EID Parry hosted a conference call on Nov 11,2021. In the conference call the company was represented by Mr S Suresh – Managing Director, Mr Suresh Kannan – Whole Time Director, Mr MuthiahMurugappan – Head - Strategy & Nutraceuticals, Mr A Sridhar – Chief Financial Officer and Mr Biswa Mohan Rath – Company Secretary.

Key takeaway of the call

On the international front due to dry weather Brazilian crop is expected to be around 520 million metric ton and will be producing around 32 million metric ton of Sugar. The company expects that the high oil prices and ethanol prices will push the sugar prices up.

Maximum sugar is expected to be produced by Brazil however, it will not be able to meet the whole global demand. In order to meet the demand,the prices of sugar are expected to go up and international raw sugar prices are expected to be in the range of US$ 19-21 cents.

Pandemic has not affected the sugar consumption significantly.

The Indian sugar production is expected to be around 30.5 million metric tons and is in line with last year. This is after diversion of sugar to ethanol to the tune of 3.5 million metric ton.

The government has increased the FRP to Rs 2900 a base recovery rate of 10%. This is an increase of Rs 50 over last year. The industry is expecting an increase in MSP from the government which has not yet happened. The industry is also expecting an increase in prices of ethanol which is procured by oil marketing companies and may happen any time.

Tamil Nadu government has announced to produce ethanol from sugar syrup and b heavy molasses.

Standalone Revenues for the quarter stood at Rs 438 cr in Q2FY2022 as against RS 529 cr in Q2FY2021. EBITDA stood at Rs 115.0 cr in Q2FY2022 as against Rs 226 cr in corresponding quarter of previous year and PAT stood at Rs 73 cr as against Rs 131 cr in Q2FY2021. The company had fulfilled all the export obligation in the last year itself and is scouting for opportunities for export.

Sugar Segment: The company operated only in Tamil Nadu during Q2FY2022. The company crushed 6.6 lac metric tons in Q2FY2022 as against 5.70 lac metric tons in Q2FY2021. The recover rate was 8.71% in Q2FY2022 as against 7.91% in Q2FY2021. The company produced 0.57 lac metric tons of sugar when compared to 0.45 lac metric ton in Q2FY2021.

Sugar cane landing cost was Rs 2971/per metric ton in Q2FY2022 as against Rs 2850/ per MT. The current sugar season the landing cost of sugar cane in Karnataka is Rs 3400/per ton, Andhra Pradesh it is Rs 3100/ ton and Tamil Nadu it is Rs 3200/ton.

Sugar sales volume stood at 0.84 lac MT of which domestic sales contributed 0.77 lac MT and exports contributed .07 lac MT. For the half year ended the sales volume stood at 1.8 lac MT of which 1.37 lac MT was domestic and 0.43 lac MT was exports.

Selling price stood at Rs 34.76/per kg in Q2FY2022 as against Rs 34.66/ per kg in Q2FY2021. The closing stock was at 1.46 lac MT.

Revenue for the quarter from sugar segment stood at Rs 313. cr in Q2FY2022 as against Rs 412 cr in Q2FY2021.

CO generation: The company produced 570 lac units in Q2FY2022 as against 521 lac units in Q2FY2021. The company exported 297 lac units in Q2FY2022 as against 268 lac units in Q2FY2021. The revenue for the segment stood at Rs 18.51 cr as against Rs 17.11 crore in Q2FY2021. Power is exported in Karnataka and Andhra Pradesh through Power purchase agreement and in Tamil Nadu through IEX exchange.

Distillery operation: The company sold 165 lac liters in Q2FY2022 with 62 lac liter of ENA and 103 lac liter of ethanol. Ethanol average realization stood at Rs 54.55 per liter and for ENA realization it stood at Rs 56.64 per liter. Revenue for the quarter stood at 91.89 cr in Q2FY2022 as against Rs 85.12 cr in Q2FY2021. Margins were lower when compared to last year due to lower realization.

Nutraceuticals: revenue for the quarter stood at Rs 21.46 cr as against Rs 21.82 cr in Q2FY2021.

Dividend: The board of directors have announced a dividend of Rs 5.5 per equity share.

Expansion: The company has commissioned the distillery at Bagalkot with a capacity of 60 KLPD. Commercial production has commenced and the company has started supplying ethanol to oil marketing companies.

The board has also approved 120 KLPD grain-based distillery plant in Andhra Pradesh. This is in order to take benefit of the ethanol program of the government and is expected to be on stream in next financial year(Q3FY2023). The total CAPEX is around Rs 92 cr.

Haliyal plant expansion is on line and is expected to be commissioned by end of Nov 2021. With this the total crushing capacity will be around 11500-12000 tcv per day.

Debt: The debt levels have improved when compared to Mar 31,2021. Long term debt stood at Rs 101 cr as on Sep 30,2021 when compared to Rs 200 cr as on Mar 31,2021 and short-term debt has reduced to Rs 102 cr as on sep 30,2021 as against Rs 355 cr as on Mar 31,2021. Finance cost has reduced by Rs 9.67 cr in Q2FY2022 when compared to Q1FY2021.

In refinery segment, the company does not have any long-term debt. The short-term debt is Rs 800.0 cr.

Other expenses: Increase in other expenses is due to maintenance cost which the company has incurred which could not be done in the last year due to covid. Increase in retail operations volumes has increase which has resulted in increase in logistic cost.

CAPEX: Over all including Bagalkot, Haliyal and Sankili (Andhra Pradesh) should be around Rs 300-350 crore.

Outlook:

Distillery total capacity is 294 KLPD and the whole capacity will be operational. With respect to cane crushing, the company expects to crush at least 10-12% higher when compared to previous year and in next year also the company expects another 10-12% higher crushing if the rains are normal.

The company expects normal run rate of around 2 lac Mt in refinery business from Q3FY2022.

The breakeven for the sugar is Rs 34.0/ per kg(realization).

On a full year basis, the company targets a sale of 1.65 lac ton of branded sugar.

The company gets around 10% better realization for branded sugar sales than the trade sales.

Management Commentary:

Commenting on the performance of the company Mr S Suresh- Managing Director said “The company operational performance in Q2 2021-22 was affected as compared with corresponding quarter of the previous year on account of reduced export sales coupled with lower release order quota allocation.

During the quarter, the Board has approved the setting up of a 120 KLPD Distillery (Grain/Sugar/ Syrup/ Molasses) in Sankili which augurs well for the growth of the company.

Government has increased the FRP by Rs 50 per MT for the sugar season 2021-22 without any increase in MSP of sugar. Industry is expecting an increase in MSP for sugar and Ethanol price for covering the two consecutive increase in FRP for healthy survival.

Availability of cane is expected to be better in Karnataka for sugar season 2021-22 as compared to previous sugar season on account of transferred capacity from Pudukkottai to Haliyal while it is expected to be same lines of last year for Tamil Nadu and Andhra Regions.

Standalone Nutraceuticals registered a reduction in profit from Rs 4 crore in corresponding quarter of the previous year to Rs 2 crore in the current quarter on the premise of increased raw material cost. Consolidated Nutraceuticals registered an increase in revenues of 7% from Rs 58 crore in corresponding quarterof the previous year to Rs 62 crore during the current year.”