Shree Renuka Sugars is a fully-integrated sugar company, besides sugar, power generation and ethanol are also additional sources of revenue. If Q2FY09 had been disappointing, the company more than made up for it in Q3FY09, declaring a bumper set of results. The company had not really taken full advantage of the bullish cycle in Q2FY09 but on hindsight that has proven to be prudent as the bull run only got better in Q3FY09 and it made full use of it this time around.
Sequentially, its net profit more than doubled from Rs.33.20 crore to Rs.78.10 crore. This really does not come as a surprise as in Q2FY09, the company was sitting on inventory of Rs.336 crore and this itself would have helped add on to the company's earnings quite substantially and we could see more gains getting on in Q4FY09 also. Moreover, given the current spike in sugar prices, the company did well by offloading the inventory, making full good use of these high prices.
The topline of the company rose by an unbelievable 108% at Rs.893.50 crore. In the sugar sector, the company managed to earn an EBIT of Rs.86.30 crore (Rs.20.60 crore in Q2FY09) on a sales of Rs.585.10 crore (Rs.86.30 crore) and this was its biggest earner. Cogeneration contributed Rs.80.10 crore (Rs.86.90 crore) to the topline and EBIT of Rs.20.30 crore (Rs.38 crore), indicating an overall fall. Revenue earned from ethanol was almost flat at Rs.37.80 crore (Rs.37.90 crore) but realisations fell as EBIT was at Rs.9 crore as against Rs.12.90 crore earned in Q2FY09.
The company is expanding its refining capacity at Karnataka to 2,000 tonne per day from 1,000 tonne per day. It is also raising refining capacity in Karnataka by 1,000 tonnes per day. Both plants are expected to be commissioned by December 09'. Once both these units go on stream, company's sugar refining capacity will increase to 6,000 tonne per day, which includes the 2,000 tonne per day port-based sugar refinery at Haldia, West Bengal, and the 4,000 tonne per day refining capacity at three of its integrated sugar mills in Karnataka.
It also recently raised Rs.506 crore via QIP issue and this increased the equity capital of the company from Rs.28 crore to Rs.31.70 crore and reserves has swollen to Rs.502.30 crore.
The shortfall in sugar production is a well known fact now and prices are already up to around Rs.26 per kg in the retail sector. With festival season around the corner and despite the Govt getting imports to keep a check on the prices, we can expect realisations of sugar companies to go up further.
Source: www.premiuminvestments.in (S P Tulsian)
