Sugar mills to deliver better revenues, profits this season: CRISIL tracker

Sugar mills are expected to see both revenue and profitability improve in the 2022 season (SS 2022; October 2021 to September 2022).

Sugar prices are expected to rise 16-17 per cent this season, compared with a marginal fall in the last, led by a pickup in industrial demand and increased exports. An increase in consumption amid stable production is expected to deplete inventories, leading to the sharp rise.

Exports are likely to be robust at about 5 million tonne. A 15-16 per cent rise in international prices is expected to make exports viable despite there being no government subsidies this time around. 

Higher sales volumes and higher realisations will aid revenue growth of 18-19 per cent. Integrated sugar mills will also benefit from higher revenue from the distillery segment as ethanol prices have risen by 4-6 per cent and offtake by oil marketing companies is expected to increase.

Cane costs, meanwhile, are expected to rise at a slower pace of 8 per cent in north India and 3 per cent in south India. This would provide ample room for improvement in operating profitability, or earnings before interest, taxes, depreciation and amortisation (Ebitda) margin, which is expected to increase by 300-400 basis points.

All this, in turn, will help sugar mills pay off the cane arrears on time this season.