Balrampur Chini Mills posted a steady set of earnings in Q1 as the sugar business saw strong revenue growth and steady margins but the co-gen and distillery business margins took a hit.
In an interview to CNBC-TV18, Vivek Saraogi, MD, Balrampur Chini Mills spoke about the results and his outlook for the company.
Overall trajectory should remain firm. There is no shortage and prices should be stable, he said.
Looking at enhancement of recovery rate as well as production this year, he added.
The industry would be carrying 4 million tonne (mt) as on October 1, that is the estimated figure. I won’t remember our data right now but we would be in sync, said Saraogi.
Below is the verbatim transcript of the interview.
Latha: How is the upcoming sugar year looking like, what kind of volumes can the industry look forward to and more importantly Balrampur Chini and realisations, do you see there is more scope for realisations?
A: On the industry front, I think next year’s production is very early estimates but should be between 250 lakh tonnes and 255 lakh tonnes which would be equal to the consumption predicted for next year. So I think there is a very fine balance, there is going to be no excess or there is going to be no shortage. We are going to end the year with an inventory of about close to 4 million tonnes (mt) which is absolutely a gain in the balance. So I don’t see this either to weaken prices, this is not an inventory or a production level which would cause weakness in prices over the year. I cannot predict whether couple of months in the crushing season can be weak or not but overall trajectory should remain firm and there is no shortage.
So I think there is a kind of a trade in the sugar price, which will play out – let us say the price is about 37.25-37.50 now. It is very difficult to predict but very range bound.
Reema: Prices should be stable from hereon?
A: Yes.
Reema: What about your co-gen and distillery business, there the margins have taken a hit? If you could tell us the reason for the same in the June quarter and is that pressure going to continue in the coming quarters as well?
A: I would like to say that you would ask about my volumes also. So as Balrampur, we have crashed about 8.3 to 8.4 crore lakh quintals last year. We see about 15 percent growth in our area in cane and we are very positive -- our recovery over last year’s levels based on the fact that there is going to be more early variety percentage in our company as a whole.
Latha: Was your recovery rate in Q1 was 12.1, wasn’t it? So what kind of a recovery are you looking at and volumes you were saying 15 percent higher?
A: Yes. We don’t look at quarter. When I talk, we talk season. Last year Balrampur’s average was 10.74. We are looking at an enhancement to that figure for the next year. Last year’s crushing was 8.35 crore quintals, the production was into 10.74 percent. So whatever about 89 bags. Let us say we are looking at a crushing close to 10 crore quintals and a recovery which is north of 10.7 for closer to 11 maybe. So we have recovery enhancement as well as production enhancement for our group. This is what we are looking at right now which would also give us extra bagasse and molasses because any cane crush comes with both. So I would not look at a quarter on distillery or the co-gen, I would look at the year and I don’t think in the year both the sectors would underperform compared to their results in the previous year.
Sugar – I have told you my view, I have given you my view on cost of production and volumes and the countrywide metrics, I have given you.
Latha: With the improvement in bagasse availability, are you saying that we should expect this margin dip to be one off in your co-gen business. You expect it to improve for FY18 as a whole?
A: I cannot give you a guidance in that manner but I can give you broad stokes which I have given you, any underperformance which one has seen in the year should get wiped out.
Reema: Would you be looking at increasing your sugar capacity in anyway, looking at making some acquisitions now that the sugar cycle seems to have turned and appears to be stable from hereon?
A: We are looking at capacities which come with what we need. Good cane area, good recovery belt and integration. However, we want to see the cane price policy of UP play out, which I am personally – as I told in my previous interview also – I am very positive. Let the cane pricing policy play out, it is better to buy into clarity rather than buy before that.
Anuj: Are you being ultra conservative here because the feedback I have is that the production also is going to be lower this year and that company like you are carrying good inventory at good price and this could be a bumper year for you?
A: I did not say we are not doing well. We are doing very well. Last year the country produced two hundred two lakh tonnes, when I am saying we will go to 252, I am not either being conservative or I am not being optimistic. These are data points, which from the sugar mills association based on the satellite mapping, which was done till now in the association.
So this is based on some data. This is not based on Vivek Saraogi’s personal view.
So these are data points and I think Uttar Pradesh’s (UP) production will go up. I have also indicated Balrampur’s production and the stock with which we are carrying and the price at which we are carrying is well-known in the last quarter’s results.
Latha: What is the inventory you are carrying? The industry is carrying about 4 million tonne (mt), right?
A: The industry would be carrying 4 mt as on October 1. That is the estimated figure.
I won’t remember our data right now but we would be in sync.
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