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May 29, 2013, 01.59 PM IST | Source: CNBC-TV18

Sugar price to rise by Rs 5/kg, aiding margin: Sakthi Sugar

Sakhti Sugar expects sugar prices to improve Rs 4-5 going

Sakthi Sugars expects margins to improve going ahead as sugar prices are seen firming up due to drop in production of sugar can, managing director M Manickam said.

“With the draught and the production of sugar being lower next year, we think the sugar prices may also firm up a bit, which will again give us a better performance,” Manickam said.

He expects sugar prices to improve by Rs 4-5 in the year ahead to Rs 34-35. The Coimbatore based sugar producer hopes its realization to improve Rs 32-33 from Rs 31 currently due to improvement in prices of the sweetener.

Also read: Domestic Sugar production to fall 6-8% in SY2012-13: ICRA

The company today posted a net loss of Rs 25.12 crore in March quarter against a net profit of Rs 27.87 crore in the year ago quarter. Its net sales rose 2.35% on year to Rs 402.39 crore.

Lower sugar prices in the last year mainly dragged the company in to losses in past two quarters, Manickam said.

Below is the verbatim transcript pf the interview
 
Q: Your sugar business has once again posted a loss on the operational front of about Rs 10 crore odd or so. Just take us through this calendar year and what your expectation is with respect to the sugar business and how you could improve?

A: In the last year, the central and state government had increased the sugarcan prices by about Rs 400, but sugar prices increased only by about Rs 200. We were already in the negative. So basically it increased by another Rs 200. We have touched about 2.8 million tonnes of cane which results in to loss of roughly about Rs 50 crore. So that by and large translates the increase in losses.

Also we have the overhang of investment that we have done in our cogenerations and expansion plans. That is the interest which is actually on our balance sheet, so now we are working on getting the cogent operating fully. So we expect that going forward it should be operationally better. With the drought and the production of sugar being lower than this year, we think the prices may also firm up a bit, which will again give us a better performance.

Q: What are your estimates in terms of the sugar domestic production? What would it look like? What sort of realisations are we possibly working with in the sugar production year?

A: We have about 24.5 million tonne production this year and I think next year it may not be more than 22 or maybe even little lower. If that happens we could look at sugar prices going up by about Rs 4-5 to Rs 34-35, because UP mills certainly need that kind of a sugar price for them to break-even. When we are having a shortage then possibly the prices will correct to the level where we have a break-even or at some surplus on our prices. What we are looking forward to is, balance out situation.

Q: Would that be realisations for the calendar year itself? What could the range look like for your company for the realisations this time?

A: Calendar year we are almost six months down. We are at about Rs 31-32 now. So we will probably be looking at it for the next six months, not really for the calendar year. So we might average around Rs 32-33.

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