Balrampur Chini: Higher realisations save the day - Views on News from Equitymaster

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Balrampur Chini: Higher realisations save the day

Feb 11, 2009

Performance summary
  • Sales decline marginally during 1QFY09 on back of lower volumes.
  • Operating margins improve by 18% YoY during 1QFY09 primarily driven by inventory gains and healthy realisations witnessed during the quarter
  • Reports net profits as compared to losses last year.

Financial snapshot
Rs(m) 1QFY08 1QFY09 (%) Change
Net sales  4,315  4,295 -0.5%
Expenditure 3,943 3,138 -20.4%
Operating profit (EBDITA)            372         1,157 210.8%
EBDITA margin (%) 8.6% 26.9%
Other income 10 5 -48.5%
Interest 134 249 86.7%
Depreciation 248 275 11.2%
Profit before tax  1   637 48907.7%
Tax 2 125 6473.7%
Profit after tax/(loss)       (1)    512
Net profit margin (%) 0.0% 11.9%  
No. of shares (m) 248.2 255.5  
Diluted earnings per share (Rs)*            5.8
Price to earnings ratio (x)*             10.3
* 12 month trailing earnings

What has driven performance in 1QFY09?
  • Balrampur Chini (BCML) reported a marginal decline in sales during 1QFY09. While realizations were higher, the volumes saw a decline on account of decline in sugar production. Sugar segment saw a 1.4% YoY growth in revenues. 1% YoY decline in sugar production coupled with lower recovery rate of 8.82% as compared to 9.36% during 1QFY08 led to the muted growth. However, realizations were higher by 29% YoY, touching Rs 17.7 per kg. Distillery segment saw a mixed growth of 5.5% YoY. The distillery volume sales were lower by 35% YoY, while ethanol volume sales also declined by 33% YoY. However, realisations increased by 52% YoY owing to strong realisations witnessed in RS and ENA products. Cogen segment saw a flat increase, with a 9% YoY decline in unit sales. Average realization per unit of power sold to state power grid was around Rs.3.05 per unit. Low bagasse availability affected both these segments.

    Segment wise performance
    Rs m 1QFY08 1QFY09 (%) Change
    Sugar 3,740 3,792 1.4%
    % of total revenues 87.1% 88.3%
    Distillery 314 332 5.5%
    % of total revenues 7.3% 7.7%
    Cogeneration 557 557 0.0%
    % of total revenues 13.0% 13.0%
    Others 5 9 65.4%
    % of total revenues 0.1% 0.2%
    Total revenues         4,616       4,688 1.6%
    Less inter segment revenue 320 393
    Net Revenues         4,296       4,295 0.0%

  • The operating margins improved by 18% YoY during 1QFY09. This was primarily driven by inventory gains and healthy realisations witnessed during the quarter. The opening inventory of sugar was valued at Rs. 14.05 per kg compared to sugar sold at higher levels (Rs 17.7 per kg) during 1QFY09. Sugar segment witnessed positive PBIT as compared to losses last year. Cogen segment’s PBIT was lower by 1% YoY on account of lower bagasse availability.

  • BCML reported a net profit of Rs 512 m as compared to loss during 1QFY08. Higher operating margins led to the huge jump.

What to expect?
At the current price of Rs 60, the stock is trading at 10.3 times its 12 month trailing earnings. After severe losses over the last 2 years, the company has witnessed some sweetness in its performance aided by the integrated business model and higher sugar realisations. Domestic production of sugar is expected to go down to 16 to 17 m tonnes from our previous estimates of 21 m tonnes in FY09E. This is mainly on the account of lower recovery rates, shorter crushing period due to lower availability of cane and higher sugar cane prices paid by gur and khandsari producers resulting in steep decline in the drawal rate. This will lead to lower sugar production and thereby higher prices. However, with elections expected soon, the pricing of the cane price would play a key role.

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Aug 4, 2020 03:37 PM


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