Sugar bucks Covid downtrend on record exports: Report

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SME Times News Bureau | 05 Oct, 2020
Sugar manufacturers have bucked Covid-19 induced downtrend on record exports, said ratings agency India Ratings and Research.

Accordingly, the agency pointed out that aggregate revenue of major sector entities grew 21 per cent YoY in 1QFY21 making it a rare sector to buck the trend of lockdown-induced declines.

"The growth was driven by a surge in exports, attributed to industry leaders such as 'Balrampur Chini Mills Limited' and 'Dalmia Bharat Sugar and Industries Limited'," the ratings agency said in a report.

"Besides, being an essential commodity of consumption, sugar saw a lower demand decline in the domestic market than other segments."

However, the report pointed out that while the domestic demand is likely to have witnessed a quick recovery in 2QFY21, many entities could see a moderation in the super-normal export volumes seen in 1QFY21.

Nevertheless, the report said that surge in sugar profits have compensated for decline in distillery and cogen.

"The strong growth in the sugar segment offset the declines in higher-margin distillery and cogen segments," the report said.

"Distillery EBIT fell 25 per cent YoY in 1QFY21, as the lockdown impacted petrol demand, leading to reduced offtake from oil marketing companies, in addition to higher molasses prices."

Additionally, the report cited the 18 per cent YoY decline in production to 27.2 million tonnes (mnt) in 'SS20' is likely to reduce closing stock to 11.5mnt, it would remain almost twice of the normative carry forward requirement.

"Furthermore, Ind-Ra expects sugar production to increase to 30.5mnt in SS21, factoring in cane diversion equivalent to 1.5mnt of sugar, resulting in a continued oversupply," the report said.

"Sugar volumes are likely to have been back to near-normal in the second-half of 2QFY21, which would limit the decline to around 3 per cent in FY21."