SUGAR MILLS POST STELLAR PROFIT GROWTH IN APRIL-JUNE

Average realisation from sugar up 42%

Asharp increase in the realisation from sugar and ethanol helped mills post good profits in April-June. The trend is likely to continue on expectations of a big inventory of sugar and ethanol.

The Uttar Pradesh-based Balrampur Chini posted a net profit of ~110.7 crore in the quarter ended June against a net loss of ~70.4 crore in the same quarter a year ago. The net profit of Sakthi Sugars rose to ~79 crore in April-June from a loss of ~22.8 crore in the same period a year ago.

“This was due to a jump in sugar realisation to ~35/kg on average. Higher sugar recovery also supported the margin improvement,” said Afshan Sayyad, analyst, Dolat Capital Market.

Mills had an average 42 per cent increase in their realisation from sugar, which contributes nearly 75 per cent of their sales. Sugar M 30 in the Vashi market jumped to an average ~3,712 a quintal in April-June from ~2,613 a quintal in the same quarter a year ago.

A recent World Bank report said world raw sugar prices rose by 30 per cent since midApril, reflecting perceptions of a tightening global supply.

DCM Shriram’s net profit jumped to ~33 crore during the quarter from a ~1.6 crore loss in the same quarter a year ago. Announcing the June quarter results, Ajay Shriram, chairman, DCM Shriram, had said, “The sugar business’ earnings recovered from last year driven by an improvement in margins.”

Compared to JanuaryMarch, however, over half the listed sugar mills posted a decline in their net profit on lower saleable stocks. The crushing season ends in April and mills draw down on their inventory till September.

Also, distilleries call off the season concurrently with sugar mills and production of ethanol also comes to a halt.

A recent study by the Indian Sugar Mills’ Association (ISMA) estimates India’s sugar output at 25.1 million tonnes in 2016, 11 per cent lower than last year. The output is expected to decline to 23.1 million tonnes next year.

“The September quarter is also expected to be good with high realisations and sufficient inventories with millers,” said Sayyad.