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Oudh Sugar Mills Ltd.

BSE: 507260 Sector: Agri and agri inputs
NSE: OUDHSUG ISIN Code: INE594A01014
BSE LIVE 15:58 | 22 Mar Stock Is Not Traded.
NSE 15:57 | 22 Mar Stock Is Not Traded.
OPEN 133.50
PREVIOUS CLOSE 134.90
VOLUME 106546
52-Week high 170.00
52-Week low 88.50
P/E 2.30
Mkt Cap.(Rs cr) 339
Buy Price 130.75
Buy Qty 1.00
Sell Price 0.00
Sell Qty 0.00
OPEN 133.50
CLOSE 134.90
VOLUME 106546
52-Week high 170.00
52-Week low 88.50
P/E 2.30
Mkt Cap.(Rs cr) 339
Buy Price 130.75
Buy Qty 1.00
Sell Price 0.00
Sell Qty 0.00

Oudh Sugar Mills Ltd. (OUDHSUG) - Chairman Speech

Company chairman speech

Dear Shareholders

After years of significant challenges India's sugar industry witnessed a cautiousrecovery during the year. The El Nino effect and consequential drought in Maharashtraresulted in a fall of output; and the stock position is at a comfortable position. Theoverall industry scenario is showing unmistakable signs of positivity with theGovernment's initiatives to support the sugar sector. The industry is gradually movingtowards a firm footing and sustainable growth.

GLOBAL SCENARIO

The global sugar output is expected to decline by 1.969 million tonnes during FY2015-16. The market was largely influenced by developments in three major sugar-producingcountries including Brazil China and India. Although primary exporting countries showedan increase in production importing countries saw a significant decrease. During theyear India continued to remain one of the world's largest sugar producers and a sugarsurplus country. On the consumption front as well the country remained a frontrunner inthe global stage.

In China domestic sugar prices strengthened in recent months owing to growingexpectations of tighter supply during the year. Prices firmed in India and hit multiyearhighs in Brazil in October 2015. While prices in the US Mexico and Russia showed a stablebehaviour EU witnessed a marginal recovery only after August 2015.

DOMESTIC SCENARIO

As India continues to be the world's major sugar producer and consumer any imbalancein the sugar scenario in the country is likely to lead to global imbalance. After fiveyears of surplus sugar production domestic sugar production in FY 2016 was marginallylower vis-a-vis domestic consumption. An aggressive sugar-export strategy coupled withdeclining domestic production gave the much needed upward lift to domestic prices.

Lower production along with exports of around 2 million MT is likely to bring down theclosing stocks to around 7.6 million MT in the sugar season 2016 from around 9.5 millionMT in the corresponding season of 2015. The decline in sugar stocks is a positive; and hasresulted in an improvement in domestic sugar realisations since August 2015.

Interest-free loans from the Government of India and cash subsidy from UP and Bihargovernments have also benefited the industry. At present sugar pricing is at a balancedposition and prominent players are expected to perform well in future.

After successive years of staggering loses the industry seems to be slowly recovering.Even today it is saddled with huge debts and tight liquidity. Undoubtedly the canearrears to farmers have reduced considerably as compared to a year ago although it is yetto be eradicated.

The long-term prices and profitability of Indian sugar companies is likely to remaincyclical and reliant on domestic and international supply-demand trends. It would alsohinge on agro-climatic conditions in the major sugar producing countries and the trends incrude oil prices.

Going forward we hope the Government would usher in reforms in this sector and restorethe health of the sector to ensure cane payment as the present opaque and unbalanced canepricing is adversely impacting the sugar industry. This will benefit industry playersconsumers and millions of farmers.

ENCOURAGING PERFORMANCE

After years of instability FY 2015-16 turned out to be a positive year for theCompany. Our revenue from operations stood at 121501.26 lacs compared to '142965.29 lacs in the previous fiscal. The profitability of the Company stood at 623.11lacs on better sugar yield despite lower crushing of sugarcane and sugar realisations.

The consumption has been steadily increasing by 2-2.5% annually with significant growthin bulk sugar and unbranded generic sugar. We have been supported by the Government aswell as bankers to continue operations in a hassle-free manner. Farmers have to a verylarge extent received their payments and the overall scenario is improving compared tothe last few years.

STRATEGIC FOCUS

We are restructuring our two businesses to bring in fiscal flexibility and facilitateoperational efficiency. The UP unit will be under Avadh Sugar & Energy Limited andBihar unit will be under Magadh Sugar & Energy Limited. The restructuring process isawaiting regulatory approvals and the entire process is expected to be completed bySeptember-October 2016.

Going forward we will consolidate and improve our own internal capabilities. Our focuswill continue to be on enhancing efficiencies for further cane development. We areexpecting sugar production to be lower in FY 2016 17. The fall in production can beattributed to drought in cane-growing areas of Maharashtra.

Sugar has historically been classified as an essential commodity and has been regulatedacross the value chain. The heavy regulations in the sector artificially impact thedemand-supply forces resulting in market imbalance.

While the Government has supported sugar mills by providing interest-free loans toclear cane dues and mandating compulsory exports to tackle the high sugar stocks in thedomestic market the primary aspect of linking sugar and by-product realisations with canecosts is yet to be fully addressed. We expect more firm steps in that direction.

WAY FORWARD

With possible changes in production and projected consumption growth a deficit ofabout 6 million tonnes is likely on the global industry horizon. This indicates thecontinuation of the deficit phase in the world sugar cycle for at least one more season.

Given the high cost of imports and the strategic importance of food security Indiawould need to target its production in excess of domestic consumption and which providesthe sector huge investment potential.

We are fortunate to have a high-morale team who continue to remain equally committeddespite challenges. I seek the support and guidance of all our stakeholders in charting apositive roadmap for the Company and to create enduring value for the community at large.

With regards

Chandra Shekhar Nopany

Chairman