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Simbhaoli Sugars
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Explore Simbhaoli Sugar connections « Sep 09
Chairman's Speech (Simbhaoli Sugars) Year : Sep '10
2009-10 proved to be a difficult business year for the international as
 well as domestic sugar industry with very high price volatility,
 changing production estimates and error in forecasting trends. Domestic
 sugar prices touched one of the historically high levels and then came
 down sharply after a correction in the domestic supplies. There were
 losses on account of marking to market valuations of sugar inventory
 and the highest ever raw material costs.
 
 Simbhaoli achieved a record production and turnover level of white
 sugar at 3.82 lacs mt and Rs 1490 crores respectively. Raw refining
 programme, as a business model, has been successfully carried out at
 all the units, paving way to increase the size of the business and to
 improve the capacity utilisation.
 
 The year started with a short cane supply and rising sugar prices
 resulting in very high cane price payments to the farmers.  However,
 this rally in the free sale sugar prices did not sustain and prices
 came down by as much as 45 percent in a short span of time. High
 inventory levels caused operating losses in the sugar segment.
 Availability of By-products was also impaired resulting in under
 utilisation of capacities in alcohol segment.
 
 Despite a slowdown in the liquor segment, your Company has launched
 three new brands during the year. The export of extra neutral alcohol
 (ENA) has commenced with 72 lacs BL. ENA and IMFL exports are expected
 to surge significantly in future and shall be a focus area for the
 Company. Commencement of ENA exports to Africa, a continent with new
 business opportunities coming up, is a step in this direction.
 
 Since the sugar cycle is showing definite trends of moving from
 deficit to a surplus phase, your Company is re-aligning its
 policies to position itself in changing scenario. We have started
 exploring new markets for sugar and its variants. We have approached
 the Regulators to allow sugar mills to export white sugar on a
 consistent basis.
 
 To realise the long-term vision of Simbhaoli as a customer-centric
 enterprise and an FMCG producer, new brands have been launched in
 specialty sugar area and new market segments have been entered into.
 The introduction of Trust Sipp, an instant fruit-drink mix has been
 an initiative towards adding value to the sugar business.
 
 Your Company supports the usage of ethanol as a green and renewable
 fuel. During the year, it has participated in the tendering process and
 received ethanol orders from the oil marketing companies under the
 Ethanol Blending Program (EBP). EBP will help in stabilising the prices
 of molasses and spirits at remunerative levels. Cogeneration of power
 has emerged as the steadiest business for sugar mills. We have a long
 term plan to scale up our power generation capacity from 64 MWH at
 present to 100 MWH in the future.
 
 Integrated Casetech Consultants Pvt Ltd, our technology subsidiary is
 spreading its business areas and providing a number of technical and
 agricultural solutions particularly in the areas of refining, energy
 management and sugarcane development in India and overseas.
 
 Your Company is promoting a green-field sugar refinery at Kandla to
 create one of the least cost raw refining facility for catering to the
 domestic as well as international refined sugar markets. The port based
 stand alone sugar refinery shall have a capacity of producing 1000
 tonnes of sugar per day.
 
 Extremely adverse business conditions have resulted in negative margins
 for your Company in the last three quarters of the year.  But the
 turnaround is expected with the start of the new sugar season. The
 sugar cycles have become short and I am confident that 2010-11 will see
 an upswing, which will positively impact profitability across sugar
 mills. Simbhaoli has systematically enhanced the sugar production
 capacities and with increase in the volumes, the allied business
 activities are also expected to contribute towards the profits in the
 coming years.
 
 The factors which are likely to contribute to the turnaround in 2010-11
 include the softened cane prices, lower levy sugar quota, lower
 inventory levels, export of sugar and alcohol, ethanol off take at
 improved prices; and higher power generation. GOI is considering
 deregulation of the sugar industry, and a number of steps have been
 initiated. A lot more is still needed to be done, particularly creating
 cane price fixation structure and removing quantitative restrictions on
 sugar. Simbhaoli along with entire industry is looking for the new
 opportunities and challenges to be created by such a move.
 
 In the end, I thank all our stakeholders for their enterprise,
 commitment and support. I am confident that together we will take
 Simbhaoli Sugars to the new heights of growth and profitability.
 
 Gurmit Singh Mann
 
 Chairman & Managing Director
 
 New Delhi
 November 29, 2010
 
 
 
 
Source : Dion Global Solutions Limited
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