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Analyst Meet / AGM
04-Feb-13
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Conference Call
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Shree Renuka Sugars
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Cane planting expected to be lower in Maharastra and Karnataka
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Shree Renuka Sugars announced the results for the quarter ended December 2012 and recently held a conference call to discuss the results and future growth strategies. The key takeaways of the call are follows.
Highlights of the call:
- The refinery division and the power capacities were utilized to the fuller extent during the quarter.
- Recently, The Government of India has notified the Fuel Ethanol mandate requiring the Oil Marketing Companies (OMCs) to sell ethanol blended petrol up to 10 percent in order to achieve the mandatory blending of 5% across the country as a whole. In this regard OMCs have announced a domestic tender for procurement of approximately 1.4 billion liters and International tender for procurement of approximately 0.8 billion liters of ethanol.
- The sugar production for the Maharastra expected to be 6.8 million tons and 2.8 million from the Karnataka for SY'13 expected to be significantly lower than previous year. Also, The Yields have fallen in the main production states of Maharashtra and Karnataka due to less availability of water for irrigation. Further, the outlook for the planting is also negative/lower in these two states.
- The Crushing for the season 2013-14 has started in India last quarter and sugar production for estimated between 23.0-24.0 million tons for SY'13. Till 15th January 2013, The Indian mills had crushed more than 113 million tons of sugarcane to produce 11 million tons of sugar, which is 3% higher than last year.
- During the quarter, The Indian sugar prices have declined by about Rs 2000 per ton on account of start of crushing season and a new domestic release system. But the domestic price is still higher by 25% year on- year.
- The Global raw sugar prices dropped during the quarter from USD 21.6 cents/lb to USD 18.7 cents/lb on account of surplus in the world sugar market. Further, the White-raw sugar gross refining spreads remained below USD 120 per ton for most part of October and first half of November. They have since declined below USD 100 per ton due to higher availability of refined sugar in Central-America.
- The World raw sugar prices have stabilized in the range of USD 18 cents/lb -20 cents/lb. Further, the Prices are expected to remain at these levels due to expected surplus in the global sugar market and parity of ethanol in Brazil at these levels. The current raw sugar prices are favorable for the refining business and will help in running the refineries at full capacity.
- The 2013-14 crushing season for Centre-South Brazil is expected to be a high yielding crop with estimated crushing of 585 million tons. Also, The Brazilian Government has announced an increase in the gasoline price by 6.6% which will increase the price parity for ethanol closer/above the sugar price parity in Brazil. In addition, it is expected that the ethanol blending ratio will increase from current 20% to 25% from May 2013 onwards helping to increase the overall demand of ethanol. Given the above two factors, higher demand of ethanol will help in off-setting the higher cane availability in 2013-14 season.
- The Average cost of the sugar production is 18 cents/pound and 15 cent/pound for the VDI, where as the Brazillian Average lies at 16.5 cent/pound.
- The management hopes that the government will remove release mechanism and the levy mechanism (as part of Ranagrajan Committee recommendations) from April'01st 2013.
- The management indicated that it is not successful in the deleveraging the Brazilian balance by selling the co-generation but continue to look for selling the assets. It further indicated ecosystem much favorable on account of improved Brazil account coupled with the recent power tariff hikes.
- The Standalone Debt (India operations) has come down to Rs 2655 crore as on date from the Rs 4320 crore as on 31st March 2013. The debt on Brazil subsidiaries is around Rs 4900 crore.
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