See stronger sugar prices in Q4: Shree Renuka

In an interview to CNBC-TV18, Narendra Murkumbi, managing director of Shree Renuka Sugars says, the Indian domestic price has moved from export parity, from around Rs 26-27 per kg ex-mill level region to about currently Rs 33-34 per kg. "I expect these prices to hold. One could see stronger prices in the Q4," he adds.

He expects ethanol margins to be significantly higher in the coming year.

Below is the edited transcript of his interview with CNBC-TV18's Reema Tendulkar and Gautam Broker.

Q: It was a surprise that we did not have the Brazil numbers this time around. By when can we expect the numbers to be released?

A: We have taken a decision that this year because of the excessive management time that is needed to compile the number in time for the Indian result declaration, we will give it at a later date. I expect the same to be continued throughout the current financial year. We will declare the results in the next four weeks. There is no change in the level of disclosure at all.

Q: Co-gen business disappointed with its revenues falling about 44%, also coming out with a loss this quarter. What’s the outlook for the Co-gen business? Can we expect a turnaround in the coming few quarters?

A: This year, compared to last year, we had a shorter season. We crushed almost the same cane as last year. But because of a higher capacity utilisation in the last two quarters, we finished most of the cane by early April. That’s one of the reasons for the lower performance.

In the previous quarter, we had a much better than one of our record quarters in Co-gen. Also, in our refineries we are cogenerating power, but there we are using coal. So, there is a negative contribution there at the moment. These are the factors. I think it’s primarily a seasonal factor.

Q: What about sugar realisations? How much do you expect to sustain? Current domestic prices are way above. Do you see the prices stabilising at current levels?

A: Since July, the domestic prices have adjusted to the fact that we have a very stress situation with the monsoon. The Indian domestic price has moved from export parity, which was around Rs 26-27 per kg ex-mill level region to about currently Rs 33-34 per kg. I expect these prices to hold.

One could see stronger prices in the Q4. Poor monsoon is also a factor that can further influence domestic sugar prices. If you see our sugar segment, last quarter, it was driven by very strong volumes, especially export volumes, which were subdued in the previous quarter. In this quarter, we have had record shipments for export after the new export policy was announced. Price realisations also have been very good, about Rs 34.5 per kg on the export leg.

World prices now are below domestic prices. However, on a re-export basis, our refineries continue to show positive margins. So, we will be importing raw sugar from Brazil. Infact, the first sugar has already arrived and we will be processing that and re-exporting it from our refineries to the Asian region. Because of the absence of other exports from India, I don’t expect any more exports from India, from domestic production for the next 12 months.

We expect our refineries to have less competition in the Asian region and therefore better margin than the previous year.