Better prices to help record profits in Q4: Sakthi Sugars

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Better prices to help record profits in Q4: Sakthi Sugars

Managing director of Sakthi Sugars M Manickam says that better prices and recoveries will help them post profits in the upcoming quarter.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Sakthi Sugars See previous management interviews See what other Experts & Brokerages are saying about Sakthi Sugars Sakthi Sugars BSE | NSE 30/05/12 Are Mutual Funds betting on Sakthi Sugars?

Despite another quarter in the red, managing director of Sakthi Sugars M Manickam says that better prices and recoveries will help them post profits in the upcoming quarter. "However, exports will not help much because export prices are looking flat to the domestic market at this point of time," he said.

Sakthi Sugars third quarter saw a steep fall in sales to Rs 180 crore from Rs 335 crore a year ago and Manickam says that this is because of the lack of sugar processing. "Last year we did a lot of raw sugar but this year it's purely cane," he said.

Going forward, Manickam says that they need sugar prices to move up so as to record profits. "A definite policy on cogenerated power from the state government will also help results," he added. He estimates full year sugar production to come in around 26 million tonne.

Below is an edited transcript of his interview with Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: We are continuing with this red on your bottom-line. When do you see yourself emerging into the black?

A: I think the next quarter we should have black coming because of better recoveries and prices being little better. That will probably reduce the total losses in a way.

But as I have been maintaining, what we need is the sugar prices to move up, particularly given the cost drivers at this point of time. If you really look at the kind of impact that sugar prices have, it's fairly high. For every rupee you will have almost about Rs 20-30 crore in our balance sheet.

Q: What's the upside if you were to export? Do you think export prices are still favorable and you could have a slightly higher realization as compared to the domestic?

A: Not really. Export prices are looking flat to domestic market at this point of time. Two or three factors are really impacting. One major factor is the cogeneration of power. The company now has about 95 megawatt of cogenerated power but we are not really attending to it optimally due to lack of clear policy from the state government at this point of time. So if that were to actually kick in, we could probably have better results.

By the first week of April, when the new tariffs come in, we expect the state government would probably announce a more pragmatic policy for purchasing power.

Q: What's been the realization across these segments in Q3, particularly for power, and what are you expecting once the revised policy comes out?

A: Right now we don't expect the cogenerated power to go up. Whatever I am getting on cane is about Rs 360-370 and that will maintain. What we expect is coal based power which we would be able to generate on top of that.

Right now the state government is not even buying it because our cost reproduction is at least about Rs 4 plus and they are not in the market to buy power at this. So we expect that they will be in the market to start buying power from about April.

Q: To start buying from?

A: From the coal based generators. We will be able to run on coal and increase our output. Last year we were able to run on coal, but since coal prices have gone fairly high, they have not been able to compensate the prices of coal on power that they buy from people.