Simbhaoli Sugars Limited Simbhaoli Sugars Limited Simbhaoli Sugars - - PowerPoint PPT Presentation

Simbhaoli Sugars Limited Simbhaoli Sugars Limited Simbhaoli Sugars Limited Simbhaoli Sugars Limited

Integrated Sugar Complexes Integrated Sugar Complexes Corporate and Sector Analysis

MUMBAI INDIA JANUARY 28, 2010

Presentation contents Presentation contents Presentation contents Presentation contents

• Company overview

p y

– Business overview – Financial overview

• Q 1 FY10 update

– Future growth Plans

• Indian sugar scenario
• Indian sugar scenario

– Govt regulations – Sugar balancing Sugar balancing – Short term outlook

• Global sugar scenario

g

– Demand and supply – Price trends

Corporate Announcement

GREENFIELD 1000 TONES PER DAY WHITE SUGAR REFINERY AT

Corporate Announcement

KANDLA, GUJRAT, WEST COAST, INDIA COMMENCEMENT 2011

Sugar/ Refining Branding Sugar and Potable alcohol Agri development

BUSINESS

SSL

OVERVIEW

SSL

Port based refining Alcohol/Ethanol Cogeneration of Import/ Exports Cogeneration of power Import/ Exports

The The Facilities Facilities/ Capacities Capacities The The Facilities Facilities/ / Capacities Capacities

Si bh li B ij th Chil i Facilities Simbhaoli (Western UP) Brijnathpur (Western UP) Chilwaria (Eastern UP) Total

Brijnathpur Simbhaoli

Sugar from Cane (TCD) 9500 4000 6600

20100

Sugar from 850 550 600

2000

Chilwaria

g Raw (TPD) 850 550 600

2000

Alcohol/ ethanol (KLD) 90 60 60

210

ethanol (KLD) Surplus Power (MWH) 18 16

34

Organic Manure

(000’mt)

17 9 9

35

• SSL integrated complexes

19 IMFL bottling tie ups in 11states apart from UP

Company Overview (1/2) Company Overview (1/2)

Sugar and Sugarcane

l h d k d b f l

• Complete sugarcane processor with de‐risked business profile

– white sugar from cane – raw refining from cane

raw refining from cane

– Setting up a port based 1000 TPD refinery

• Second largest sugar refining capabilities in India with 2000 TPD

g g g p capacity

• Year round production of sugar
• Strong Agri linkages with over 130,000 sugarcane farmers
• Large institutional customer base, multiple brands in sugar
• First Sugar Co in India to receive all international quality

certifications (ISO 9000, 14001, HACCP). A Star Export House

Company Overview (2/2) Company Overview (2/2) Company Overview (2/2) Company Overview (2/2)

By products By products

• Present in all segments of alcohol
• Offering multiple brands in potable spirits in domestic (pan
• Offering multiple brands in potable spirits in domestic (pan

India) as well as international markets

• Export of surplus power to State grid

Export of surplus power to State grid

• Year round power generation capacity
• Other by products: CO2, methane gas, manure

Other by products: CO2, methane gas, manure

• Technology edge with an independent research and

consultancy subsidiary y y

• International trading business‐ independent subsidiary

Simbhaoli Sugars: Value Chain Simbhaoli Sugars: Value Chain

Sugar Raw

• Value added exports

Cane Raw sugar

p

• f EC grade sugars
• Import of raw sugar

for refining for domestic/ export market

Port Based

• Export of ENA and

IMFL products

Port Based standalone refinery*

• Potable alcohol

(12 brands)

• Industrial alcohol
• ENA/ RS
• Carbon dioxide

Technology Vertical Integrated sugar complexes

International Market

Alcohol/Ethanol (Molasses) Ca bo d o de (Molasses) Bio-manure (Press mud) Supplying white and speciality sugars including icing, breakfast, cubes, candy, pharma sugars

By products Sugar

Power co- generation with CDM benefits (Bagasse) ( )

Local Market Retail Outlets Trade Buyers Institutional

(Bagasse) Clients include Coca

Trust brand has

Consumers

Clients include Coca- Cola, ITC, Heinz, PepsiCo, & GlaxoSmithKline

Trust brand has significant share

• f North Indian

branded sugar market *project under implementation

Simbhaoli today has Simbhaoli today has

• capabilities to carry out off‐ season raw refining with minimum

conversion losses

(Already processed 63,000 mt raw in 2009/10 season. 260,000 mt in 2009 off crop)

• effective cane development for increasing sugarcane availability and

improving recoveries improving recoveries

• value addition through innovation, branding and quality

improvement improvement

• utilisation of equipment and power generation round the year

Business plan (09‐10) Off‐ season Season plan Total Status Raw processing (MT) 160,000 200,000 360,000 Processed 80,000 mt p g ( ) Cane sugar (MT) Nil 170,000 160,000 During current season Power generation (MWH) 11,000 90,000 101,000 Round the year generation, ith b d l (MWH) with bagasse and coal Alcohol (KLD) 11,340 32,130 43,470 Tendering the ethanol to OMCs

Technology Edge Technology Edge Technology Edge Technology Edge

• Technology business through company named

gy g p y

Integrated Casetech Consultants Pvt Ltd

• Providing following services at national and

g g international levels:

– Technology Upgradation Technology Upgradation – Energy Management – Agri Development Agri Development – Maintenance and Support

• Working on a large number of projects
• Working on a large number of projects
• Achieved a top line of Rs 20 mn in the current fiscal
• Shall emerge as a ‘technology hub’ in the sugar space

Raw Refining Operations Raw Refining Operations

• Season and off season raw refining capabilities with technical expertise
• Imported/contracted 2.4 lakh mt raw for off crop period (already refined

0.08 mmt)

• Plan to refine 3.6 to 4 lakh mt in 2009‐10 season in addition to sugar cane
• Procured raw at an average price of US$ 525 pmt

Simbhaoli Monthly Sugar Production Plan (cane and raw)

40,000 50,000 20,000 30,000 40,000

in MT

10,000

JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP

July 2009 to Sept 2010

Off season Off season

Typical cost sheet for Processing Raw and Cane Typical cost sheet for Processing Raw and Cane

(per (per mt mt of white sugar)

• f white sugar)

Particulars Raw (Rs) Cane (Rs) Industrial Recovery 96.50% 9.25% cost of raw /cane per ton 32200 2500 33368 27027 Cost of Raw Material 33368 27027 Internal Transportation Cost 1700 1000 Processing Cost 2000 3000 Processing Cost 2000 3000 Factory Cost and Overheads 600 2100 Total 37668 32727 Total By products credit 115 2900 Net Cost 37553 29827 E ti t d lli i 42000 37200 Estimated selling price 42000 37200 EBIDTA Margins 4447 7373 EBIDTA % 10.59% 19.8

SSL has purchased sugar at average rate of Rs 24,150 per mt so far and achieved An EBIDTA of over 20% on sugar operations for Q1 FY10

Agriculture Management Agriculture Management

• Pioneer in various cane development area

– Propagating high yield high sugar variety COJ 238, 239, 118 – Making available land preparation equipment, plants protection devices – Intensive and integrated pest management system – Demonstration farming, field trials and continuous training to farmers

• Mechanisation of cane farming
• Encouraging farmers for multi‐cropping with sugarcane

–

Acting as facilitators for entire crop cycle for multiple crops

–

2,000 hectares area in 2009‐10 (plan 5,000 hectares in three years)

Industrial yield of Simbhaoli plant vs Industry Average Industrial yield of Simbhaoli plant vs Industry Average

10 11

%

8 9 9 10

Recovery

8 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

SSL Industry average

Brand Building Brand Building

Sugar Alcohol

• In consumer and institutional packs
• Branded sugars under brand Trust.
• SSL

spirits is producing brands in whiskey, rum, vodka segments g

• Domestic sachets and cubes segment

growing over 30% annually

• New markets in different geographical
• Increasing its presence within India and
• verseas
• Brands‐

Hunters/ Simbhaoli XXX

• New markets in different geographical

areas

• Tie up with modern retail chains

C d k f b d d Brands Hunters/ Simbhaoli XXX (Rum), Seven Knights (Whisky), Seven Knights Lemon flavor (Dry Gin), Xing (Vodka) and Ice Blue Tango (Pre mixed)

• Created export market for branded
• sugars. Africa, middle east and Canada

are preferred destinations ( ) g ( )

• Developed new brands after extensive

research on product, packaging and consumer preferences

• Constitute 8% of total segment sales

(CAGR 15%). Target is to increase to 25% p

• Achieved 1 mn cases mark in 2008‐09.

Target for 2009‐10 at 2 mn cases

Only sugar company nurturing and investing in brand building

INDIAN SUGAR SUGAR INDUSTRY

Sugar flows from the surplus to deficit states. Most of the imports from Gujarat, Tamil Nadu and West Bengal

Indian Sugar Balancing Indian Sugar Balancing Structural deficit: change in sugar cycles Structural deficit: change in sugar cycles Structural deficit: change in sugar cycles Structural deficit: change in sugar cycles

(in mmt white values)

Particulars 2009‐10 2010‐11 2011‐12 2012‐13 Particulars 2009‐10 2010‐11 2011‐12 2012‐13

Opening Balance 2.30 1.32 2.66 5.34 Production ‐Sugar Cane 14 50 20 00 25 00 27 00 Sugar Cane 14.50 20.00 25.00 27.00 Imports ‐Raw Sugar 5.75 4.00 3.00 ‐ ‐White Sugar 2 00 1 00 ‐ ‐ White Sugar 2.00 1.00 Total Imports* 7.52 4.84 2.88 ‐ Total Sugar Available 24.32 26.16 30.54 32.88 Demand (Domestic) 23 00 23 50 24 00 24 50 Demand (Domestic) 23.00 23.50 24.00 24.50 Export ‐ ‐ 1.20 2.00 Closing Stock 1.32 2.66 5.34 6.38 Day’s requirement 21 days 34 days 67 days 78 days SSL estimates

• In the years 2009 to 2012 anticipated import of 15 16 mmt of raw/white sugar

Day s requirement 21 days 34 days 67 days 78 days *Including 96% of Raw sugar after processing

• In the years 2009 to 2012, anticipated import of 15‐16 mmt of raw/white sugar
• Indian demand 19 kg/pa per capita still lower to world average
• Exports after 2009‐10 signify the pending export obligations deferred upto Mar 2011

Sugarcane availability Sugarcane availability

240 280 320 360

MT)

120 160 200 240

Production (M

40 80

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Concerns in cane availability Measures

Andhra Pradesh Karnataka Maharashtra Uttar Pradesh

Shift in the cropping pattern Sustained agri management initiatives Higher margin from food crops Higher cane prices Stagnant yield New varieties for improving per hectare yield Water availability More irrigated area under cane cultivation Cost of farming Multi cropping to increase farm earnings/ hedge risks Cost of farming Multi cropping to increase farm earnings/ hedge risks

Sugar Demand elasticity (1/2) Sugar Demand elasticity (1/2) Sugar Demand elasticity (1/2) Sugar Demand elasticity (1/2)

Factors directing higher growth in Indian sugar demand by

g g g g y 3.75% p a:

– Population shift rural to urban (c.3.3% p.a. in 2007‐08 to 11‐12 ) – Increase in population: Average 2% p.a. up to 2006‐07 and 1.5% pa

thereafter

– Shift from direct to indirect consumption

p

– Shift of consumption from alternate sweeteners to sugar

By 2011‐12, total sweetener consumption estimated at 29.9

mmt (27.8 kg per capita); sugar consumption at 24.9 mmt (23.9 kg per capita)

Domestic Per capita consumption of alternate sweeteners

came down from 12.5 kg in 1980‐81 to 4.5 kg in 2008‐09 g g

Price movement Price movement

700 800

4000 4500

Correlation between London White, Delhi M 30 and NY 11

300 400 500 600 700

2000 2500 3000 3500 4000

USD/MT

Rs/Qtl

100 200 300

500 1000 1500

T

R Delhi M 30 L 5 White NY 11

Domestic prices, in view of large imports are in sync with global prices. They are

at the levels of over US$ 750 (FPB) for white sugar which is 29 years high

Number of GOI initiatives to reduce prices volatility . Critical is demand and

p y supply mismatch. May cause further rally in the prices

Indian demand and supply mismatch is similar to other countries viz

Pakistan, Indonesia, Iran, China and Russia

How much high is the high, is anybody’s guess How much high is the high, is anybody’s guess

Changing sugarcane pricing mechanism Changing sugarcane pricing mechanism

GOI has announced (Oct 22, 09) the change in cane price fixation system

• Fair and remunerative prices replaced
• Fair and remunerative prices replaced
• Difference of FRP and SAP to be borne by the miller
• UP millers are paying yet higher price to the farmers based upon economic
• UP millers are paying yet higher price to the farmers based upon economic

viability: higher cane cultivation and paving the way for negotiated price

• mechanism. (Cane price for the season 2009‐10 in the range of Rs 205 to

( p g 245 per qtl)

• Levy sugar prices to be calculated based upon FRP. Expected to be Rs 19 per

kg for 2009/10

• In UP, difference between SAP and FRP is about Rs 300 pmt.

This will result in level playing field in sugar costs and substantial gains for non SMP states in the long run Combined cane and refining model will now become the most viable business model in the state of UP

Concerns in Indian Sugar Industry Concerns in Indian Sugar Industry Concerns in Indian Sugar Industry Concerns in Indian Sugar Industry

• Import of white is highly price sensitive Availability is
• Import of white is highly price sensitive. Availability is

limited globally

• Ensuring long term supply of sugar at correct prices will be

Ensuring long term supply of sugar at correct prices will be difficult for GOI

• Raw sugar program curtailment in UP

Raw sugar program curtailment in UP

• High domestic freights/ port storage facilities
• Emergence of ethanol on consistent/ sustainable basis
• Emergence of ethanol on consistent/ sustainable basis
• Raw processing cost/ loss in conversion in sulphitation

plants plants

• Industrial and farm yields of sugar/cane
• Lower availability of capacity for off season refinery
• Lower availability of capacity for off season refinery

Particulars Particulars 09 09‐10 10 08 08‐09 09 07 07‐08 08 06 06‐07 07 Change Change

WORLD

Estimates Estimates Provisional Provisional mmt mmt in % in %

Production

159.9 153.0 168.6 166.0 6.9 0.0

WORLD SUGAR S

Consumption

167.1 164.3 162.2 155.0 2.8 0.0

Surplus / (Deficit)

(7.2) (11.3) 6.4 11.0

INDUSTRY

IN MMT

Import demand

52.1 48.2 46.0 46.1 3.9 0.1

Export availability

52.1 48.3 46.2 46.1 3.8 0.1

End Stocks

60.7 70.5 67.9 7.3 0.1

Stocks/ Consumption ratio in%

32.0 37.0 43.5 43.8 53.5 53.5

Global sugar trade is about 34% of sugar production. Falling stock Global sugar trade is about 34% of sugar production. Falling stock to use ratio (lowest in last ten years) implies higher sugar prices and high volatility.

International Raw Sugar Prices Trend International Raw Sugar Prices Trend

(cents per pound) (cents per pound) (cents per pound) (cents per pound)

60 70

Nov 1974

Price remained above 30 cents 10 months

50

10 months, peaked above

50 cents

Ready to touch

30 cents and Nov 1980

Price remained above 30 cents 7 months

30 40

conditions similar to 1974 / 1980 persist 7 months, peaked above

46 cents

20 10

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Jan‐7 Jan‐7 Jan‐7 Jan‐7 Jan‐7 Jan‐7 Jan‐7 Jan‐7 Jan‐7 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐8 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐9 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐0 Jan‐

NY 11 Raw

Only two times in past 40 years prices touched 30 cents/pound and each time they gone up way above that level for a period of 7/8 month. However, in real terms, price increase in the past has been much higher giving adjustment of inflation over the period

World Outlook World Outlook

• World consumption is projected to grow at 1.7% in 09/10, against CAGR of
• ver 2%
• Carry over stocks at 53.5 mmt are the lowest in recent past
• Consistent postponement of demand for high prices, means bunching of

purchase purchase

• This may push the world prices to extra ordinary levels (like in the

year1974, 60 cents per pound and 1980, 46 cents)

• Consumption increase in Indian subcontinent, China and Africa
• The ocean freight costs are rising means higher CIF costs
• China, per capita consumption at 14 kg (2008‐09) is showing an increase
• Rising crude price will create fresh interest in ethanol. At US$ 79 a

barrel ethanol becomes economically viable in most of the countries barrel, ethanol becomes economically viable in most of the countries

With given scenario, world is getting into structural shortages of sugar gg g , g g g g for medium term period, i.e. 3 to 4 years. This sugar cycle may be the biggest

Gross turnover Rs 393 Cr , up by 102% Net sales at Rs 325 Cr up by 162% PBT Rs 51 Cr, turned positive: cash profit Rs 61 Cr PBT Rs 51 Cr, turned positive: cash profit Rs 61 Cr Refining of 80,000 mt of raw sugar A li i f R 32 800

FINANCIAL FINANCIAL

Average realisation of sugar Rs 32,800 per mt Closing stock of white sugar 94,400 mt

FINANCIAL FINANCIAL OVERVIEW OVERVIEW (QTR (QTR DEC DEC

Sugar sales at 83,800 mt Systematic plans to reduce leverage by deploying

(QTR (QTR DEC DEC 2009) 2009)

y p g y p y g

• Most of the cash generation
• Long term fund raising for the purpose
• Long term fund raising for the purpose

Reduced FCCB liability by 94% by buying back USD 31.11 mn FCCBs at 53.7% discount

Financial results for Financial results for quarter ended Dec 09 quarter ended Dec 09

(Rs in mn)

quarter ended Dec 09 quarter ended Dec 09

(Rs in mn)

Particulars Quarter ended Dec, 09 Dec , 08 % Change Gross Sales/ Income 3764.0 1947.4 ‐ / Net Sales / Income 3083.0 1239.9 149 Other operating Income 202.7 5.9 ‐ Exchange gain 91.9 ‐ ‐ Total Income 3377.6 1247.4 163 Manufacturing Exp. 2180.8 818.7 130 Staff Cost 97.1 81.4 19 Other Expenditure 330.8 233.5 42 Interest 157.2 129.6 21 Depreciation 97.0 88.5 10 Profit / (Loss) Before Tax 514.7 (104.3) ‐ Cash Profit / (Loss) 611.7 (15.9) ‐ Tax Expense 76.9 14.3 ‐ Profit After tax 437.8 (118.6) ‐ Avg realisation‐ Sugar (Rs. PMT) 32800 17620 86

Segment wise results Segment wise results

(Rs in mn) (Rs in mn)

Segment wise results Segment wise results

(Rs in mn) (Rs in mn)

Segment Total income EBIDTA EBIDTA % Segment Total income EBIDTA EBIDTA % Sugar 3289.6 694.2 21.7 P 491 1 114 9 23 4 Power 491.1 114.9 23.4 Alcohol 304.1 (24.1) (7.9)

Important

• The benefits under UP sugar industry incentive scheme

have not been taken into account h l i i id d 3 k

• The levy price is considered at Rs 13 per kg
• White sugar is valued at cost of production

Concerns and management response Concerns and management response Concerns and management response Concerns and management response

• Low capacity utilisation: The sugarcane processing at 70% of capacity on

account of lower cane availability in entire area However it is more than account of lower cane availability in entire area. However, it is more than supplemented by raw processing

• Restriction on raw processing in UP: Company transferred most of the raw

sugar to the factory before the rail movement restriction. So far regular in processing.

• Rising cane and raw sugar prices: to an extent mitigated by advance purchase

Rising cane and raw sugar prices: to an extent mitigated by advance purchase

• f raw. Most of the cane is bought from sugar mills proximity resulting in lower
• freight. High cane price in this year will help in increased cane plantation in

future future.

• Highly leveraged: Reduction in the long term debt by Rs 23 Cr. Present
• utstanding Rs 285 cr. Plan to pay nearly half of bank loans in next 12 months
• High interest costs: shall be reduced with lower debt position.
• Higher closing stocks: An advantage because of anticipated price rise

GOI t l i i N f th i l ft i ill h t b

• GOI controls on price rise: No further avenue is left as price will have to be

determined by demand and supply forces

Shareholding pattern Shareholding pattern (Dec 31, 2009)

(Dec 31, 2009)

g p g p

( , ) ( , )

Category Category Percentage Percentage

• A. Indian Promoters

44.0

Options pending allotment Options pending allotment

• A. Indian Promoters

44.0 Sub‐total (A) 44.0

• B. Non‐ Promoters

Particulars Particulars No of No of underlying underlying shares (mn) shares (mn) % of % of expanded expanded capital capital

Mutual Funds, FIIs and Banks 5.1 Private Corporate Bodies 14.9 Indian Public (individuals) 34.2

ESOPs

0.80 3.27

FCCBs

0.55 2.22

Total

1.35 5.49 NRIs / OCBs 0.5 Any other/ clearing member 1.3 S b t t l (B) 56 0 1.35 5.49 Sub‐total (B) 56.0 Grand Total (A+B) 100

• Issued equity shares 23 2 mn of Rs 10 each
• Issued equity shares 23.2 mn of Rs 10 each
• Paid up share capital Rs 232 mn (USD 4.5 mn)
• Aggregate of options pending for conversion: 1.35 mn
• Expanded capital base: 24.54 mn shares (Rs 245 mn)

SETTING UP A SETTING UP A 1000 TPD PORT BASED PORT BASED SUGAR REFINERY REFINERY EXPANDABLE TO 1200 TPD TO 1200 TPD

Project Rationale Project Rationale j

• Likely Indian sugar deficit in future on regular basis
• Current year gap (7 mmt) to be fulfilled by import of raw/

white, out of which 5 mmt likely to be raw N t l ti t d t 5 t I f t 3 t f 5

• Next year, supply gap estimated at 5 mmt. In future 3 out of 5

years are likely to be domestic sugar shortfalls

• Indian sub continental and neighboring countries are having
• Indian sub continental and neighboring countries are having

sugar deficit

• Demand is increasing on regular basis

g g

• Distance between raw processing facilities and port will

determine the cost/ earnings

• The facility can be a tolling destination because of proximity to

deficit areas

• In surplus years, domestic raws can be used for value addition
• Local Lignite and imported coal is available as fuel

Why Simbhaoli Sugars Why Simbhaoli Sugars

• Technology advantage

Technology advantage

– Technology available in house – Least conversion costs C i l b l 3 5% – Conversion losses below 3.5% – Most competitive production

• Marketing advantage

g g

– Already producing and selling 45 icumsa sugar in Northern India – Locational advantages: proximity to domestic deficit areas – International market – International market

Marketing arrangement Marketing arrangement

• Product mix: large, medium and small grains
• Sale within the radius of 700 km

P t ti l k t G j t R j th MP H t

• Potential markets: Gujarat, Rajasthan, MP, Haryana, exports
• Institutional: 50 to 60% of production
• Sale through distributers and agents

Sale through distributers and agents

• Molasses, a premium product will be sold at premium
• Potential to generate surplus power

Our Valued Customer Base Our Valued Customer Base

For further information please contact For further information please contact

harmeet@simbhaolisugars.com harmeet@simbhaolisugars.com +919911987419 +919911987419

Certain statements in this presentation with words or phrases such as “is likely to”, “should”, etc., and similar expressions or variation of these expressions or those concerning our future prospects are forward looking statements. Actual results may differ materially from those suggested by the forward‐ looking statements due to a number of risks or uncertainties associated with the expectations. These g f p risks and uncertainties include, but are not limited to, our ability to successfully implement our strategy and changes in government policies. The company may, from time to time, make additional written and

• ral forward looking statements, including statements contained in the company’s filings with the stock

exchanges and our reports to shareholders. The company does not undertake to update any forward‐ looking statements that may be made from time to time by or on behalf of the Company