"Your Company is optimistic of outperforming the broad sectoral growthaverage"
Capitalising on the recovery
In recent years Dalmia Bharat Sugar reinforced its operating culture around thrift andefficiency. The result is that as soon as sugar realisations revived the improvement inthe Companys bottomline was immediate and substantial from Rs.1.5 Crore in2014-15 to Rs.58.4 Crore in 2015-16.
The principal internal driver was a substantial improvement in our recovery. Thisimproved across each of our operating units our consolidated Uttar Pradesh recoverystrengthened by 114 bps to 11.73% which was indisputably the highest across all sugarmanufacturing groups in Uttar Pradesh. Our Maharashtra recovery of 13.04% was amongst thebest mills.
The substantial increase transpired for three reasons an improvement in thevarietal mix of cane an improvement in the climatic environment and our initiatives tosweat resources better. The result was that improved recovery alone accounted for anincrease in output by approximately 37000 tonnes during the year under review whichrepresents a faithful index of how our superior performance translated into enhancedproductivity capitalising on excellent climatic conditions.
It would be relevant to indicate that this peak productivity was the result of anexceptional convergence. This convergence may not recur even as the benefits of improvedvarietal mix and corporate focus may sustain.
Some of our other achievements during the year under review comprised extensivebenefits of our Kolhapur expansion which became visible: increase in sugar manufacturingcapacity from 3500 TCD to 5000 TCD the commissioning of our 23 MW cogeneration plantwhich was commissioned last year with full benefits accruing this year and 60 KLPDdistillery which was commissioned at the end of this year the full benefit of which willaccrue next year. This timely commissioning stabilisation integration and monetisationrepresented the principal achievement of this unit during the year under review.
Countering the challenges
Consider the challenges: cane yields were affected in drought-hit Maharashtra affectingplant operations; Dalmia Bharat Sugar ran its plant 178 days during this season.
Maharashtra reported a 19% decline in crushing during the season; Dalmia Bharat Sugardelivered a 38% increase in the quantum of cane crushed (to 9.5 lakh tonnes in the2015-16).
The plant reported a 13.3% recovery in 2014-15 following which analysts predicted adecline; I am pleased to report that even as output increased in the 2015-16 wesuccessfully protected our overall recovery in this unit which translated into anattractive volume-value proposition.
Most observers forecasted that it would be difficult to enthuse farmers to deliver morecane given our relative inexperience in the geography; we generated a sizable increase incane drawal at a time when most command areas reported lower output; virtually all ourcane was drawn from within 60 kms moderating logistic costs.
The other highlight during the year under review was clearly the successful turnaroundof our Sangli unit. At a time when most experts advised caution with our Maharashtraoperations considering that we were still engaged in expanding and widening our Kolhapurplant we embarked on the stabilisation of the Sangli unit. Most indicated that gettingfarmers interested to grow cane would be time-consuming; we crushed 120000 tonnes andreported an attractive 12.33% recovery. Most said that such a small plant would never beviable; we ran the plant for 100 days.
Going ahead we foresee a decline in Indian sugar production from an estimated255 lac tonnes in the sugar season 2015-16 to around 230 lac tonnes in 2016-17 due todrought in Maharashtra. On the other hand we expect Indias sugar consumption tosustain at the current level of 260 lac tonnes in 2016-17. This transformation is likelyto draw down the countrys sugar inventory from an estimated 3.5 months ofconsumption to around 2.3 months. We feel that this drawdown would create a positivesentiment for sugar realisations over the coming months. This in turn is expected tobenefit sugar manufacturers increase their capacity to remunerate farmers on timeeliminate the incidence of cane arrears and strengthen the countrys rural fabric a win-win for all.
Dalmia Bharat Sugar is attractively placed; we possess integrated andadequately-balanced capacities that could perform better than standalone ordisproportionately sized integrated companies.