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Balrampur says not sure when sugar price will break even

Balrampur Chini posted weak set of quarterly earnings Wednesday, with net loss widening from Rs 4 crore to Rs 72.7 crore.

August 12, 2015 / 05:07 PM IST
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Balrampur Chini posted weak set of quarterly earnings Wednesday, with net loss widening from Rs 4 crore to Rs 72.7 crore.

In an interview with CNBC-TV18's Sonia Shenoy and Anuj Singhal, MD Vivek Saraogi discussed the company's earnings and state of business.

Below is the transcript of the interview on CNBC-TV18.

Anuj: Update us on the current situation; we have seen quite a bit of collapse in sugar prices if I am not wrong, so where do things go from here?

A: As you are aware that sugar price has kind of hit a 6-10 year low and currently the prices have recovered from the lows. They were trading at about closer to Rs 25 per kg and they have fallen to about Rs 23.

So, in this quarter, we sold sugar at Rs 25.39 and we sold 19 lakh bags and the loss in the sugar segment is Rs 118 crore, the profit in the Cogen segment is Rs 45 crore, distillery profit is Rs 33.5 crore, the net negative being Rs 39.5 crore, the rest is finance cost is about Rs 29.68 crore and other expenditure of Rs 3.47 crore leading to a net loss of Rs 72.74 crore.

Sonia: Yes in fact your net loss has widened significantly to Rs 73 crore versus Rs 4 crore on a year-on-year (Y-o-Y) basis. Just tell us whether you expect this sugar loss to continue? This time it has been an Earnings before interest & tax (EBIT) loss of almost Rs 120 crore in the sugar business.

A: It is very difficult to predict as to till when the loss will continue. Just to let you know, we have marked down our inventory to 2428 in the current quarter and we are carrying about 41.5 lakh bags of closing stock. So there has been a two-pronged hit on the sugar side, a) much lesser production in the quarter, 4.4 lakh bags against 7.78 in the corresponding quarter.

So, it gets spread over -- the costing goes much higher and you are marking it down to Rs 24. So, you have marked your March 31 closing stock down also and the current production down also. So, that is the accounting part of it and we do hope that things would improve from here in terms of pricing but I don’t know by when we will get back to recovering our cost of production from the sugar segment.

Anuj: That is what a lot of people want to know because normally sugar plays out in a four-year cycle. This time the weakness has been there for far too long, do you have a sense in terms of when should you see at least you being able to be in a position to at least recover your costs?

A: I can tell you the government of India and the government of Uttar Pradesh (UP) have both been briefed and they are very well aware of the position. So, on the government of India side, the positive part is ethanol and they are looking at making even 10 percent [mixing in auto fuels] mandatory.

There will be some kind of a price uptick in ethanol in to the duty waiver expected to kick in in the next year’s production of ethanol. So, other sides as we move ahead are getting more and more positive but the basic product I still don’t have visibility.

The government of India is in the process of mandating exports etc which, all of us are reading and are aware that things are happening however I would like to see more concrete action resulting into a price rise. Only when the prices rises, can I tell you that we are near cost.
first published: Aug 12, 2015 05:07 pm

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