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 in Q3 fiscal '25 being particularly low.
- The initial recovery trends for the ongoing sugar season were on the lower side due to inclement weather and degeneration of the 238 variety of sugarcane.
- The Alcohol business faced lower profitability due to a lower sales volume of high-margin ethanol produced from molasses and a shortage of molasses-based feedstocks.
- The Water business experienced a decline due to delays in receipt of new orders and slow execution in certain projects, impacting overall performance.
- The net debt on a consolidated basis stood at INR960 crores as of December 30, '24, with a marginal increase in the overall cost of funds.
Q & A Highlights
Q: Can you provide insights on the ethanol spreads and future volume expectations, especially with the recent price announcements?
A: Tarun Sawhney, Executive Vice Chairman and Managing Director, explained that the company is seeing 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 anticipates better margins in the coming quarters as they adjust their feedstock mix.
Q: What is the outlook for the sugar market, considering recent government export announcements and price changes?
A: Tarun Sawhney noted that sugar prices have increased following government export announcements. The company expects a 15% increase in cane crush this year, despite a delayed start to the season. The closing stock is expected to be just above 6 million metric tonnes, which should support stable pricing.
Q: Could 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 is expected to decrease as recovery improves, particularly in Q4, which historically sees better recovery rates.
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 early tests and weather conditions. The company strategically delayed the start to ensure better initial recoveries. The season is expected to end later, which is positive for absorbing off-season expenses.
Q: Can you discuss the rationale behind the 20% stake retention in the Power Transmission business post-demerger?
A: Tarun Sawhney stated that retaining a 20% stake is crucial for establishing PQs and maintaining balance sheet strength, especially as the company incubates its defense business. This structure supports the business's success and value creation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
