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Balrampur Chini: Sweetened quarter - Views on News from Equitymaster

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Balrampur Chini: Sweetened quarter
Aug 6, 2009

Performance summary
  • Topline grows by 70% YoY during 3QFY09 led by the 103% YoY growth in the sugar segment. Higher sugar realisations are witnessed on account of lower production in the country.
  • The operating margins decline by 2% YoY during 3QFY09 due to higher raw material costs as a percent of sales. For the season 2008-09, the cane price has been accounted for at the State Advised Price (SAP) of Rs 140 per quintal.
  • Net profits surge 293% YoY during 3QFY09 on account of strong operating profits, lower interest costs and depreciation charges.


Financials
Rs(m) 3QFY08 3QFY09 (%) Change 9mFY08 9mFY09 (%) Change
Net sales 3,165 5,381 70.0% 10,588 13,246 25.1%
Expenditure 2,328 4,081 75.3% 8,037 9,477 17.9%
Operating profit (EBDITA) 837 1,300 55.3% 2,551 3,769 47.7%
EBDITA margin (%) 26.4% 24.2%   24.1% 28.5%  
Other income 4 2 -60.5% 18 9 -47.8%
Interest 249 236 -5.2% 613 785 28.0%
Depreciation 330 267 -19.2% 884 809 -8.4%
Profit before tax 262 799 205.0% 1,072 2,184 103.7%
Tax 93 136 45.4% 248 346.4 39.9%
Profit after tax/(loss) 169 663 293.4% 825 1,838 122.9%
Net profit margin (%) 5.3% 12.3%   7.8% 13.9%  
No. of shares (m) 255.5 255.5   255.5 255.5  
Diluted earnings per share (Rs)*         7.8  
Price to earnings ratio (x)*         15.7  
* 12 month trailing earnings

What has driven performance in 3QFY09?
  • Balrampur Chini (BCML) reported a topline growth of 70% YoY during 3QFY09 led by the strong 103% YoY increase in revenues from the sugar segment. The segment contributed 87% to the total sales (68% during 3QFY08). While there was no sugar production during the quarter as compared to 8.1 lakh quintals produced last year, realisations were higher by 59% YoY and sale volumes were higher at 44% YoY. The distillery segment reported lower sales on account of 52% YoY decline in volumes witnessed across the products due to lower availability of molasses. Cogen sales fell by 30% YoY on account of a 48% YoY decline in volumes. For 9mFY09, the company’s overall sales grew by by 25% YoY on the back of a robust 35% YoY growth in sugar sales.

    Segment wise performance
    Rs m 3QFY08 3QFY09 (%) Change 9mFY08 9mFY09 (%) Change
    Sugar 2,363 4,809 103.5% 8,570 11,539 34.7%
    % of total revenues 67.8% 86.5%   71.6% 80.3%  
    Distillery 507 317 -37.4% 1,271 1,062 -16.4%
    % of total revenues 14.5% 5.7%   10.6% 7.4%  
    Cogeneration 612 428 -30.1% 2,115 1,743 -17.6%
    % of total revenues 17.5% 7.7%   17.7% 12.1%  
    Others 4 8 83.3% 14 25 82.5%
    % of total revenues 0.1% 0.1%   0.1% 0.2%  
    Total revenues 3,486 5,562 59.6% 11,969 14,369 20.1%

  • The operating margins declined by 2% YoY during 3QFY09 led by higher raw material costs as a percent of sales. For the sugar season 2007-08, the company had accounted the price of cane at Rs 110 per quintal. For the season 2008-09 the cane price had been accounted for at the State Advised Price (SAP) of Rs 140 per quintal. For 9mFY09, the margins improved by 4% YoY to touch 29% during the period. This was mainly aided by lower staff and other expenses which were lower due to the absence of crushing operations during the quarter. The management expects the margins to improve due to higher sugar realizations.

  • On the PBIT front, the cogen and the distillery segment saw a decline in profits at the PBIT levels. Lower production and sales volumes because of non-availability of molasses led to higher per unit costs in the distillery segment. The power segment saw a decline of 35% YoY as the company had operated some of its facilities for lower number of days on account of lower bagasse availability. However, the sugar segment was the key performer as its margins improved from 4% in 3QFY08 to 14% during 3QFY09 led by higher average sugar realisations. The realisations improved to Rs 23 per kg as compared to Rs 14.5 per kg in the corresponding quarter last year.

  • BCML witnessed robust performance at the net levels during both the periods under consideration. This was largely aided by strong growth at the operating levels coupled with lower interest (during 3QFY09) and depreciation costs. Going ahead, interest costs are likely to reduce due to repayment of long-term loans and lower level of working capital utilisation.

What to expect?
At the current price of Rs 122, the stock is trading at 15.7 times its 12 month trailing earnings. The sugar production is estimated to be lower than demand, though a greater clarity of its extent will be available closer to commencement of crushing. While the yield per hectare in Uttar Pradesh will be lower due to below normal rainfall to date, recoveries may improve. The management expects the crushing volume to be 10% to 15% higher and the recovery rate to also be 10% higher. With sugar realisations currently being at around Rs 25 per kg, the company would witness better times going forward.

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