Dalmia Bharat Sugar rapidly expands distillery capacitiesDALMIASUG - 443 Change: -12.85 (-2.82 %)
News: Dalmia Bharat Sugar reported strong results with 52.5% growth in earnings. Consolidated revenue saw flat sales (up 1.6%) due to lower sugar sales impacted by dip in sugar volumes but distillery sales witnessed strong 25.2% growth. Sugar volume were down 17% to 1.14 lakh tonnes (lt) given the company received 1.04 lt of domestic sale quota. Sugar prices inched up by ~11% during the quarter. Operating profit witnessed growth of 57.9% to Rs.87.9 crore driven by firm sugar prices, significant increase in distillery volumes & higher proportion of B-heavy and Juice based ethanol. With considerable reduction in debt Interest cost came down from Rs.11.1 crore to Rs.6.4 crore. PAT grew 52.5% to Rs.56.6 crore on the back of higher operating profit, lower interest costs. Income tax provisioning was higher during the quarter.
Views: Sugar prices have seen an uptick in the last six months, mainly on account of reduction in sugar inventories & increasing diversion of sugarcane towards ethanol. Sugar inventories in the country have come down from 14.5 MT in September 2019 to 8.2 MT in September 2021. Considering 6-7 MT of exports (already contracted 4.5 MT) in the current season, inventories would further come down to below 7.0 MT by September 2022. Dalmia Bharat is one of the most aggressive companies in expanding distillery capacity. Moreover, it has also proactively utilised the opportunity (higher global sugar prices) to export additional sugar. We believe the company has one of the leanest sugar inventories in the industry. It is also undertaking capex of two 100 KLD grain based ethanol distilleries. This would take its total distillery capacity to 21 crore litre. We remain positive on the company’s strong balance sheet, its strategy to diversify in branded consumer business along with the strong macro factors in sugar industry (firm sugar prices, uptick in distillery revenues).