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Balrampur Chini: Bad times continue - Views on News from Equitymaster
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Balrampur Chini: Bad times continue
Feb 20, 2008

Performance summary
  • BCML’s topline grew by 27% YoY in 1QFY08 led by strong performance of its allied businesses.
  • Higher raw material expenses (as percentage of sales) led to the decline in operating profits to 7.8%.

  • Net profits were down by 100% YoY for the quarter.

Rs(m) 1QFY07 1QFY08 (%) Change
Net sales 3,371 4,275 26.8%
Expenditure 2,856 3,942 38.0%
Operating profit (EBDITA) 515 332 -35.5%
EBDITA margin (%) 15.3% 7.8%  
Other income 17 103 518.1%
Interest 55.2 186 236.8%
Depreciation 171 248 45.1%
Profit before tax 306 1 -99.6%
Tax 114 2 -98.3%
Profit after tax/(loss) 192 (1) -100.3%
Net profit margin (%) 5.7% 0.0%  
No. of shares (m) 248.2 248.2  
Diluted earnings per share (Rs)*   -  
Price to earnings ratio (x)*   -  
* 12 month trailing earnings

What has driven performance in 1QFY08?
  • The topline grew by 27% YoY in 1QFY08. The sugar division witnessed a 25% YoY growth. It produced 1.7 m quintals as compared to 2.2 m quintals in 1QFY07 on account of delayed start of the crushing season. Even the realisations declined by 19.5 % YoY to Rs. 1,366 per quintal from Rs 1,697 per quintal in the corresponding quarter last sugar season. The distillery segment grew by 69% YoY led by 116% YoY growth in distillery products to 19,525.8 KLPD in 1QFY08 as compared to 9,028 KLPD in 1QFY07. Lower realisations witnessed in products like RS and ENA during the quarter were offset by increased sales leading to improvement in revenues in the distillery division. On account of capacity expansions, BCML sold 133 m units during the quarter, a growth of 11.7% YoY. Average realisation per unit of power sold to state power grid was around Rs 3 per unit. The integrated business model continues to insulate the company from the cyclical nature of the sugar division.

    Segment wise performance
    Rs m 1QFY07 1QFY08 (%) Change
    Sugar 3,041 3,792 24.7%
    % of total revenues 89.9% 87.2%  
    Distillery 206 350 69.4%
    % of total revenues 6.1% 8.0%  
    Cogeneration 451 557 23.4%
    % of total revenues 13.3% 12.8%  
    Others 10 5 -47.5%
    % of total revenues 0.3% 0.1%  
    Total revenues 3,709 4,703 26.8%
    Less inter segment revenue 327 355  
    Net Revenues 3,382 4,349 28.6%

  • BCML expanded its capacities across all segments. Sugar capacity stood at 73,000 TCD for the season 2007- 2008, which includes 8,000 TCD unit established at Gularia during the quarter and 8,000 TCD unit at Kumbhi commissioned at the end of the previous sugar season. It also considerably expanded its co-generation saleable capacity to 126 MW as compared to 83.2 MW during the corresponding period last year. The distillery capacity stood at 320 KLPD on account of capacity expansion at Mankapur unit (100 KLPD).

  • The margins have fallen by 7.5% YoY to 7.8% in 1QFY08. The raw material costs were up 48% YoY and touched 78% of sales (67% in 1QFY07). On the segmental basis, the sugar division continued to face losses. Its PBIT was down 232% YoY. However, the distillery and cogeneration segments provided some relief. Distillery margins touched 42% from 35% in 1QFY07, while power segment margins were up 1% to 44.5%.

  • Lower margins, higher interest and depreciation costs have led the company once again to report a loss at the net level. With the sugar sector in doldrums, the company’s performance continues to get adversely impacted. Even a 518% YoY growth in other income did not help matters.

What to expect?
According to industry estimates, the country is likely to produce about 27 million tons (MT) of sugar in the 2007-08 season, compared to 28.3 MT in the last season. Before the current season began, it was estimated by the industry that the sugar production in the country would climb further to 32 MT. However, late start of the crushing season in Uttar Pradesh and heavy rains in Maharashtra impacting sugar production provided some relief to the sugar mills. The annual consumption in India is estimated at about 20 MT. Sugar exports in the current season is pegged at 2.5 MT. This would lead to reduction in the excess stocks in the country. However, a mismatch in terms of selling and raw material prices is expected to continue. Till the government aids the proper alignment of prices, the sector scenario would continue to remain unfavourable. Having said that, the BCML’s derisked business model would help the company tide over the rough times being faced by the sugar sector.

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