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Dhampur Sugar sees 18.1% decline in sales, profitability dips by 4%

News: Dhampur's consolidated revenue de-grew 18.1% to Rs.762.5 crore on account of 27.4% dip in sugar sales. Domestic sale quota was 1.5 lakh tonnes against 2.2 lakh tonnes in the corresponding quarter. Sugar prices rose from Rs.32.5/kg in June 2021 to Rs.37/kg in November 2021. Distillery sales grew 41.7% due to increased proportion of B-heavy ethanol. Operating profit de-grew 8.4% to Rs.66 crore impacted by lower sugar sales volumes. However, operating margins improved 100 bps to 8.7%. Interest cost was down 15.6% to Rs.17.8 crore with reduction in debt & lower interest rates. Net profit dipped 4% to Rs.26.7 crore. Long term debt came down from Rs.320.1 crore in March 2021 to Rs.302.1 crore in September 2021 & inventory liquidation led to |436 crore dip in working capital debt to Rs.384 crore. Company announced a distillery capex of 150 KLD (including 50 KLD grain based distillery @ Rs.140 crore). 650 KLD consolidated capacity by November 2022 after the capex. Company also adding one country liquor plant of 12 lakh cases with the capex of 12 crore in its Asmoli unit.

Views: The sugar industry is getting transformed into a structural growth sector, increasing distillery capacities over the next three years. In last three years, industry sugar inventories reduced from 14.5 million to 8.2 million tonnes (September 2021) through aggressive exports & sugarcane diversion towards ethanol.With the reduction in industry wide sugar inventories, domestic sugar prices are likely to remain firm above Rs. 35/kg. Moreover, higher global raw sugar prices would help millers to export 5-6 million tonnes in 2021-22 sugar season. Also aggressive expansion of distillery capacities would further aid company utilise the excess sugarcane for ethanol production. We believe firm sugar prices & increasing ethanol capacities would result in strong earnings growth over the next three years. We remain positive on the sector