DALMIA BHARAT SUGAR REPORTS DISMAL Q2FY23 RESULTS

News:

 Dalmia Bharat Sugar reported dismal Q2FY23 results with 20.5% de-growth in sales. Consolidated revenue witnessed a de-growth of 20.5% to Rs578.9 crore on account of 21.4% decline in sugar sales. Sugar volume were down 25% to 1.11 lakh tonnes but sugar realisation was slightly higher. Distillery sales was slightly up by 1.4% led to Rs 168.2 crore. Distillery volumes were up 5% to 3.16 crore litre but, we believe, distillery realisation would have been down due to inferior mix. Operating profit saw a sharp dip of 91.6% to Rs 7.3 crore mainly on account of higher cost of production due to increase in sugarcane prices & lower recovery rate in 2021-22 sugar season. Sugar prices were also muted during the quarter despite high festive season demand. Moreover, one time impact of wage arrears of last three years & increase in levy molasses quota also aggravated the performance during the quarter. Net profit was also down 80.2% to Rs 11.7 crore

View:

 Most sugar companies reported a dismal Q2 performance, adversely impacted by higher cost of production, subdued sugar prices, increased levy molasses quota & one off spend on wage arrears of last three years. UP based sugar millers witnessed lower recovery rate in 2021-22 season due to extreme weather conditions during the crushing season. However, we believe sugar recovery would improve in 2022-23 season resulting in reduction in cost of production by Rs1/kg. We believe high global refined white sugar prices would considerably improve Dalmia’s blended sugar realisation in next two quarters given it can export 98,000 tonnes of given quota. The company is most aggressive in undertaking distillery expansion given it has reached 705 KLD (22 crore litres per annum) distillery capacity. It is further increasing it to 800 KLD (24 crore litre). We also believe the company’s working capital requirement would also come down significantly given it is holding cash of Rs572 crore. We remain positive on sugar industry as well as Dalmia Bharat Sugar

Impact:

Neutral