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Shree Renuka Sugars announced the results for the quarter ended June 2012 and held a conference call on 16th August 2012 to discuss the results and its future growth strategies. The key takeaways of the call are as follows:
Highlights of the Call:
The drought like situation in western part of India (60% of India's sugar production) is likely to impact the sugar production for next season.
In Maharastra and Karnataka the replenishments in ground water and damns were lower. So, the irrigated lands in these areas are likely to impact the sugar production for the coming season as the pre-seasonal plants were affected. However, the better clarity would emerge by the end of September 2012.
The Company expects sugar production in the range of 23.5-24.5 MT for the sugar season 2012-13.
The domestic sugar prices likely to be remain steady at Rs 33-34 per kg during the quarter but may move upward afterwards on account of lower production.
The Total sugar exports is expected to be 3.5 MT for the sugar season 2011-12. Further, around 3MT was already shipped out.
In Brazil, the cane crop is in good shape and the yields are higher than earlier estimates. The crushing during the quarter was lower (30-40% lesser) due to heavy rains in the months of May and June resulted lower number of drier days available for the cane crushing. However, this is expected to result in the better yields in the second half of the season.
The weighted average price for the Brazil market is 22-25 cents. For, the coming season the prices expected to be 22-23 cents.
The world sugar market expected to produce a surplus of 4-6 million tones for the next season considering the 33 million tones from Brazil and 25 million tones from the India.
On refining, the Company importing raw sugar from Brazilian subsidiaries and exporting refined sugar. The EBIDTA margins were at USD 40 per tonne. However, there is parity (10% import duty) to sell the same (refined sugar) in the domestic market.
The white-raw sugar spreads remained above USD 120/ton for the most part of last quarter and even touched USD 150/ton post the dip in world sugar prices in July 2012. The strong white sugar prices coupled with weaker currency ensured good margins on the sugar processed from the domestically procured raw sugar.
The inventory cost for the white sugar is Rs 28 per kg and little lower for the raw sugar.
The corn prices are higher by 60% in the US due to severe drought and this resulted higher demand from the US for the import of ethanol from the Brazil market. Currently, the export price for the Brazilian ethanol to USA is around 20.5 cents/lbs in sugar equivalent terms.
The Standalone debt decreased to Rs 4019 crore as on 30th June 2012 compared to Rs 4313 crore as on 30th June 2011. Also, the Consolidated debt is at Rs 9069 crore as on 30th June 2012 compared to Rs 10005 crore as on 30th June 2011.
The Renuka Vale do Ivai (RVDI) is expected to repay the debt in October 2012 and Renuka do Brasil (RdB) to repay in July 2013.
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