Common man’s woes are sugar industry’s gain

Sugar might have turned bitter for consumers across the country, but sugar companies are raking in bumper profits for their promoters and shareholders. With prices almost doubling in a year, 33 sugar companies listed on the stock exchanges have seen their profits zooming by 2,900 per cent to Rs 901 crore for the quarter ended December 2009 from Rs 30 crore in the same period of last year. If the profits of unlisted sugar companies — especially sugar co-operatives controlled by politicians in states like Maharashtra — are included, the profit figure could double, analysts say.

Balrampur Chini’s profit spurted from Rs 51.29 crore to Rs 76.55 crore in third quarter of 2009. Triveni Engineering, another leading producer, saw its quarterly profits rising from Rs 23.98 crore to Rs 72.94 crore. More than a dozen sugar companies — including Bajaj Hindustan, Kothari Sugar, Mawana Sugar, Rana Sugar and Simbhaoli Sugar — which made losses in the third quarter of 2008 turned the corner in the last quarter and started making profits.

The turnover of 33 sugar companies also surged by 74.60 per cent to Rs 6,443 crore during the quarter. “It was all expected... it was not a surprise at all. The price rise could be the prime factor for this bumper profitability this quarter (October-December 2009). The price went up to Rs 32 per kilo till the end of Oct-Dec quarter from Rs 15 per kilo at the same period of the previous quarter (Oct-Dec 2008). We have seen sugar prices maintaining an upward trend in the last 6-7 months. So I don’t think there will be any negative impact on their bottomline even if the government takes measures to bring down the prices,” said Sageraj Bariya, an analyst from Angel Broking.

Analysts say the sugar industry would continue to rake in moolah in the ongoing quarter as well. “Even if the government curbs the sugar prices, I think the companies will maintain their pace in the profitability growth in the next quarter because there has been no huge change in the raw material prices in the last one year. The industry has seen raw material prices remaining flat and the government’s measures to effect a 15-20 per cent cut in the sugar prices would not impact the sector much,” said Mehul Agarwal, analyst with Sharekhan Commodities Ltd.

The price rise is a global phenomenon. “It is not a national phenomenon. When the prices were low one year ago, unevenness in the supply-demand position in the industry boosted prices and the companies stretched their bottomline to a surprise level,” said Anand James, senior research analyst of Geojit COMtrade Ltd. According to an HSBC report, sugar prices are likely to remain high until 2011. However, a report by Stanchart forecast sugar prices will trend lower over the course of the season, as better harvests in Brazil and other smaller producers come on stream.

source: indianexpress