Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dwarikesh Sugar Industries Ltd (BOM:532610, Financial) reported a 6% increase in sugar prices, selling at INR3,833 compared to INR3,608 in the previous year.
- The company has cleared all cane price payments for the 2023-24 season ahead of schedule.
- Dwarikesh Sugar Industries Ltd (BOM:532610) holds a strong credit rating with a long-term rating of AA- and a short-term rating of A1+ for its INR300 crores Commercial Paper program.
- The government is expected to reintroduce the ethanol blending program after September 30, 2024, which should positively impact the company's operations.
- The company has undertaken significant measures for red rot management and varietal changes, which are expected to improve crop yield and recovery rates in the upcoming seasons.
Negative Points
- The company experienced a significant drop in revenue, with the top line decreasing by about INR230 crores compared to the previous year.
- Dwarikesh Sugar Industries Ltd (BOM:532610) reported a loss after tax of INR9.73 crores for the quarter.
- Sugarcane crushing activities were completely halted in Q1 FY25 due to the early closure of the sugar season, leading to no production activity.
- Ethanol sales saw a notable decline, with only 123 lakh liters sold compared to 303 lakh liters in the corresponding quarter last year.
- The company faced unabsorbed overheads due to the lack of production activity, contributing to the financial losses.
Q & A Highlights
Q: What are your thoughts on recovery in the current quarter? And what is the situation of red rot and the 238 variety mix for this year?
A: In the DD plant, we have done significant fieldwork to address red rot. The crop condition is currently good, suggesting better yield and recovery than last year. However, we did not have any sugar manufactured in the current quarter. For the entire season, our recovery has been 11.53%, and we expect it to improve in the coming season.
Q: How do you see domestic sugar prices trending, especially with the current surplus?
A: Prices depend on the quantity released for the month. Currently, prices are around INR3,900 per ton. The government might announce a minimum MSP for sugar, which would stabilize prices. We expect prices to hold between INR3,800 and INR3,900 per ton.
Q: Does it make sense to export sugar at current prices?
A: There is a dispute regarding the closing stock numbers. The government might take a call on exports by January or February when production numbers are clearer. Export prices are currently lower than domestic prices, so it might not make sense to export at these prices.
Q: What is the outlook for the year, given the weak quarter?
A: The sector is poised to do well, but we have faced challenges with a significant drop in crushing numbers. We expect partial recovery in the coming fiscal and a return to our previous performance levels by fiscal '25-'26.
Q: What is the current stance of the government on the ethanol program?
A: The pause on the ethanol program is due to a notification valid until September 30, 2024. It is unlikely to be extended, and we expect the ethanol production program to resume after September, improving our performance in the second fiscal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
