Distillery divisions lifts Balrampur Chini's profits

MUMBAI: A better recovery and higher quantity of sugar cane crushed help Balrampur Chini Mills to negate the effect of higher cane costs in the quarter ending March 2012. The company reported a 15% y-o-y growth in profits to Rs 129 crore in March 2012 quarter.

In the quarter ending March 2012, sugar recovery rate was 9.88%, which was highest since the last four quarters. In addition, surplus production this year led to 15% y-o-y increase quantity of sugar crushed.

However, the higher cane costs posted a dent in the margins from sugar division. The cane procurement price for this sugar season was increased 20% to 240 per quintal. As a result, earnings from the sugar division before interests and taxes reduced 16% y-o-y to Rs 80 crore in March 2012 quarter.

The real game changer the company in the last quarter was the co-generation and distillery divisions. A larger quantity of cane crushed resulted in higher realization from distillery and co-generation units. Both these division combined reported a sharp 135% jump in profits before interests and taxes in March 2012 quarter.

The prospects of sugar sector are likely to improve in the coming months. With freeing up of exports, domestic sugar prices are likely to sustain above current prices of Rs 29/kg. Moreover, the prevailing drought situation in parts of Maharashtra and Karnataka would influence the sugar production for next season.

It is believed that the sugar production for the next season would not exceed the current year’s production of 26 million tons. At the current price of Rs 49.6, the stock is trading at a Price to book value of 1. Investors can accumulate the stock at current levels.