Balrampur Chini Mills: Higher volumes, better realizations helped to post decent profit

MUMBAI: Higher volumes and better realizations in the December 2012 quarter helped Balrampur Chini Mills to post a decent profit of Rs 60 crore. In the same period last year, it had posted a loss of Rs 64 crore.

Sugar prices have remained buoyant on account of lower production estimate for this season (Ocober 2012 to September 2013). According to initial estimates, sugar production is expected to fall to 24 million as against 26 million tons in last season.

On the other hand, consumption is expected to remain at 22 million tons. As a result, sugar prices have risen by nearly 11% since June 2012. In the December quarter, Barampur Chini's average sugar realizations were at Rs 34.6 per kg.

However, due to delayed start in crushing this season, revenues from byproducts - ethanol and co-generation were subdued. In the coming quarters, the company's profitability would remain subdued due to high cane costs. The UP State government had increased the State administered Price for sugarcane by 16% to Rs 280 per quintal for this season.

At this price, the company would breakeven only if the sugar prices are above Rs 34 per kg. However, the government's initiatives to decontrol the sector would be a long term positive for the industry.

Some of the measures can may be implemented are market pricing of ethanol and removal of levy sugar. The industry may see a re-rating if these measures are implemented.