Plans to trim output to balance out demand: Sakthi Sugars

In July 2015, Sakthi Sugars was selling a kilogram (kg) of sugar at Rs 19.5. But today the prices have shot up to Rs 34 per kg, says M Manickam, Executive Vice Chairman, Sakthi Sugars. "The worst is over for the sector," he says.Finally, he adds that India has been producing sugar in excess of the demand. So, the company plans to trim production to have a better balance between demand and supply.Below is the transcript of M Manickam’s interview with Manisha Gupta and Agam Vakil on CNBC-TV18.Manisha: It really has been a good quarter as has been seen in the numbers of other sugar companies. What has your sense been for the quarter gone by?A: It has been fairly good. We have gone through the worst patch for the sugar industry. We had a topline of about Rs 332 crore for the quarter and a profit of about Rs 12.35 crore and we ended the year with about Rs 821 topline and about Rs 55 crore losses. We had actually expected much higher losses, but this is much better than what we expected.Manisha: What has been the sense in your segments? How has sugar done and what has been with the other segments? How would you put that across?A: Sugar segment has picked up in the last quarter. In fact, the prices have improved and particularly the prices have improved after April. They have gone to about Rs 34-35. Until March we had about Rs 30 and we have seen that the prices have increased. So, we expect that it will really perform in the coming quarter. But the worst is over for the industry. We have seen a low of Rs 19.50 in June of 2015 and now, we are seeing about Rs 34, so there is a big jump in the top realisation for the company.Agam: Can you update us on the amount or what the quantity of the inventory that you hold in sugar and at what rate do you expect to offload this inventory going forward in the next couple of quarters?A: We do not have too much of inventory, we may have about 50,000 bags at this point of time. And we are looking at selling it upwards of Rs 34 versus Rs 26 was the average for last year. So, it is a much better realisation than the previous year.Agam: May I assume that your breakeven right now is at around Rs 32 per kg?A: Rs 33-34 is our breakeven and then whatever we get out of our cogen and other things will be helping us.Manisha: Even as the monsoons this time around are expected to be good, the last couple of droughts really have not done so well, and we are also looking at an expectation of a lower crop this time and in the next season as well. How is that going to impact cane banking and everything else?A: Which is good actually, because India is producing too much sugar. Problem was we produced much more than what we require. So, possibly, the production will be muted and we will have better balance between demand and supply. And every rupee we actually make on the higher side helps the company’s bottomline. So, by and large, we are better off no producing in excess, just producing enough for the country will be the better thing to do for us.