Dhampur Sugar Mills Limited (500119) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Dhampur Sugar Mills Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agarwal, Head, Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. It's my pleasure to welcome you on behalf of Dhampur Sugar Mills Limited and SKP Securities to this financial results conference call. We have with us Mr. Gaurav Goel, Managing Director; and his colleagues, Mr. Susheel Mehrotra, CFO; Mr. Vinit Gupta, VP, Finance; and Mr. Akshat Kapoor, VP, Operations. We'll have the opening remarks from Mr. Goel, followed by a Q&A session. Thank you, and over to you, Gaurav.

Thank you. I'm Susheel Mehrotra. First of all, a very warm welcome to ladies and gentlemen, at our Q4 and FY '24 earnings conference call. The year under consideration was full of challenges, which had impacted the overall financial performance of the company. As you know, the external factors that affected mainly the performance include the retrospective redetermination of the higher legislative obligation fixed by the UP state government, which had an impact of INR 18.8 crores on our profit. Secondly, increasing the supply price of sugarcane, which directly impacted the cost of production. Third was the lack of availability of sugarcane due to lower yields, which in turn was caused by heavy rainfall and prolonged monsoon last year. And then came the ban on use of sugarcane juice and syrup for ethanol production. However, a positive note. Commissioning of the company's new distillery facility last year as also the grain-based facility this year has helped us a lot for increasing the ethanol production, and we produced 1,189.78 lakh liters ethanol versus 931.08 lakh liters compared to last year, thereby partly offsetting the negative impact of ban on use of juice and syrup for ethanol collection. The higher production of ethanol, combined with the higher sugar realization in this quarter, has helped us compared to last year, partly overcome the impact of other adverse factors as well. As a result, the revenue from operations during the quarter ended March '24 stands at INR 666.9 crores versus INR 754 crores. EBITDA is INR 100.5 crores versus INR 105.1 crores. PBT is INR 68.6 crores versus INR 78.7 crores, and cash profit is INR 73.5 crores versus INR 81.7 crores in corresponding quarter last year. Coming to the full year, the revenue of operations stands at INR 2,644.1 crores versus INR 2,826 crores. EBITDA is INR 291.8 crores versus INR 311 crores. The positive side is we have been able to maintain the EBITDA margin at 11% which was same as last year. PBT is INR 190.5 crores versus INR 215.1 crores, and cash profit is INR 216.3 crores versus INR 229.8 crores as compared to last year. Now coming to the capital-related charges. Our depreciation in this quarter is higher on account of full year charge on the new distillery assets, as also the depreciation on grain-based distillery for 3 quarters of this year. Moreover, lower production in sale of ethanol, which has higher cash velocity as against other businesses, has resulted in higher utilization of the working capital limits. That, together with the increasing interest rate scenario, resulted in higher interest expense during the quarter despite improvement in company's credit rating and replacement of some high-cost churn rate by low cost [indiscernible]. Though in the full year, like higher interest rates, we could save on the interest cost by efficient fund management. Now coming to business-wide focus. In Sugar segment, the company crossed 15.7 lakh tonnes of sugarcane in the current quarter versus 18.5 lakh tonnes in the corresponding quarter due to lower availability of cane. The gross recovery in this quarter stands at 11.73% versus 12.38% in the corresponding quarter of last year. This can be attributed to heavy rainfall last year as also some impact of red drought. Now to overcome red drought, we have already laid down the plan for the righter shift and are also initiating other actions to mitigate this loss. Sugar production during this quarter is 1.75 lakh tonnes, which was 1.47 lakh tonnes in the corresponding quarter of FY '23, an increase of nearly 19% as a result of discontinuation of the diversion of syrup to ethanol. Sugar sales during the quarter stands at 0.71 lakh tonnes as 0.96 lakh tonnes in the corresponding quarter of last fiscal. The average sugar realization in this quarter having INR 38,165 per tonne as against INR 34,665 per tonne in the corresponding quarter of last year. Sugar production during FY '24 is 3.5 lakh tonnes as compared to 3.08 lakh tonnes in the previous year, an increase of over 14%. This again has happened due to the discontinuation of use of syrup for ethanol production. Sugar sales during the year stands at 2.58 lakh tonnes. In the last year, the company sold 3.89 lakh tonnes of sugar, which included 0.6 lakh tonnes of raw sugar. Average sugar realization in the year has been INR 37,359 per tonne as against INR 34,839 per tonne of white sugar in the last year. Sugar inventory is 2.1 lakh tonnes as on March 31, '24, which was 1.20 lakh tonnes as on March 31, '23. And the sugar inventory is valued at INR 34,500 per tonne. In the Ethanol segment, total ethanol production from all the stocks is INR 257.25 lakh liters in this quarter, which includes 77.11 lakh liters from maize and [indiscernible] to grain, which is 30% of the total production. In the corresponding quarter last year, production was 347.18 lakh meters, which was entirely from sugarcane juice and syrup production. The discontinuation of use of fed-up for its ethanol production resulted in lower production, which was partly offset by collection from new and damaged food grain. Total sales of ethanol during the quarter from all feedstocks is 264.22 lakh liters, including 69.34 lakh liters from new and damaged food grain, which is 26% of the total sales versus 287.04 lakh liters in the corresponding quarter of last year. In this year, the total ethanol production from all feedstocks is 1,189.78 lakh liters, which includes 171.67 lakh liters from new and damaged food grain, which is 14% of the total production versus 931.08 liters in the previous year. The sale of ethanol during the year from all feedstock is 1,231.87 lakh liters, including 157.38 lakh liters from new and damaged food drink. Now this is 13% of the total sales. This average is 97.7 lakh liters in the previous year. The production and sale of ethyl acetate has been 83.21 lakh kg and 78.89 lakh kg versus 108.18 lakh kg and 107.4 lakh kg as compared to the corresponding quarter of last year. In the full year, the production and sale of ethyl acetate has been 327.21 lakh kg and 323.32 lakh kg versus 345.45 lakh kg and 351.91 lakh kg as compared to last year. Production of potable spirits during the quarter has increased to 4.95 per cases from 3.96 lakh cases in the comparable quarter, and sale has increased to 5.14 lakh cases from 4.14 lakh cases in the corresponding quarter of last year. In the full year, the production of potable spirits has increased to 22.42 lakh cases from 19 lakh cases, and sale has increased to 22.38 lakh cases from 19 lakh cases as compared to last year. On the revenue mix for the quarter, sugar has contributed 46.2% of the quarter revenue, which is down from 55%, and ethanol is at 20.6%, which is up from 17.9%. Power is at 10.6%, again up 8.8% -- from 8.8%. The revenue from Chemicals is 7.2% as against 8%, and potable spirits is 14.5% as against 9.5% in the corresponding quarter of last year. On the profit mix for the quarter, the sugar has contributed 29.5% of the quarter, EBIT up from 7.3%. Ethanol is at 5.1%, down from 43.6%. Power is at 41.7%, again, down from 42.3%. EBIT from Chemicals is 1.6% as against 7%. And potable spirits was 2% against a loss of 0.4% in the corresponding quarter last year. On the revenue mix for the current year, the sugar has contributed 43.5% of the revenue, down from 54.7%. Ethanol is at 34.7% from 16.8% on account of higher sales volume compared to last year. Power is at 6.8%, again, up from 6.1%. Revenue from chemical is 7.9% against 8.5%, and potable spirits is at 16.4% against 13.1% in the last year. On the profit mix in the current year, sugar has contributed 10.8% of the year EBIT as against 19.8%. Ethanol is at 48.2%, up from 44.8%. Power is at 33% from 27.7%. EBIT from Chemicals is 5.1% as against 7.7%. And potable spirits is at 2.6% against low of 0.3% in the last year. Now coming to the consolidated results. Revenue from operations during quarter stood at INR 667.1 crores versus INR 759 crores. EBITDA is INR 100.7 crores versus INR 108 crores. PBT is at INR 68.8 crores versus INR 81.5 crores. PAT is at INR 51.9 crores versus INR 60.7 crores. And cash profit is INR 73.6 crores, which was INR 84.5 crores last year. On a full year basis, the consolidated revenue from operations is INR 2,646.8 crores versus INR 2,874 crores last year. EBITDA is INR 293.4 crores versus INR 318.8 crores. PBT is INR 192.1 crores versus INR 222.8 crores, and PAT is INR 134.5 crores versus INR 158.0 crores. And the cash profit is INR 218 crores versus INR 237.5 crores. So these are the significant operating and financial numbers for the quarter and year. Thank you once again for joining us on this conference call. We'll be happy to answer any questions that you may have. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Aditya Agarwal, an individual investor.

Sir, I have 2 questions. The first is, what is the transfer pricing and cost per COP for B heavy and C heavy dry ethanol? And what is your net recovery for the sugar season, for the entire sugar season in '24?

Transfer price for the B heavy molasses is INR 1,200, and for the C molasses is INR 850. And what was the next question?

The net recovery for the sugar season?

11.73%.

Seven points, sir?

11.73%.

[Operator Instructions] The next question is from the line of Sanjeev Dama from SKD Consulting.

Sir, in very difficult times, you have performed so well. First, please accept my congratulations. And my question was whether are we still running the mills or mills are closed by now?

Sir, all the mills are closed, both our plants are closed by now. And even in UP, there will be hardly now any few which are running as of now. UP has seen a [Foreign Language] because of weather, because of red drought. So [Foreign Language] for the whole state of UP will become very important. How do we change 238, [Foreign Language]

Okay. Sir, one more thing. It's a very clerical thing. But I want to understand that in our segment-wise revenues, unallocable liabilities are shown as INR 1,070 crores. So I mean, can I get some understanding about this amount?

Yes, these are actually largely the working capital borrowings because the borrowings cannot be allocated to any segment.

Okay. Okay. So that is -- actually, I also thought that way. But sometimes, when the assets and liabilities are put in sugar segment, working capital related to sugar segment can be added there only in liabilities instead of unallocable. Can it be done, sir?

Right. But the working capital is generally a pool. So that is why they've shown like unallocable.

[Operator Instructions] We'll take the next question from the line of Avinash Nahata from Parami Financial Services.

So what are the expectations as far as sugar prices are concerned for the next 5, 6 months? And what has been the recovery, industry-wide recovery?

So I believe that the prices should stay within the same range. As of now, I believe that the next 5 to 6 months, the prices will range in the range of INR 38 to INR 39 will be the price range that we will see over the next 5 to 6 months. And as far as your other question goes, ours was 11.73% for the quarter and 11.63% for the whole year, which is over the average of what was there in UP.

Okay. And this would be up on an average 10 bps to 20 bps?

Yes, about 20 bps, we will be higher than the average of UP.

Okay. And any global context, if you can give us regard the global top and the pricing behavior?

So basically, the prices have come down over the last 4 to 8 weeks. Brazil is seeing a good crop as of now. Obviously, India has not exported for the year '24 as of now. We aren't sure whether exports will happen or not. But we have to surely asked the government to allow exports of 2 million tonnes. But that will have to wait till June once all of this is worked because India has sufficient stocks as of now. So we hope that government will allow 2 million tonnes of exports post June.

And on a price parity basis, given the current raw sugar prices, how much premium it trades to the domestic prices?

So as of now, as you know, there will be no export of raws because most of the plants are now shut. So there has been no raw which will be made. All the exports, if it is allowed, will only be in white, whether it is refined or it is your sulfur white sugar.

[Operator Instructions] As there are no further questions from the participants, I would like to hand the conference over to Mr. Goel for closing remarks. Over to you, sir.

On behalf of Dhampur Sugar Mills, we would like to once again thank you all for taking your time out for this conference call. If you have any further questions, please feel free to contact us either by phone or by e-mail. You can also visit our website www.dhampursugar.com and post any queries that you may have, and we'll get back to you as soon as possible. Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of SKP Securities Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.