Shree Renuka Sugars
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Printed Date: 21/Apr/2025 at 1:31am
Topic: Shree Renuka Sugars
Posted By: Insight
Subject: Shree Renuka Sugars
Date Posted: 27/Dec/2009 at 12:24pm
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Here is my analysis on Sugar industry and Shree Renuka Sugars
Sugar in 2009:
Since the start of 2009, sugar prices have almost doubled. The price spike is mainly explained by unfavorable weather—too little rain in India and too much in Brazil. India’s sugar production fell by almost half last year, turning the country from the second-biggest producer to the biggest importer. Combination of lower area under sugarcane cultivation (decline of 13%), lower sugarcane production yields due to scanty rainfall (decline of 12%), lower recovery of sugar from sugarcane by millers and higher diversion of sugarcane (more than 50%) to alternate sweetener manufactures like Jaggery and Brown Sugar resulted in a steep fall in sugar production in India. In order to make matters worse, credit crunch put lot of Brazilian sugar producers in trouble. Also, lot of sugar companies in Brazil were setup to only produce ethanol and therefore could not pick up the slack left by busted sugar millers.
Reasons to not put on sugar trade:
The global sugar inventory balance is set to be the tightest in the last two decades. Sugar prices are already at their peak levels. It never pays to underestimate the power of high prices to cure high prices. Higher prices attract more farmers to plant the cane and supply catches up with the demand eventually. Some of the problems in Brazil stem from inability of millers to add more sugar milling capacity due to credit crunch. That situation is changing as credit market continues to improve and millers get financing to expand their capacity. I would also not like to bet on the repeat of poor weather conditions next year as well. It is also important to keep in mind that sugarcane is a hardy crop which can sustain harsh weather conditions. Sugar millers story in India does not give me any comfort level. Sugar industry is highly cyclical and capital intensive industry with heavy government intervention. Sugarcane price, which is the raw material for the industry has no linkage to the price of the end product i.e. sugar. Sugarcane prices are artificially increased by the government to satisfy the vote bank of the farmers. In times, when sugar prices fall, due to artificial high prices of sugarcane, companies can't even cover their operating cost. There is not even one national pricing for sugarcane. Essentially, each state is free to determine its own State Advise Pricing (SAP) on top of the price mandated by the central government. Reasons I am optimistic about long-term prospects for sugar: I am optimistic about the long-term prospects of sugar as a commodity on account of structural global changes such as ethanol mandate, removal of subsidies by European Union and rising demand from China and India. Oil price trend will also influence the price of sugar as higher oil price will influence the extent of cane diversion to ethanol. Most of the sugar that is produced, gets consumed and any fall in the production due to weather conditions wreaks havoc on sugar prices. I also like the sugar trade as a diversification trade in the portfolio. It is generally not linked to economic cycle and follows its owns cycle. Sugar millers in India have learnt from their previous mistakes and they are not planning to increase their capital expenditure like they did during last sugar price boom. Expected capital expenditure is zero because there is lot of overcapacity in India. This will limit supply expansion in India. Cane production is not going to be more than 25 million tonnes for India and there is already capacity to crush over 30 million tonne crane. Domestic production in India will improve in FY 09-10 but is again expected to fall behind annual consumption leading to a demand supply gap and expectations of robust sugar price realizations. Positive change's to India's sugar policy look good on paper but very very difficult to implement:
India's government recently announced several encouraging changes to sugar policy which essentially takes care of my rant above. There are two principal changes. One, the federal government will no longer set a Statutory Minimum Price (SMP) but set a "Fair Remunerative Price" (FRP). The latter will be set with some reference to costs. Two, the Indian states are no longer able to order mills to pay a top-up to the federal government's price. Rather, they will be forced to pay the difference themselves.
These are very very important changes that can change the way India's sugar industry operates and take out the inherent volatile production of sugar in India.
There is no guarantee that policy changes will stick. There are plenty of opposition to the changes from the farmers. Subsequent to violence from farmer unions, government has withdrawn the clause where the state government bears the extra price over the the central government price. The future of theis policy hangs in the balance. In any case, millers will probably end up paying higher prices for cane this season until policy gets resolved and implemented.
Conclusion: Sugar prices are not coming down anytime soon in spite of increase in production from Brazil and India. India would only increase its production in 09-10 by 10-15% from current deficit levels. It will not cover the demand and India will have to import sugar along with Pakistan and Srilanka for FY 09-10. India alone would need to import between 6 and 7 million tons in total to meet its consumption demand. Mechanics of sugar industry in India does not give me much comfort as far as sugar producers are concerned. However, their margins are going to be sustained for the current season (2009-2010) due to higher sugar price realizations and minimum capital expenditure. Shree Renuka Sugars Limited (BSE:532670):
Shree Renuka Sugars Limited, together with its subsidiaries, manufactures sugar, energy, ethanol, and biofertilizers in India. It produces EC II grade refined sugar and sulphurless sugar used for direct consumption in European and African countries, as well by corporates for industrial usage. The company also produces power from bagasse, a fibrous by-product resulting in the process of crushing of sugar cane; and sells power to the state electricity boards. In addition, it produces alcohol from the molasses, which can be used both for potable purpose and an industrial chemical, as well as alcohol can be purified to produce fuel grade ethanol that can be blended with petrol. Further, Shree Renuka Sugars sells residue product from distillery operations blended with chemicals as bio-fertilizers. The company was founded in 1995 and is based in Mumbai, India.
Shree Renuka is an innovative company and there are many things I like about the company:
- Leader in India's fuel ethanol business with nearly 21% market share. New ethanol tenders are expected to price at Rs. 26
- Largest raw sugar refining capacity in India. Sugar refining capacity helps enhance the company's asset utilization by processing raw sugar during off-season.
- The company is the second largest exporter of sugar from india with a presence in the Middle East, South East Asia and East Africa. It exports almost 20% of India's international sugar trade
- The company directly markets sugar to institutional buyers instead of selling to wholesale agents and dealers. The company is a sugar 'supplier of choice' amongst companies that produce carbonated soft drinks, fruit juices, choclates, baby foods and dairy products. Its clients include Coca Cola, Pepsi, ITC, Britannia, Nestle and Cadbury, among others. The company sells premium refined sugar.
- Company enjoys certain advantages on account of its West and South Indian location. It has plants in Maharashtra and Karnataka. It enjoys a longer crushing season (over 200 days, starting from October to May), higher recovery (10-20% higher than other regions), proximity to port and lower sugarcane prices due to much lesser state interference in setting sugarcane prices.
- In order to diversify it's revenue base, the company has acuired a 80% stake in KBK Chem-Engineering Pvt. Ltd. engaged in providing turnkey solutions (EPC contracts) in the field of distilleries, ethanol plants and biofuels.
- The company has converted some of its fixed cost liability by leasing out manufacturing operations instead of owning sugar capacities resulting in almost 27% of the total capacity being leased out.
- Shree Renuka has the ambition to become global sugar player. In that effort, it recently acquired Brazilian ethanol and sugar manufactures to provide for a low cost sugar manufacturing capacity and also secure raw sugar supplier for its refineries. The company has a stated goal of growing and expanding its production base in Brazil. The Brazilian company is located near the ports, has access to sugarcane from captive farms that are on long term lease. Shree Renuka is modifying the plants of the company to take up sugar capacity to 75% and the rest to ethanol production.
Risks:
The company dervies a significant portion of sugar sales from a limited number of large corporate customers. Six largest clients accounted for almost two-thirds of the company's revenue. Hopefully, the company will be able to keep up its premium sugar quality and remain the preferred supplier for it's clients. Another risk is concerning cyclicality of sugar production. Asset light model of the company and rising consumption demand should help the company break-even when such a scenario occurs.
Developments:
-Goldman Sachs and Inter Continental Exchange are in talks with the company about selling their 5% stake in National Commodity and Derivatives Exchange (NCDEX) to Shree Renuka Sugars.
- Shree Renuka Sugars was also in talks to acquire controlling stake in Balrampur Chini Mills. These talks are reportedly off the table.
Promoter:
Narendra Murukumbi's rags to riches story is inspiring. He is only 38 years old and an IIM graduate. Approx. 10,000 famers became shareholder in company's IPO which changed the relationship between the farmers and the sugar mill from supplier to that of a shareholder. He lives in rented quarters in Worli and opted to buy an apartment in Prabhadevi instead of expensive South Mumbai.
Valuation:
Main capex requirement is on the 3,000 ton refinery in Gujarat. It will be about Rs 400-450 Cr. plus another Rs 50 Cr. for the cogeneration unit. The company expects 3/4th of production from raw sugar. The company has Rs. 480 Cr. of cash. Sugar contributes almost two-thirds of the revenue base.
I come up with an increase in revenue by 80% for FY10 and EPS estimate of Rs.12.5/share. That would result in company selling for a forward PE of 17.5, a premium over most of its competitors. However, none of the other companies in the industry come close to Shree Renuka in terms of efficiency and innovation.
Conclusion:
Shree Renuka Sugars is the new smart kid in the block. It has all the makings of a world-class sugar company. The company is selling rich (as it should be) but I would rather pay a little higher price for a talented, honest, smart and amibtious company than a discounted price for a not so great company. I will not be surprised if the company keeps on innovating and delivering on its promises. |
Replies:
Posted By: TCSer
Date Posted: 28/Dec/2009 at 8:10pm
| Who is the author of this fascinating report? |
Posted By: Insight
Date Posted: 28/Dec/2009 at 9:05pm
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I am glad you liked the report. I take down notes from annual reports and conference call transcripts as I start working on an Industry and than compile notes in the end as I work on various companies in an industry. It's saddening to see how the immense potential of the Indian sugar industry is being wasted by unnecessary government politics. ps: I wanted to provide a link to more detailed notes (with graphs and more details on mechanics and politics of sugar) on the sugar industry available on my website . However, it is probably against forum rules. I am not sure if it's ok to let people know that my website can be accessed through my member login profile. Moderator: Please delete the above if it's against the forum rules. I don't want to break any rules here. |
Posted By: hit2710
Date Posted: 28/Dec/2009 at 10:39pm
Thank you for a interesting and understandable report on sugar. Renuka certainly looks very interesting amongst all sugar stocks. Have a look at Bannari amman sugar(not much tracked), also a south based sugar company if possible. ------------- Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart. |
Posted By: Insight
Date Posted: 28/Dec/2009 at 10:48pm
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I actually looked at Bannari and I like the management but I am not sure what the catalyst is going to be for Bannari. Any help to improve the analysis or change my views would be appreciated. Here are my notes on Bannari: Maybe we can make this a separate thread for Bannari Amman Sugars? --------------------------------------------------------------------------------------------- Bannari Amman Sugars Limited engages in the manufacture of white crystal sugar, alcohol, bio-compost, bio-diesel, cotton yarn, and granite products in India. It also engages in the co-generation and distribution of power; and exports the surplus power to the Tamil Nadu and Karnataka State Electricity Boards, as well as engages in the transport business. In addition, the company operates wind mills and generates wind energy. Further, it offers polished granite slabs, tiles, and monuments to customers in India, the United States, Germany, Belgium, Italy, Australia, the Middle East, and the Far East. Additionally, the company produces alcohol and extra neutral spirit from sugarcane molasses, as well as engages in the distribution of automobiles and related accessories. Bannari Amman Sugars Limited is based in Coimbatore, India. Bannari Amman's sugarcane cost is much lower than UP based producers due to lower SAP prices paid by Southern Indian producers. It can also benefit from unavoidable import of raw sugar by India as it has got the refining capacity to process raw sugar into white processed sugar. The company has grown it's revenue by 13.5% and EPS by 22% annualized over the last 10 years. Gross profts margins are in high 20's to mid 30's over the last 5 years. Interest expense has come down in last 5 years. Tangible Book Value Per Share has grown by 16% annualized to Rs.485 per share. Even though revenue has gone up, account receivable has gone down from 2008 to 2009 fiscal year which reflects better customer receivables by the company. Sugar contributes almost two-thirds of the revenue base and it's margins as expected are the lowest and also fluctuate the most. Margins in 2008 were -15% and there were as high as 13% in 2006. Power accounts for almost 25% of the business, followed by distillery business accounting for 10% of the business. Power is the most profitable segment. Margins are as high as 45% while distillery business margins are impressive 17% to 50% in good years. The company did show Rs. 200 MM Free Cash Flow for the financial year 2009 and still managed to bring down its debt to equity ratio to 44%. Promoters hold 55% of the company stock. The company also has positive Cash Flow From Operations (CFO). The average cash conversion cycle of the company has gone up significantly from 134 days in 2007 to 220 days in 2009 FY. It has mostly to do with longer average days for inventory outstanding. It could be that the company is holding more inventory per unit of sales to sell it at higher future prices as the demand situation keeps on improving. It could work out very well for 09-10 FY. Absolute inventory levels are lower on account of lower production in 08-09 FY. The company is selling at P/BV of 2,5 and P/E of 9.5. I am impressed with high ROE levels of the company ranging from a low of 10% to high of 30% in the current fiscal year. The management is conservative and the company routinely pay off its debt to bring down the debt level and I think that's smart on the part of the management. The company also has steadily expanded its operations. It has setup a new integrated sugar facility in Tamilnadu with a capacity of 5000 Tonnes Crushed Per Day. It has also acquired 6000 TCD facility in Karnataka alongwith 28.8 MW of power co-generation facility. Bannari Amman Sugars is not expected to produce as much sugar as it did in FY 2009 due to drought in Karnataka and competition from other crops. Refining facility margins also are going to be impacted as the company has to procure high price raw sugar in the international market. I will pass this opportunity for now eventhough I like the company but I don't see any catalyst for the company's shares to go up next year. |
Posted By: hit2710
Date Posted: 28/Dec/2009 at 11:07pm
Thanks, that was quick. 
I heard Rajen Shah of Angel Broking recommending bannari amman sugar once on cnbc and hence checked out some fundamentals of the company. While it is valued cheap as compared to renuka, the latter will always attract higher valuations due to the reasons cited by you on report on renuka. What impressed me most was the free cash flow for three continuous years upto 08, and the fact that inspite of other companies reporting losses during bad years for sugar industry, it always managed to report profits. that certainly says something about its management. ------------- Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart. |
Posted By: TCSer
Date Posted: 28/Dec/2009 at 11:36pm
| Renuka sugar is a class apart a true example of world class entrepreneurship which is one of the main attraction of India as a FII destination. |
Posted By: TCSer
Date Posted: 28/Dec/2009 at 11:37pm
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Insight have you studied Sir Shadilal enterprises a UP sugar stock available atonly 2 PE? If not pl do n give your comments |
Posted By: Insight
Date Posted: 28/Dec/2009 at 12:12pm
I have not looked into the above company. |
Posted By: saravanans
Date Posted: 30/Dec/2009 at 1:07pm
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SHREE RENUKA SUGARS LIMITED, together with its subsidiaries,
manufactures sugar, energy, ethanol, and biofertilizers in India. It
produces EC II grade refined sugar and sulphurless sugar used for
direct consumption in European and African countries, as well by
corporates for industrial usage. The company also produces power from
bagasse, a fibrous by-product resulting in the process of crushing of
sugar cane; and sells power to the state electricity boards. In
addition, it produces alcohol from the molasses, which can be used both
for potable purpose and an industrial chemical, as well as alcohol can
be purified to produce fuel grade ethanol that can be blended with
petrol. Further, SHREE RENUKA SUGARS sells residue product from
distillery operations blended with chemicals as bio-fertilizers. The
company was founded in 1995 and is based in Mumbai, India ================= http://today.msnbc.msn.com/id/34242504/ns/today-today_fashion_and_beauty/ - yoostar http://www.davidshepherd.com - David Shepherd |
Posted By: EMANI
Date Posted: 05/Feb/2010 at 2:17pm
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Shree Renuka has recently announced bonus.Its year high is 247 and low of 77.From the top its almost 30%down.And ex-bonus rate will be close to the year low ie90/- .I think it makes sense to buy at current levels. Please advise.....
------------- esn |
Posted By: EMANI
Date Posted: 05/Feb/2010 at 2:23pm
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Renuka appears to have strong support at around 180 levels.
------------- esn |
Posted By: EMANI
Date Posted: 05/Feb/2010 at 9:51pm
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India, the world’s largest consumer, will have to import at least 7
million tons this season, Macquarie Group Ltd. estimates. The
Philippines will import 60,000 tons by the end of April as it seeks
overseas supplies for the first time in eight years after drought cut
domestic crops. Countries including Egypt, Pakistan and Indonesia also
plan to make purchases. Excess rains in Brazil and a weak monsoon in India hurt sugar-cane output from the world’s two biggest growers. Global demand for sugar will outpace supply by 13.5 million tons in the 2009-10 season, according to Czarnikow Group Ltd.( source...Bloomberg) ------------- esn |
Posted By: Insight
Date Posted: 26/Feb/2010 at 10:01pm
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I completely agree with you. It has been a month since Shree Renuka Sugar approved the bonus issue and the stock price should have been down much more to adjust for bonus. Stock bonus adjusted price even for someone who bought at the peak of 247, will be 123.5. Please let me know if anybody has heard anything about the record date. |
Posted By: Vivek Sukhani
Date Posted: 26/Feb/2010 at 11:35pm
Should have been down more???? ------------- Jai Guru!!! |
Posted By: Insight
Date Posted: 26/Feb/2010 at 12:53pm
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I am thinking that the bonus share approval news came out on Jan. 25th and the stock price was around Rs. 226. If the bonus shares are going to be approved (which I think they will), stock price should have gone down to Rs. 113 next day. If 113 is the floor than Rs 53 or so is the arbitrage profit that hasn't gone away for someone who bought it at Rs. 226, considering current market price of Rs 166. It is obviously even more sweet for someone who buys it at today's level where bonus adjusted price is going to be Rs 83.5 What is it that I am missing? |
Posted By: Vivek Sukhani
Date Posted: 26/Feb/2010 at 10:19am
The stock price should get halved on the ex-date for the purpose of bonus. Approval date has no value whatsover. Even if you buy the shares at X just beofre the stock goes ex-bonus, you will have double the shares of what you bought trading at X/2. The thing is, the price will become X/2 on the date it goes ex-bonus, and not immediately after the announcement of bonus. ------------- Jai Guru!!! |
Posted By: Vivek Sukhani
Date Posted: 26/Feb/2010 at 10:22am
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113 is not the floor. If the stock were to get ex-bonus now, the price will be 87.5 after it goes ex-bonus( assuming a price of 175 before going ex-bonus). The person who has bought at 226, would be losing 226-(87.5*2)=51 rupees per shre. ------------- Jai Guru!!! |
Posted By: Insight
Date Posted: 27/Feb/2010 at 7:35pm
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Posted By: Vivek Sukhani
Date Posted: 27/Feb/2010 at 9:49am
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You may look at the recent cases of bonus issuances. Examples can be Reliance, Jaiprakash Associates and Adani Enterprises. ------------- Jai Guru!!! |
Posted By: ThinkDifferent
Date Posted: 19/Mar/2010 at 11:13am
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So..is anybody buying renuka sugars or any other sugar stocks now that the sugar prices are down considerably and also that the sugar stocks have corrected a lot?
------------- I am an Amateur in Stocks. |
Posted By: LearningToFly
Date Posted: 20/Mar/2010 at 10:38pm
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Insight, The company looks strong and as you said the management is great with IIM tag. My concern is the deteriorating fundamentals in the last year. I did some calculations and found the following: The reference data is taken from Moneycontrol site
When I do free cashflow calculation, this shows negative FCF.
The other concern I have is the following:
1. It is spending huge amount in fixed assets.
2. The inventory has gone up drastically in last year. Why is that so. Is Sheer Renuka trying to hoard and cash the crisis. Any import concession by the Government on Sugar will turn this inventory into a big liability. Government is alreday taking steps to ease the import restriction.
3. Debt is huge.
Let me know if this calculation is right or I am missing something. ------------- Success... at all cost. |
Posted By: Insight
Date Posted: 21/Mar/2010 at 7:20am
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I am surprised somebody is still interested in my opinion given the fact that the analysis has gone wrong completely.
Here is how I think of your questions:
I do not think Shree Renuka Sugars was cash flow positive anytime and that would be expecting a lot from a cyclical and a growing company.
Most of the expenditure comes from building the two refineries and the recent two acquisitions. However, return on assets is very impressive as compared to its competitors. The company is also going to lie low for some time to digest its recent acquisitions.
I think the company liquidated much of its inventory in the most recent quarter. Infact, I would think that you want the company to be sitting on inventory if the price of the product is going up and it can sell for far more than the cost.
Total Debt/Capital from the most recent B/S is about 47% which is about the same as previous years.
In post-mortem analysis, I think following basic investment checklist criterion were violated:
A too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments. Always buy cyclical stocks at the bottom of the cycle. I still believe in Shree Renuka Sugar story. The company has acquired it's second Brazilian sugar mill and the promoter Mr. Murukumbi also put in his own money for the acquisition. Both Brazilian acquisitions have been acquired at distressed prices, which shows managements capital allocation skills. The Brazilian acquisition will essentially free the company from its dependency on volatile Indian sugarcane production and ensure raw sugar supply for its refineries. It will also give the company flexibility to convert sugar to ethanol if sugar prices remain depressed in the future. The company also announced bonus issues (stock dividend) and I believe the stock is trading at its cyclical lows.
It should be a reasonably good company to partner with in the long-term. Time will tell.
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Posted By: shontou
Date Posted: 17/Aug/2011 at 9:36pm
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Conference Call
Shree Renukha Sugars Expects improvement in consolidated margins on the back of operational improvements in Brazil subsidiaries Shree Renukha Sugars announced the results for the quarter ended June 2011 and held a conference call to discuss the results and its future growth strategies. Key take aways of the call are: Highlight of the call: Consolidated Net sales higher by 12% to Rs 2240.10 crore for the quarter ended June 2011, on the back of higher realizations in Brazil coupled with strong performance from the ethanol in India. Further, The Company witnessed strong export based sales growth in sugar segment in the India. Revenues from the Sugar business grew by 7% to Rs 849.3 crore for the quarter ended June 2011, due to the combination of higher exports leading to improved realization and lower cost of production. Interestingly, Revenues from the Ethanol surged by 215% to Rs 89.5 crore for the quarter ended June 2011, on the back of drastic surge in sales on the back of high production and rise in the demand due to the ethanol blending program. The Cogeneration sales fell by 22% to Rs 87.7 crore for the quarter ended June 2011, on the back of low utilization of refineries and low utilization of coal as alternative means of fuel. Further, The Co-generation sales volumes were lower than last year partially offset by higher price realization per unit, as Merchant power rates increased by 24% to Rs 6.37 per unit for the quarter ended June 2011, as a result of higher spot rates. During the quarter, other income surged by 196% to Rs 125 crore on account of foreign exchange gain of Rs. 105 crores on account of currency appreciation of Brazilian Real (R$) versus Indian Rupees (INR). The Company Closing stock of white sugar is at 260821 MT in India as of June 2011 and Raw Sugar is 75026 MT. In addition, Molasses is at 138660 MT and Ethanol is at 52618 KL. Sugar Sales were lower by 6% to 288113 MT for the quarter ended June 2011, on the back of 68% fall in the domestic sales to 97144 MT. However, Exports were at 195244 MT with no exports in the corresponding previous period. Ethanol sales witnessed sharp surge by 201% to 33741 KL for the quarter ended June 2011. However, Co generation business sales declined by 36% to 80 million units for the same period. Further, it feels that Long-term contracts in co-generation segment to expected to provide price visibility. The average realization for Sugar Sold is higher by 12.1% Rs. 30/kg for the quarter ended June 2011. Ethanol realizations higher by 4% to 27 Rs per litre and Power per unit has gone up by 24% to Rs 6.37. In addition, the ethanol productions also rise by 144% to 40852 KL on the back of increased cane crushing. Further, the company has supplied 19.2 million liters of Ethanol to Oil Marketing Companies under the Ethanol Blending Program. In Brazil, to capitalize on the higher prices of ethanol during the start of the season it has diverted maximum juice toward production of ethanol leading to production mix 54.2% towards ethanol during the Quarter. The Company proposes change in Accounting Year from the financial year from 1st October- 30th September to 1st April - 31st March. Board of the company has approved the change in Accounting year subject to regulatory approvals. Recently, it has commissioned new sugar refinery at Kandla with a capacity of 3000 tons per day (1 million MT per year) of raw sugar refining and 45 MW of co-generation capacity. This new sugar refinery will take the port-based refining capacity of the Company to 5000 tons per day (or 1.7 million tons per year). Renuka do Brasil (RDB) net sales (including other income) were higher by 69% to Rs 886.2 crore for the quarter ended June 2011, compared to the previous quarter. Interestingly, The Company posted profit of Rs 95.6 crore compared to Rs 5.1 crore in the previous quarter. Renuka Vale do Ivai (RVDI) net sales (including other income) were higher 683% to Rs 212.3 crore for the quarter ended June 2011, compared to the previous quarter. The Company posted profit of Rs 43.1 crore compared to Rs 10.3 crore in the previous quarter. The Cane crushing is undergoing at a good pace in both Renuka VDI and Renuka do Brasil and 10.0 – 10.4 million tonnes of cane expect to be crushed in the 2011-12 season. Further, The profitability of the Brazilian subsidiaries is expected to benefit from the higher prices of ethanol in Brazil and sugar globally despite lower crushing. The Company further expects improved profitability in Brazilian subsidiaries coupled with strong price for Ethanol. Further, it informed that majority of Brazil sugar production is hedged at minimum price of 23 cents/lbs. Ongoing operational improvements in Brazil expected to improve consolidated margins and production costs. In addition, increased proportion of owned cane used in Brazil enable margin expansion. Further, Higher Asset Utilization will lead to spreading of fixed costs over larger base. The Company feels that the recent approval of additional sugar exports by the Government of India under OGL (Open General Licensing) is expected to positively benefit the company in the coming quarters. Further, it feels that rebound in the raw-white spread is also expected to boost the bottom line as it plans to ramp up production through its refineries. ------------- Every day, self-proclaimed stock market "experts" tell us why the market just went up or down, as if they really knew. So where were they yesterday? |
Posted By: shontou
Date Posted: 15/Nov/2011 at 3:21pm
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Conference Call
Shree Renuka Sugars Robust margins in renewable segment would provide stability to the overall earnings going forward Shree Renuka Sugars announced the results for the quarter ended September 2011 and recently held a conference call to discuss the results and its future growth strategies. Key takeaways of the call are: Consolidated Net Sales decreased by 2.9% to Rs 2419.30 crore for the quarter ended September 2011 on account of lower utilization of refineries despite the higher sales realized in Brazil on the back of higher realization of sugar and ethanol. It posted a consolidated net loss of Rs 615.90 crore for the quarter ended September 2011 as against net profit of Rs 128.10 crore in corresponding previous quarter. The loss was on account of huge Rs 569.80 forex loss mainly due to depreciation of Brazilian Real (R$) versus USD. Renuka do Brasil (RDB) net sales (including other income) were higher by 12.8% to Rs 688.30 crore for the quarter ended September 2011, compared to the previous quarter. The company, however, posted net loss of Rs 611.60 crore as against net profit of Rs 47.10 crore in the previous quarter on account of huge forex loss due to depreciation of Brazilian Real (R$) versus USD. RDB holds closing sugar stocks of about 568,000 tonnes and ethanol stocks of 60,000 tonnes. Renuka Vale do Ivai (RVDI) net sales (including other income) were higher 32.7% to Rs 221.40 crore for the quarter ended September 2011, compared to the previous quarter. However, it posted net loss of Rs 28.40 crore as against net profit of Rs 22.90 crore in the previous quarter. The margins from Brazil subsidiary were affected by lower yields on account of adverse weather (frost) leading to higher cost per ton of cane. Yield per ha dropped to as low as 20 tons per ha toward the end of the quarter versus normalized levels ranging between 60 and 70 tons per ha. The company expects 65 tonnes per ha for the next season. The profitability in renewable segments on consolidated basis improved for the quarter ended September 2011 on the back of higher raw material supply as a result of strong cane crushing season in India. Margins improved in ethanol segment due to higher availability of raw material. Its Closing stock of white sugar is at 151225 MT in India as of September 2011 and Raw Sugar is 29853 MT. In addition, Molasses is at 137612 MT and Ethanol is at 18944 KL. The export price of white sugar is in between Rs 32-33 per quintal. Sugar Sales were lower by 44% to 220908 MT for the quarter ended September 2011, on the back of 59.6% fall in the domestic sales to 131907 MT. However, Exports increased by 30.7% to 89001 MT during the quarter ended September 2011. Ethanol sales witnessed sharp surge by 290.7% to 37319 KL for the quarter ended September 2011. However, Co generation business sales declined by 65.5% to 19 million units for the same period. The average realization for Sugar Sold is higher by 11% Rs. 29.60/kg for the quarter ended September 2011. The Ethanol realizations rose by 18.4% to 29.14 per litre and Power per unit was down by 1.4% to Rs 3.48 for the same period. It has started crushing in Karnataka and buying sugarcane at Rs2,400 per ton. In Brazil, sugar sold was about 1,89,000 tonnes at an average rate of 26 cents per pound. The quarter under review was off-season for cane crushing in India. However, The cane yields in Brazil were affected by around 20%-25%. The cane crushed was 50% higher to 2.3 million tonnes compared to the 1.5 million tonnes crushed last year. The company expects to maintain 10.5 million tonnes of capacity. Coming to sugar production, the company witnessed higher recovery (ATR) of 138 kg/tonne from Brazil operations in September 2011 quarter, compared to 116 kg/tonne in June 2011 quarter. During the quarter, the company diverted higher juice (62%) towards sugar production, as the price of sugar is higher as compared to ethanol during the quarter. It also capitalized on higher flexibility to produce maximum ethanol to take advantage of higher ethanol prices during June 2011 in its Brazilian subsidiaries Renuka do Brasil and Renuka Vale do Ivai. Coming to co-gen segment, the power exports in India were lower on YoY basis due to end of season in India. On QoQ basis, lower power exports in India complemented by strong volumes from Brazilian subsidiaries. It feels that robust margins in renewable segment would provide stability to the overall earnings in the coming quarters. The company expects to increase in refinery volumes with the stabilization of production at Gujarat Refinery and effective risk mitigation strategies. The company is optimistic that ongoing operational improvements in Brazil would improve consolidated margins and production costs per pound. Also observed that the increased proportion of owned cane that is expected to be used in Brazil would enable margins expansion. The company also feels that higher asset utilization in the coming quarters will lead to spreading of fixed costs over larger base. As on date, it has already planted (incremental) 16,900 ha of new cane in Brazil. It expects to plant 22,000 ha of cane by March 2012. The company has already paid USD 35 million towards increase its stake in RDB to ~59% and expects to pay the next tranche of USD85 million would be paid before March 2012. ------------- Every day, self-proclaimed stock market "experts" tell us why the market just went up or down, as if they really knew. 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