- 07 Nov 2022
- ICICIdirect Research
Avadh Sugar reported dismal Q2FY23 results with Rs 16.2 crore lossAVADHSUGAR - 436 Change: 5.50 (1.28 %)
Consolidated sales dipped by 4.9% to Rs 589.2 crore mainly on account of 5.5% sugar sales de-growth & 12.8% de-growth in distillery sales. The company’s domestic sugar quota was lower by 4.7% to 1.3 lakh tonnes during the quarter. Moreover, sugar realisation also remain muted in Q2. With the increase in levy molasses quota obligation, its distillery sales have also declined during the quarter
· The company posted operating profit of mere Rs 0.5 crore. Cost of production for the company has increased by Rs3/kg in 2021-22 season mainly on account of higher sugarcane prices & lower recovery rate. Moreover, employee spends also increased by 68% to Rs 36.3 crore on account of Rs 11.98 crore wage arrears of last three years paid during the quarter.
· Interest cost declined by 24.4% to Rs 18.2 crore mainly due to substantial decline in debt level. The company posted a net loss of Rs 16.2 crore during the quarter. Total debt for the company declined by Rs 363.8 crore in last six months. Further aggressive payment towards sugarcane resulted in Rs 280 crore dip in trade payable. The company generated operating cash flow of Rs 509 crore in last six months.
The decline in operating profit in Q2 was mainly impacted by higher cost of production & subdued sugar prices. Moreover, one off costs related to wage arrears, higher levy quota obligation aggravated the performance. However, we believe improvement in sugar recovery in 2022-23 season, higher export realisation & increase in distillery volumes would result in higher profitability in H2FY23 & FY24. Though, we believe average sugar prices would remain Rs 35/kg in next one year, cost of production would decline by Rs 1/kg. Moreover, increase in distillery realisation by Rs 2/kg would aid margins. We believe Avadh sugar would witness Rs 500 crore reduction in debt levels in between FY22-24. We remain positive on sugar industry & Avadh Sugar