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

Good day, ladies and gentlemen. Welcome to Dhampur Sugar Mills Limited's Q1 FY '25 Results 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. 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 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. Akshat Kapoor, COO; and Mr. Vineet Gupta, VP Finance. We'll have the opening remarks from Mr. Mehrotra, followed by a Q&A session. Thank you, and over to you, Susheel.

Thank you. Good afternoon, and I extend a very warm welcome to all the participants to this conference call of Dhampur Sugar Mills Q1 FY '24 [ FY '25 ]. Now just to take it forward from the last quarter, certain adverse factors of the last financial year continued to impact our operations in this quarter also. These are primarily lower yield of cane, which was due to unexpected heavy rains and impact of the red rot in the last crop. Secondly, the ban on use of syrup and B-Heavy molasses for production of ethanol. So on account of lower cane availability, which was caused by unseasonal and heavy rainfall in 2023, Rajpura unit of the company had closed crushing season in March '24 and Dhampur unit could operate till the first week of April '24. This impacted the performance of the company for this quarter as well. The revenue from the operations of -- for the current quarter ended June '24 stands at INR 677.9 crore versus INR 914.6 crore in the last year same quarter. EBITDA is at INR 31 crore versus INR 95.5 crore. PBT is INR 2.0 crore versus INR 67.8 crore, and the cash profit is INR 15.1 crore versus INR 69.5 crore in the corresponding quarter of last year. Coming to business-wise performance during the current quarter. The company crushed 0.4 lakh tonnes as against 7.45 lakh tons in the corresponding quarter, mainly due to lower ability of the sugarcane and lower yield last year. This was due to lower yield impact of the heavy rains in 2023 as well. Sugar production during the quarter is 0.04 lakh tons, which was 0.51 lakh tons in the corresponding quarter of last year. See, actually, the operations were very minimal on the production side in this quarter. The average sugar realization in this quarter has been INR 38,967 per tonne as against INR 36,387 per tonne in the corresponding quarter, which is higher by about 7%. The sugar inventory is 1.3 lakh tonnes as on 30th June 2024, versus 0.48 lakh tons as on 30th June '23. The sugar inventory is valued at INR 34,950 per tonne. Coming to the Ethanol segment. The total production of ethanol during the quarter from all the feedstocks is 120.55 lakh liters, including 86.33 lakh liters from maize and damaged food grains, 72% of the total production, versus 335.3 lakh liters in the corresponding quarter last year. Total sales of ethanol during the quarter from all feedstocks is 145.12 lakh liters, including 99.08 lakh liters from maize and damaged food grains, 68% of the total sales, versus 357.45 lakh liters in the corresponding quarter last year. Production and sales of ethanol continue to be low due ban on use of syrup and B-Heavy molasses for production of ethanol. This is despite the additional volume from the maize. Coming to the Chemicals segment. The production and sale of ethyl acetate has been 92.76 lakh kg and 95.02 lakh kg versus 101.85 lakh kg and 101.78 lakh kg as compared to the corresponding quarter of last year. Potable spirits segment has shown the improvement during the quarter. The production of the potable spirits increased to 8.06 lakh cases from 6.2 lakh cases in the corresponding quarter and the sale has increased to 7.87 lakh cases from 5.95 lakh cases in the corresponding quarter of last year. On the revenue mix for the quarter sugar has contributed 45.7% of the quarter revenue, down from 53.0%; Ethanol is at 15.5%, down from 21.7%; Power is 2.1%, down from 4.3%. Revenue from Chemicals is 9.5% as against 7.4% and Potable spirits is 26.7%, up from 13% in the corresponding quarter of last year. On the profit mix for the quarter, sugar has contributed 60.6% of the quarter earnings before interest and taxes, up from 29.7%; Ethanol is 19.6%, down from 43%; Power is at 4.2%, again down from 17.6%. EBIT from Chemicals is 2.8% as against 7.9% and Potable Spirits is at 11.7% as against 1.2% in the corresponding quarter of last year. Now coming to consolidated results. Revenue from operations during the quarter stood at INR 678.2 crores versus INR 915.1 crores; EBITDA is at INR 31.3 crores versus INR 95.7 crores; PBT is at INR 2.2 crores versus INR 68 crores; and PAT is at INR 1.6 crores versus INR 45.4 crores. Cash profit is INR 15.4 crores versus INR 69.7 crores. So these are the significant operating and financial numbers for the quarter. 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.

[Operator Instructions] We'll take the first question from the line of Sneha Jain from SKS Capital.

I wanted to ask what is your outlook on ethanol currently? When do you think the policy would change and even for exports?

Thank you so much, Sneha. So we've been in dialogue with the government, and we are hoping that they will allow syrup and B-Heavy for the year '24-'25. As far as exports go, again, the file is there in movement, but again very, very early days. But I think that in the next about 4 weeks, we should have some sort of clarity as to be how much of B-Heavy and syrup they will say for the year '24-'25.

So the thing should not extend beyond September, the ethanol policy restrictions on that?

Yes. Because, see, again, it will only start post when the new policy will be out. Plus, we are also waiting for the new price of syrup and of B-Heavy to be out. So I think on that basis, government knows that they have got enough sugarcane for '24-'25. So I am hoping that within the next 4 weeks, clarity will be out on that.

And sir, just general attributes and the crop is good this time?

Rainfall has been good till now. So rainfall like as what we all saw last year was very, very heavy rainfall. But up till now rainfall has just about been perfect. So hoping for the same to stay for the next 8 weeks.

And sir, any particular outlook for the company? I mean, how do you view this?

The company is healthy. The balance sheet is very healthy as of now, enough of cash in the bank. So from that perspective, the company is all okay. There are no expansion plans for the year '24-'25 as such as of now. We may be thinking about CBG and all these things but those are still in process. So there is no real CapEx that we all are seeing for the next 6 months.

[Operator Instructions] We'll take the next question from the line of Gaurish, an individual investor.

Am I audible?

Yes, sir.

Yes, you are.

Sir, actually, I read somewhere that there was -- this time as well, there are some red rot disease in the Dhampur sugar mills area, and that has affected the crops. So can you just elaborate on what measures have been taken and is it under control? So can you just guide us on that?

Red rot was an issue that we faced from last year. The plans are all set for the next 5 years. Replacement of 238 has already started in both our plants and that was already started about 3 years back. But even as on date, the farmers are not very inclined to change from 238, which has been a great crop for them and for the company as well. But the process has already started. And in 3 years, 50% of our total crop will be under 238. So we are planting other varieties of cane, 118, 9423. So that plan has started. And I'm very sure that this red rot that has come in 238, we'll be able to manage it.

[Operator Instructions] We'll take the next question from the line of Nikhil Saboo from SKP Securities Limited.

Sir, is it possible for you to share your plant-wise action, which you are taking for both of your plants?

Yes. So the plant-wise action is pretty clear, is that 238, we have already started. I mean, what happened in East about 3 years back has now come to this side also of west and Central UP. So basically, we have to -- the seed has to be changed from 238. So 118 is the variety that we all are basically making our plans on. And so that plan is already in action. A large plant -- a large part of the area, which got impacted by red rot has been changed with 118 and that will carry on.

Got it, sir. So what percentage of our area has been replaced with 118? And what is the percentage of C 0238 right now? And how we see the varietal change changing over the next 2, 3 years?

No, I think with cane varieties, the main thing is that each of them have a lifeline in which they sort of do really well and towards the end they start getting disease. So it's quite a normal pattern that we're used to seeing. So there's sort of a 3-year transition that we take with it, which will include first changing our seed. So for the Rajpura plant, in fact, in Uttar Pradesh, we purchased the most amount of seed from outside our factory of other varieties, close to 52,000 quintals of new cane seed was brought in. So we do see a very large change in our planting next year, but what happens is we also keep ratoon for the early part of the season. So that's why we call it a 3-year transition. But the thing about last year is you can largely view it as a black swan event. We also had the El Nino water effect on us. So the heavy rainfall early in June and July further expedited the impact of red rot. So we don't foresee it being that large of an issue this year, and we see our seed transition happening quite seamlessly.

Got it, sir. Sir, I know it's very early to give any guidance on the cane -- how much cane are we expecting. But like last year, we have seen a significant drawdown in our cane availability. So are we likely to overcome that? Or what percentage of our drawdown we can expect to overcome in the next season, sir?

So out there you have said it absolutely right. Early days, but we're surely seeing the seed that we have been able to plant both -- and seeing the rainfall, we do believe that both our plants will see a higher crush as to what it was. But after the next call, I'll have a better idea exactly as to how much of cane increase we all will see for year '24-'25.

Looking forward for your guidance in the next quarter.

Thank you very much.

[Operator Instructions] Thank you very much, sir. That was the last question in the queue. As there are no further questions, I would now like to hand the conference over to Mr. Goel for closing remarks. Over to you, sir.

On behalf of Dhampur Sugar Mills Limited, 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 you have, and we'll get back to you as soon as possible. Thank you.

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