Sakthi Sugars to reduce debt by Rs 200 cr by Dec 2015

Sakthi Sugars showed significant improvement in its second quarter numbers on most fronts - topline, bottomline as well as margins. It was also able to reduce its losses on the back of improvement in sugar prices compared to last year.Talking about the numbers, M Manickam, Executive Vice Chairman of Sakthi Sugars said he is upbeat on the company and will be able to reduce debt further to the tune of Rs 200 crore by December 2015. The company plans to start its monetisation plans by end-December 2014.According to Manickam, global sugar prices are also likely to harden, which would naturally benefit the company. In the domestic market too, the sugar prices moved up by Rs 100 per quintal over the comparable period last year.Sakthi Sugars' September quarter net loss was at Rs 36.5 crore against loss of Rs 48 crore, in a year ago period. The net sales of the company increased by 31 percent at Rs 155.8 crore versus Rs 118.9 crore.

Below is the transcript of M Manickam’s interview to CNBC-TV18’s Latha Venkatesh and Reema TendulkarReema: Contrary to what the comment has been from various sugar companies as well as from you, the company’s performance has not been so bad. Infact it has improved if you look at it on a year-on-year basis. Can you walk us through the key highlights of the quarter and can we expect your losses to continue narrowing even in the coming few quarters?A: We will probably be narrowing the losses but the profit will be with the sugar prices moving up. What has happened is the sugar prices have moved by about Rs 100/quintal over the comparable period last year. We had crushed roughly about five lakh tonnes so that gave us an impact of about Rs 45-50 crore with our recovery. That has been the major impact that we have had. Also in last two quarters we have accounted for another Rs 20 crore tthat is Rs 10 crore each quarter of additional interest so that too was a notional thing. So our performance has been much better definitely.

Latha: Will there be some restructuring in terms of finance cost that could give you relief at all?A: Yes, in fact our latest restructuring discussions with corporate debt restructuring (CDR) is going on, we expect that there will be some restructuring and there should be a good impact on the P&L as well. Latha: How do you see prices moving? How much was the price relief that you got and what are you expecting in the second half?A: If you look at last year to this year the increase in prices is roughly about Rs 100 per quintal which almost corresponds to some of the cane price increases and most of us have not increased cane price so we are pretty much better off. What we should get is another Rs 400 for breakeven which is basically what we expect happen over time. But the silver lining now is that global surplus is shrinking and we expect that the global market will get into tightness. We are still waiting for the verdict on UP. So these are the two major factors that will determine the future of sugar which we will probably know in the next few quarters.

Viewers Q: What is the status of your non-core asset monetisation plans and why is the company considering it at all?A: We want to reduce our debt. We are attacking on both sides one is to increase our operational efficiency and the other one is to reduce debt. So, some non-core assets which we had bought long back and which are not being utilised are what we are now selling out. Some semi-urban assets and urban assets and we are well on discussions it is not been finalised yet. Once it is finalised we will have to report to the bankers and then we will make it public.Reema: Could anything culminate at least in this quarter at least till the end of December?A: End of December we are expecting small beginning I think Rs 10-15 crore kind of thing but we expect over the next two quarters till will be substantial.Reema: How much would it be?A: The indications that we have given to the banks is that we will do roughly about Rs 50-60 crore in this year. We will be doing another Rs 150 crore by next year so roughly about Rs 200 crore is what we hope to reduce the debt by December 15th.Latha: How much will that reduce the interest out go?A: It will be roughly about Rs 20 crore per year, 10 percent roughs thereabouts.Latha: You spoke about slight hardening of sugar prices globally or at least the surplus declining. What is your best guess in terms of the percentage rise in prices?A: If there is a shortage and the prices start moving up then exports actually become more viable. We should get back to 33-34 kind of a pricing range. We hope that we will get there soon because Uttar Pradesh (UP) if we really look at it the way the cane price is structured they don’t break even below Rs 35 and that will be the costliest manufacturer will probably draw that bottom-line.Latha: They have politically been resisting that Rs 35 for so long now, you see Rs 35 coming?A: They can’t help it, the cycles will come back and as it stands the cycles are kind of coming back so we would see it coming back.