Release Date: February 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Triveni Engineering & Industries Ltd (BOM:532356, Financial) reported a 3.6% increase in revenues from operations for the nine-month period, reaching INR4,060 crores.
- The company's Power Transmission and Water business order book registered a strong growth, with a combined closing order book of INR2,356 crores, marking a 52.5% year-on-year increase.
- The Board announced an incremental CapEx of INR60 crores for enhancing capacity in the Power Transmission business, aiming to increase gears capacity to INR700 crores by September 2026.
- The sugar business anticipates a 15% increase in cane crush this year on a consolidated basis, indicating a promising outlook for the ongoing sugar season.
- The ethanol blending percentage for '24-'25 stood at 16.5% as of December 31, with some regions expected to reach 20%, showcasing progress in the ethanol blending program.
Negative Points
- Overall profitability was subdued due to lower margins in the Sugar and Alcohol businesses, with sugar prices and initial recoveries being lower than expected.
- The sugar revenues for the quarter declined by 9.5% due to lower sugar sales volumes and lower realization prices.
- The Alcohol business faced lower profitability due to a shortage of molasses-based feedstocks and lower sales volume of high-margin ethanol.
- The Water business experienced a decline due to delays in receipt of new orders and slow execution in certain projects.
- The net debt on a consolidated basis stood at INR960 crores, with a marginal increase in the overall cost of funds to 5.6% during Q3 fiscal '25.
Q & A Highlights
Q: Can you provide insights on the ethanol spreads and future volumes, especially with the new FCI rice pricing?
A: Tarun Sawhney, Executive Vice Chairman and Managing Director, explained that the company anticipates expanded margins for ethanol manufacturing from C-heavy molasses due to increased prices. The availability of FCI rice at a higher rate will also impact maize pricing. The company expects a broadening of margins over the next few quarters, although the industry anticipated higher increases in ethanol prices from sugar streams, which have not materialized.
Q: What is the outlook for sugar prices and production, considering recent government export announcements?
A: Tarun Sawhney noted that despite a delayed start to the sugar season, Triveni expects a 15% increase in cane crush on a consolidated basis. The sugar production is expected to be around 27 million metric tonnes, with a closing stock just above 6 million metric tonnes. The recent export announcements and lower production estimates have led to a rise in sugar prices, which are expected to remain stable.
Q: Can you elaborate on the recovery trends and cost of production in the sugar segment?
A: Suresh Taneja, Group CFO, mentioned that the recovery gap has narrowed from 82 basis points to 60 basis points over 45 days. The cost of production for sugar is expected to be lower due to improved recovery rates. Historically, recovery in Q4 is better than in Q3, which will help moderate production costs.
Q: What are the reasons for the delayed start of the sugar season, and how does it affect production?
A: Tarun Sawhney explained that the delayed start was due to lower sucrose content in cane tests and weather conditions. The company starts processing ratoon cane, which was less healthy due to previous year's conditions. The season is expected to end later, positively impacting results and off-season expenses.
Q: What is the rationale behind Triveni Engineering holding a 20% stake post-demerger of the Power Transmission business?
A: Tarun Sawhney stated that the decision was made to support the defense business, which requires balance sheet considerations for quoting and establishing PQs. The structure aims to ensure the success of the defense business while unlocking value in the Power Transmission segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
