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News: Avadh Sugar witnessed weak set of numbers with 9.6% decline in net sales to Rs 674.5 crore mainly on account of lower sugar sales impacted by dip in domestic sales volume by 18%. Distillery segment sales inched by 17.7% during the quarter. Operating profit de-grew by 31% to |50.4 crore due to lower sugar sales, higher cost of inventory (given increase in sugarcane prices & lower sugar recovery last year). Net profit dipped by 38.6% to Rs 17.7 crore due to lower operating profit.
Views: Most of the UP based sugar mills were given lower domestic sugar sales quota during the quarter due to reduction at the inventory levels with millers, which adversely impacted sales & profitability during the quarter. Further, sugar prices have not moved up commensurate with increase in cost of production in last one year. Though, Avadh has been able to partially off-set the impact of lower sugar sales with higher distillery sales, the extend of ethanol sales volume is not very high to fully neutralise the impact of sugar volume decline. We believe sugar recovery in 2022-23 season would be similar to last year levels for the company. Moreover, expected increase in sugar prices could drive profit growth going forward.
Impact: Negative