Mumbai: Balrampur Chini Mills’ 2009-10 sugar output from cane rose 10% but falling prices of the sweetener pressure profitability in coming quarters, a senior company official said on Thursday.
The company, which runs nine sugar factories in Uttar Pradesh, has stopped crushing for the season ending September 2010, closing the year with 487,000 tonnes sugar, chief financial officer Kishor Shah told Reuters in an interview.
It had produced 441,000 tonnes in the year-ended Sept 2009.
“Cost of production is very high, sugar price is very volatile. Margins will definitely be under pressure,” Shah said.
He expects realisation to drop about 16% to Rs30 a kg in the next few months as prices have fallen over a third since a record peak in early January due to government curbs.
Till early-January millers had ample cause to cheer as both cane and sugar prices scaled new highs, boosting margins.
Soon the soaring prices became a political issue as it fuelled inflation and rising criticism forced the government to impose more curbs on buyers and sellers, and domestic prices tanked.
Galloping demand at home sparked a global rally till prices crashed to 1-year low on Wednesday, making imports cheaper and threatening Indian miller’s profitability and throwing a shadow over cane crop next year.
Shah wants the government to consider imposing duty on sugar imports to protect domestic millers.
“If this is not done then we will see lot of sugar coming in from abroad and this will kill our margins and our ability to cater to the farmers next year,” Shah said.
The sugarmaker has refined 30,000 tonnes of raws out of the total imports of 80,000 tonnes and hopes to process the remainder over the next two months. It has no plans to import more sugar on expectations of higher availability in the domestic market.
The south Asian country is likely to produce 18.0 million to 18.5 million tonnes sugar in 2009-10, compared with domestic demand of 23 million tonnes.
Cost of production from cane was Rs27-28 per kg, while that for refining raws was around Rs23, offering better margins, Shah said.
The firm expects its production to rise by 25-30% in the year-ending September 2011 as higher cane prices are prompting farmers to expand acreage under the perennial crop.
Industry officials are expecting the country’s 2010-11 output to cross 22.5 million tonnes, putting more pressure on falling sugar prices.
Balrampur posted a nearly 60% drop in quarterly net profit and shares closed 0.12% lower at Rs82.15 in a firm Mumbai market.