Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Balrampur Chini Mills Ltd (BOM:500038, Financial) reported a strong performance in the sugar segment, benefiting from higher volumes and realizations.
- The company is making significant progress in its Polylactic Acid (PLA) project, with INR300 crore already invested from internal accruals.
- The company expects a positive outlook for sugar prices due to anticipated lower inventory levels by September 2025.
- The ethanol blending program is expected to continue unhindered, with potential for increased production and government support.
- The company is actively engaging in cane development activities and varietal rebalancing to address challenges related to lower cane availability.
Negative Points
- The distillery operations faced challenges due to a temporary ban imposed by the central government, affecting production.
- Sugarcane crushing ended early, leading to a decline in production and under-absorption of fixed overheads.
- There is uncertainty regarding the exact increase in sugarcane crushing for the '24-'25 season due to previous inaccurate projections.
- The planting acreage was slightly lower due to adverse weather conditions last year, potentially affecting future yields.
- High maize prices are making ethanol production from maize less viable, posing challenges for grain-based ethanol production.
Q & A Highlights
Q: What is the expected sugarcane crushing increase for the '24, '25 season?
A: Avantika Saraogi, Executive Director, stated that they will refrain from making a guess this time due to past inaccuracies. However, they believe the tailwinds should outweigh the headwinds.
Q: What is the maximum ethanol diversion possible, and what quality of ethanol production is achievable at a country level?
A: Vivek Saraogi, Executive Chairman and Managing Director, explained that with a 3 million excess stock, the government should allow unhindered ethanol diversion, consuming 4 million tonnes, producing 400 crore liters of ethanol.
Q: What is driving the resiliency in sugar prices despite high inventory, and what is the outlook on domestic prices?
A: Vivek Saraogi noted that the outlook remains positive due to expected lower inventory by September 2025, assuming ethanol and export policies are favorable, which should keep prices buoyant.
Q: Can you provide a timeline for the PLA investment over the next 2-3 years?
A: Vivek Saraogi mentioned that they are looking at commissioning in October-November '26, with a gradual spend over 2-2.5 years, and they are tying up debt judiciously.
Q: Is there a possibility of retrospective change in ethanol prices, and are contracts watertight?
A: Vivek Saraogi clarified that they aim to return to the '22, '23 pricing regime, treating last year as an exception due to election-related disruptions.
Q: What are your views on alternative applications of ethanol, such as sustainable aviation fuel (SAF)?
A: Vivek Saraogi stated that SAF requires special investment, and Balrampur Chini is not looking at additional CapEx beyond current projects. Avantika Saraogi added that a 1% SAF mandate is expected by '26, '27.
Q: What are your expectations for the revision in MSP prices of sugar?
A: Vivek Saraogi indicated that they are working on unrestricted ethanol quantity, correct ethanol pricing, and MSP, hoping for changes before October. However, he refrained from providing specific numbers.
Q: What is the current domestic and international sugar price?
A: Pramod Patwari, CFO, stated that domestic prices are around INR38.5 to INR39 in UP ex-factory, while international raw sugar prices are around $0.18 to $0.19 per pound.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
