Balrampur Chini posts sweet results despite co-gen worries

Vivek Saraogi, MD, Balrampur Chini explains to CNBC-TV18 that above-average volumes and high price-realisation enabled the company to post positive results. However, its co-generation unit posted a loss due to non-generation of electricity during the monsoon quarter.

Below is the edited transcription of the interview on CNBC-TV18. Q: Your volumes at 2.4 lakh tonnes were very good for the current quarter. Can you explain the output and what you expect to achieve in the remaining quarters of the year in terms of volume?
A: We have about 22.6 lakh bags of sugar left which, most probably, will be sold in this quarter. Yes, the volumes have been good and the price realisation has been pretty decent with the average being above Rs 34. Q: Is the sugar market still quite tight in terms of demand and supply?
A: I think it is very evenly balanced. The crushing season has just begun, so there will not be any shortage sugar. But at the onset of the crushing season, usually the price takes a dip and then as the crushing season starts tapering off, the price starts firming up. So I think that trend will continue. Q: Do you see prices in the current quarter also holding above Rs 34 per kilo?
A: From October, the prices held out at  above Rs 34 per kilo. But after November 20, I do not think the prices would hold beyond Rs 34 per kilo, but an average of Rs 34/kilo maybe realised. Q: So you do not see a meaningful correction in prices post Diwali?
A: There maybe little correction, but we do not expect anything very meaningful. Q: Will the sugar business continue to be profitable?
A: This is the first time that we feel, after many years, that the sugar business would turn profitable next year, but you never know. Cane prices have not been announced yet and  without knowing the cost of cane, it is impossible to predict the sugar business. Q: Why has your co-generation unit turned in a lacklustre performance for the quarter?
A: In this monsoon quarter, we managed to sell hardly 4 crore units. If we compare it to the previous six months, our co-generation posted a loss of Rs 45 lakh versus a loss of Rs 3.58 crore in this quarter, because in this quarter electricity is not produced. Q: How has your distillery business performed?
A: Our distillery business has performed very well and I think for the full year, the distillery unit will turn in record profits and will continue to offer stable earnings next year. Q: What will the profits be in the vicinity of?
A: If we have to double the profits till now, it could get closer to Rs 85-88 crore at the pre-tax level. Q: Your interest costs are down Q-o-Q to about Rs 42 crore. Do you see a further reduction in the second half of the year?
A: I think if we compare quarter-to-quarter, interest costs should come down now on retained profits and the 1-percentage point fall in the interest rates. Q: Any idea you can give us of where things stand with the Rangarajan Committee recommendations and by when we can see some implementation?
A: The Rangarajan Report is divided into two parts- one part is about various aspects regarding the finished product such as levies and releases. The other part is regarding the raw material (cane) such as reservation areas and cane price linkages.
I feel the suggestions are doable. We offered our feedback and suggestions to the agriculture minister. I feel that there is a very good chance that the suggestions on the finished product could be implemented prior to the Budget. Q: The final pricing issues might take a while to be sorted out. In the interim, what are your expectations of the State Advised Price (SAP) for cane this time around?
A: We are all awaiting the announcement. Last year, the SAP was Rs 240 for general variety and Rs 250 for the early variety. Q: Do you think there will a mild revision or will the SAP be increased to levels above Rs 260?
A: It is again very difficult to make an estimate.