Mawana Sugars Limited – a producer of sugar/co-generated power and ethanol in Uttar Pradesh, India – announced its results for the quarter ended December 31, 2009.
Q1 FY10 Performance review
Sales
Net Sales were at Rs2434mn in Q1 FY10 as compared to Rs1401mn. In Sugar the Net Revenues in the first quarter of the new season were at Rs2066mn against a total cane crush of 81 lakh quintals thus far. The average realisation worked out to a strong Rs31.7/Kg as compared to Rs18.1/Kg last year. The results benefited from both an uptick in sugar volumes and the increase in prices.
Contribution from the allied businesses is looking strong, with Distillery revenues at Rs19mn in Q1 FY10 from Rs2mn last year. Similarly revenues from export of power were at Rs91mn. There has been an enhancement in co-generation realisations by 17% which contributed to the performance along with an increase in the number of units sold to the grid. In Q1 FY10 24.8mn units were sold to the grid as compared to 23.8mn units.
Revenues in the Chemicals business stood at Rs290mn from Rs399mn in Q1 FY09 given the peculiar operating conditions.
Operating Cost
Raw material cost saw considerable increase at Rs1961million in Q1 FY10 from Rs1493mn last year. The average cost of cane has moved up across the sector and the Company had to incur additional expenditure to secure its required quantum of cane. The increase in Employee Cost to Rs182mn in Q1 FY10 from Rs168mn last year was on account of normal wage/salary increments. Power and Fuel consumption was lower at Rs205mn from Rs220mn. Total expenditure was therefore at Rs2199mn from Rs1506mn last year.
EBITDA
EBITDA saw robust increase of 780% to Rs414mn from Rs47mn given the strong results in the sugar business and the Company’s focus on cost reduction.
Other Income, Interest Cost &Depreciation
Other income saw robust improvement at Rs37mn from Rs11mn mainly driven by rental income and forex gains. The Interest cost for the Company was at Rs139mn from Rs154mn, as the Company focused on debt management and has started looking at opportunities at early retirement of debt. Whereas the Depreciation charged stood at Rs134mn from Rs130mn in Q1 FY09.
PBT
The PBT was at Rs141mn in Q1 FY10 given the good operating performance. The comparable figure in Q1 FY09 was a loss of Rs238mn.
PAT
Net Profits saw a strong improvement at Rs141mn in Q1 FY10 from a loss of Rs240mn previously. EPS was at Rs4.02 & Rs(7.86)
Commenting on Mawana Sugars’ results Mr. Sunil Kakria, Managing Director – Mawana Sugars said: “I am pleased to report a healthy increment in profitability this quarter given the positive contribution from sugar. I see a progressive improvement in the operating performance going forward on account of the following factors: given the constrained availability of sugar globally the average realisations of sugar are expected to remain better than those last year and secondly we are very aggressively targeting cost at all levels to optimise our earnings.
We had a delayed start to the new crushing season this year and have stepped up crushing activity since then. Given the trends we are seeing we expect to see higher production of sugar since last year. In addition we had imported certain quantum of raw sugar that had been imported a few months back. We expect to be in a better position therefore to meet demand for sugar from our key customers.
In our Chemicals business we are expecting stabilisation of the performance given the good trends visible in demand. Further the safeguard duty applied by the Govt. on imports of caustic soda is likely to protect and benefit the domestic industry.”
Key highlight/developments:
• The average Sugar realisation in Q1 FY10 was at Rs31.7/Kg.
• Sale of sugar stood at 6.16 lakh quintals in Q1 FY10 as compared to 4.9 lakh quintals previously.
• Quantities of molasses and industrial alcohol sold in Q1 FY10 and Q1 FY09 were 2.85 lakh quintals (molasses), 4.42 lakh BL (industrial alcohol) and 0.82 lakh quintal (molasses), 0.2 lakh BL (industrial alcohol) respectively.
• The sales of Caustic soda were 11716 MT in Q1 FY10 as against 14020 MT in the corresponding Qtr last year.
Strengthening balance sheet
Mawana Sugars is actively pursuing measures to reduce the incidence of debt on books. As on December 31, 2009 the Net Debt (net of Cash and Cash Equivalents) was at Rs6bn. The comparable figure on December 31, 2008 was at Rs7bn. The management is committed to balancing the Interest Cost through revenue optimisation measures –including rationalising assets & fresh promoter equity infusion. The cash flows from operation are expected to improve inline with higher realisations of sugar and its allied products and will further support the strengthening of the balance sheet.
Sugar outlook
Sugar output for season 2009-10 has been variously cited at 15.1 M.T. Against annual demand of 22.9 M.T., there is thus a shortfall of 7.8 M.T. Thus far the country has maintained availability of sugar through imports. Sugar companies across the country, and particularly those in U.P. have contracted upto 4.5mn M.T. of raw sugar this season and those with adequate stocks of refined and saleable sugar are likely to benefit.
The sector remains influenced by policy decisions which are aimed at balancing the benefit to the cane grower on one hand and to ease the pressure of high sugar prices to the consumer. As of now there is a restriction on transferring imported sugar from the ports to the mills in U.P. –the resolution of this situation is expected to increase the quantum of saleable sugar by the millers.
Cane crush is expected to be similar to last sugar season level. The recovery is expected to be better by 0.2% - 0.3% as compared to last sugar season. The company is likely to have higher availability of sugar due to better recoveries and processing of sugar from Raw sugar of 23000 MT imported last year.