accompanying tax hedge. Our intent is visible in the numbers: we enhanced the proportion of revenues derived out of power sale from nil in 2006-07 to 14.45 percent in 2007-08. The prospects of this business segment continue to be optimistic for a number of reasons. According to the Central Electricity Authority, Indias power deficit (around 10 percent of the total demand) is set to rise. The Government has been actively exploring various options to bridge the demand-supply gap. It is in this context that the export of surplus co-generated power has emerged as a profitable opportunity. Within this, bagasse-based power generation is one of the most promising energy creation centres with a number of advantages: a shorter gestation of cogeneration assets, effective utilisation of a by-product, cost-effective power generation, environment-friendly operations, tax rebates and interest-free loans. The fact that mills are now permitted to market merchant power directly, instead of selling it to state electricity boards means that they can select credible power trading companies and recover their proceeds faster. What makes this space interesting is that as per industry estimates, the potential for bagasse- based cogeneration is as high as 3,500 MW, of which only a small proportion has been realised so far. Even for companies like Dhampur, which are already selling excess power, there is a potential to market more. Increasing ethanol manufacture Perhaps no segment of the business is more environmentally relevant, with robustly sustainable prospects, than ethanol manufacture. The use of cane- derived ethanol is substituting high cost fossil fuel. There is an added incentive of generating ethanol from renewable crop sources year after year, since fossil fuel is finite and depleting. The economics of ethanol production from sugarcane represents the most viable alternative and also positively contributes to climate change management through lower greenhouse gas emissions. As a progressive organisation, we have responded to this reality with speed and surety. A more sustainable business model At Dhampur, we are excited by the possibility of deriving more gain per cane. We are proud to report that we are among the few in our industry to have taken a call of enhancing non- sugar capacities, achieving a lower conversion cost, reporting sustainable cash flows and a direct pass-through to the bottomline. This sustainable model has been centered around economics of scale: we are one of the most extensively integrated sugarcane complexes, with one of the highest ratios of exportable power and distillery capacity of 2.03 KW and 6.84 LPD, respectively per tonne of our installed cane crushing capacity. We are moving towards the higher end of the value chain through the following initiatives: - We are one of the largest refined sugar manufacturer in India with an installed capacity of 17,000 TCD. Our refined sugar, branded as Dhampure, is retailed to prominent beverage, confectionary and food companies at attractive realisations. - A flexible product mix enables us to swing between alcohol, fuel grade ethanol and value-added chemicals, depending on realisations. Overview Through this single-minded approach, we are geared to create enhanced value in the hands of all those who own our Company in 2008-09 and afterwards. Sincerely, V.K. Goel, A.K. Goel, Chairman Vice Chairman Dhampur Sugar Mills Limited |
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| Source : Religare Technova | |
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