Optimistic on volumes, prices for next year: Sakthi Sugars

Managing director M Manickam tells CNBC-TV18 that he expects volumes to be higher and prices to be fairly better compared to the last year, helping the company become profitable in the coming few quarters.

“SY13 looks much better than the last two-three years because prices are more in parity now and the volumes are also fairly good compared to last year,” he said.

He further adds that prices will move up to Rs 34-35, which is above break even, in the coming few quarters.

For the quarter ended June 2012, Sakthi Sugars posted a profit of Rs 1.4 crore compared to loss of almost Rs 10 crore last year.

Below is an edited transcript of his interview with Latha Venkatesh and Gautam Broker. 

Q: What were the realizations this quarter around and what are you expecting in the current quarter?

A: For the quarter which was over the realization was around Rs 26, which is about the same as last year. For the current quarter, prices have moved up, so we are looking at around Rs 34-35 for the current quarter. But of course, production will be less because it is off season. So we expect that from the next quarter onwards we should be fairly profitable.

Q: You will have some indication now as to the sugar cane acreage sown, the carry forward stock and some estimation of demand, so how is sugar year ’13 (SY13) panning out?

A: SY13 looks much better than the last two-three years because prices are more in parity now. We are now Rs 35, which is above breakeven, and the volumes are also fairly good compared to last year.

Tamil Nadu has not suffered as much drought as the rest of the country, so we have maybe slightly higher volume for the next year, so we should do fairly well next year.

Q: How would your interest cost pan out?

A: We will be paying down out debt. In fact, you have seen the interest come down by about Rs 10 crore because we have paid down some debt last year. We would be paying down debt through this year. So we expect that there will be good reduction in the interest costs as we go forward.

Q: How do you feel the government will behave to the rising raw sugar prices domestically? Where do you think domestic and international prices could stabilize if there were to be a spike?

A: Today we are around Rs 34-35, and I think this is a good level for the government to let it be, because the industry has been complaining for last two years that we are not at breakeven. Around Rs 34 we are still okay, so I think we should be alright.

I don’t think government is going to do much more. They have already released 4 lakh tonne for this month, and that has had some impact of slowing down the price increase and this should probably keep the prices in range.

Q: Is there a question of imports being a threat if the tariffs are lower?

A: Not much right now because of the parity for import today. I think imported sugar is around Rs 30, with the conversion cost of about Rs 4-5 including transport and everything. We are at parity with Rs 34-35. So as long as it is priced around Rs 34-35, I don’t think imports being major threat.