At Operating level, margins fell by 160 basis points to 10.5% largely on the back of impact of margins from Brazil business as it was adversely affected by lower cane yields leading to higher cost per ton despite the improved margins in ethanol and co-generation segments due to higher availability raw material. This led to 18% fall in operating profit to Rs 244 crore. However, the 180% surge in other income to Rs 84.40 crore facilitated muted growth in PBDIT to Rs 328.40 crore. But, the sharp increase in interest cost coupled with higher depreciation during the quarter drived down the company to post PBT before forex loss Rs 89.20 crore.

During the quarter, it has diverted higher juice (62%) towards sugar production, as the price of sugar is higher as compared to ethanol. Average realization for sugar segment in India higher by 10% on account of higher sales price realized for the export sugar. Further, the ethanol segment has benefited from the higher prices and higher sales volume during the quarter. In Brazil, it capitalized on higher flexibility to produce maximum ethanol to take advantage of higher ethanol prices.

Consolidated Quarterly Performance:

Net sales lower by 5% to Rs 2334.90 crore for the quarter ended September 2011. Moreover, the OPM fell by 160 basis points to 10.5% largely on the back of 160 basis points rise in consumption cost and 100 basis rise other expenses as percentage to sales and net of stock adjustments. This resulted 18% fall in operating profit to Rs 244 crore. However, the 180% surge in other income to Rs 84.40 crore muted the PBIDT growth to Rs 328.40 crore.

Moreover, with the sharp 64% rise in interest cost to Rs 192.50 crore and 53% increase in the depreciation to Rs 225.10 crore there was loss Rs 89.20 crore at the PBT before forex loss compared to profit Rs 62.30 crore in the corresponding previous period. Further, with huge forex loss Rs 569.80 crore compared to Rs 68.90 crore forex gain in the corresponding previous period the loss was further prop up to Rs 659 crore at PBT level. After accounting tax credit Rs 40.50 crore and minority interest Rs 2.70 crore the consolidated net loss was at Rs 615.80 crore compared to profit Rs 128.10 crore in the corresponding previous period. 

Standalone Quarterly Performance:

Net sale lowered by 22% to Rs 1127.30 crore for the quarter ended September 2011 on the 43% fall in Sugar sales (51% of total) to Rs 599.4 crore, as it was off-season for crushing in India and there was 60% dip in the domestics sales volume. Also co-generation business decline by 4% to Rs 40.7 crore for the same period. However, trading business grew by robust 23% to Rs 416.6 crore contributing 36% total sales. Further, Ethanol business revenues surged (291% growth in sales volume) by 363% to Rs 108.7 constituting 9% to the total sales.

OPM expanded by 230 basis points to 4.6% on the back of 670 basis points fall in the consumption cost as percentage to sales and net of stock adjustments despite 380 basis points rise in the other expenses. As a result, operating profit grew by robust 57% to Rs 51.90 crore. Also, Other income surged by 105% to Rs 9 crore.

At PBIT level, margins from the sugar business slightly improved by 100 basis points to 2.8% resulting segment profit to fell by 15% to Rs 16.9 crore. Interestingly Ethanol business posted segment profit Rs 18.6 compared to the loss Rs 0.9 crore in the corresponding previous period. However, trading business margins fell by 110 basis points to 1.6% resulting segment profit Rs 6.5 crore.

With steep 102% rise in interest cost to Rs 40.90 crore coupled with marginal 2% incline in the interest cost to Rs 23.20 crore, PBT before forex loss was the loss Rs 3.20 crore compared to Rs 5.50 crore in the corresponding previous period. Further, with Rs 72.80 as forex loss and Rs 18.70 crore as tax credit the Company posted net loss Rs 57.30 crore compared to Rs 8.10 crore in the corresponding previous period.

Consolidated Yearly Performance:

Net sales higher by 13% to Rs 8662.30 crore for the year ended September 2011. However, OPM contracted by 80 basis points to 14.5% on the back of 460 basis points fall in consumption cost as percentage to sales and net of stock adjustments. As a result, there was 7% growth in operating profit to Rs 1255.40 crore. Moreover, the 177% surge in interest cost to Rs 657.40 crore (due to the additional debt with the Brazil acquisitions) and steep 178% rise in the depreciation to Rs 683.80 crore resulted loss Rs 68.52 crore PBT before forex loss compared profit Rs 741.80 crore in the corresponding previous period. Further, forex loss Rs 386 crore compared to forex gain Rs 132.10 crore in the corresponding previous period resulted loss Rs 454.52 crore at PBT level. Further, after accounting Rs 8.80 crore as provision for the tax and Rs 4.80 crore as minority interest net loss was at Rs 458.52 crore compared to net profit Rs 458.52 crore in the corresponding previous period.

Other Business Highlights:

• Renuka do Brasil (RDB) net sales (includes other income) higher by 13% to Rs 688.13 crore for the quarter ended September 2011. However, EBITDA fell by 33% to Rs 119.7 crore. Further, it has posted net loss of Rs 611.6 crore compared to net profit Rs 47.1 crore in the corresponding previous period.
• Renuka Vale do Ivai (RVDI) net sales (includes other income) witnessed robust 33% growth to Rs 221.4 crore for the quarter ended September 2011. Interestingly, EBITDA witnessed steep 99% rise to Rs 100.9 crore. However, it has posted net loss Rs 28.4 crore compared to the net profit Rs 22.9 crore in the corresponding previous period.
• Consolidated Net debt is at Rs 8329.3 crore as on 30^th September 2011 compared to Rs 5906.1 crore as on 30^th September 2010. Further, Standalone Net Debt stood at Rs 3338.2 crore as on 30^th September 2011 compared Rs 1692.4 crore.

Other Information:

• The Scrip was down by 4.79% to Rs 51.70 at BSE, India on 11^th November 2011.

Management Comments:

Commenting on the results and Performance, Mr. Narendra Murkumbi, Vice Chairman and Managing Director of Shree Renuka Sugars Limited Said:

"Shree Renuka Sugars had a difficult quarter due to a challenging operating environment in Brazil, especially in Sao Paulo state, due to bad weather severely affecting the sugarcane.

The Aracatuba region of Sao Paulo state, where our larger subsidiary Renuka do Brasil is located, had maximum impact of the drought-like conditions and frost and flowering of crops this season. Cane yields were down 31% year on year. Renuka Vale do Ivai displayed strong operational results and has posted good growth in out put and the EBITDA margin.

The Company has shown price growth across the sugar and ethanol segment in India as compared to the last year. However, India sugar prices remained flat during the quarter. The volatile global scenario and unavailability of raw material has resulted in lower utilization of the sugar refineries during this quarter"

Besides a consolidated loss at PAT level of Rs 461 million, the company suffered a forex loss of Rs 5698 million due to unrealized variation on foreign exchange monetary items in our Brazilian subsidiaries.

Renuka Vale do Ivai results showcase the effects of a full management turnaround and the company is focused on affecting a similar turnaround in Renuka do Brasil quickly. This primarily involves boosting the planted area of cane over the next two seasons.

The domestic sugar price cycle in India appears to be at a turning point with an undercapitalized industry being forced to run-up large cane appears in order to crush a big crop in sugar season 2011-12"