EID Parry (India) Ltd (NSE: EIDPARRY) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Muthiah Murugappan — Whole-Time Director & Chief Executive Officer
Y. Venkateshwarlu — Chief Financial Officer
S. Suresh — Managing Director
Analysts:
Harsh Sheth — Analyst
Gautam Dedhia — Analyst
Gautam — Analyst
Manoj — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to EID Parry Q2 FY ’25 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions]
I now hand the conference over to Mr. Harsh Sheth. Thank you, and over to you, sir.
Harsh Sheth — Analyst
Yeah. Thanks, Falak. Good afternoon, everyone, and warm welcome on behalf of DAM Capital Q2 FY ’25 earnings call of EID Parry India Limited. We thank EID Parry’s management for giving us the opportunity to host this call. On the call today, we have with us Mr. Muthiah Murugappan, Whole-Time Director and CEO; Mr. Suresh Kannan, Whole-Time Director, Parry Sugars Refinery India Private Limited; Mr. Y. Venkateshwarlu, Chief Financial Officer; and Mr. Biswa Mohan Rath, Company Secretary.
I will now hand over the call to the management team for initial remarks, post which we’ll open the floor for Q&A. Thank you, and over to you, sir.
Muthiah Murugappan — Whole-Time Director & Chief Executive Officer
Thank you, Harsh, and good afternoon to everyone. It’s nice to connect again. I hope you also all had an opportunity to view our investor presentation, which we’ve put up online, just after the conclusion of our Board meeting and the publishing of our results. I’ll start with a brief overview of the global sugar scenario. The global sugar balance for sugar year 2024 ended with a surplus of about 4 million tons. ’24-’25 is forecasted to end more balance in terms of supply and demand, but now projected at just over 3 million tons due to continued higher production forecast in India DCU as well as Thailand.
Brazil has witnessed downward revisions in sugar output from 41.1 million tons to 39.6 million tons from mid-Q2 due to instances of dryness, low sugar mix, and fire incidents which will have an impact on cane quality and production prospects in sugar year ’25, ’26 crop as well. The lower Brazilian output this season is causing short-term tightness in raw sugar availability, and there is price volatility. Production estimates for India is about 33 million tons gross and Thailand are still evolving with good monsoon expected to positively impact the output prospects.
Refined sugar is oversupplied due to the EU, Ukraine and Pakistan higher exports and exchange delivery. Hence, the demand is muted and expected to recover post-December ’24. White premiums have also significantly dropped to $75 to $80 per metric ton as against $110 to $130 per metric ton in September ’24.
Talk a little bit about the Indian scenario. Gross production forecasted by ISMA for the upcoming season is about 33 million tons as against sugar year 2024 production of about 34 million tons. After accounting for the expected sugar diversion to ethanol of about 4 million tons, the net production is expected to be 29 million tons. Whereas UP is expected to remain stable this year, slight drops are expected in Maharashtra and Karnataka and also in TN.
India sugar inventory is at about 8.5 million tons at the start of the sugar year and hence combined with the post net diversion production of 29 million tons, the total supply is expected to be 37.5 million tons, which will be more than adequate to meet domestic forecasted consumption of 29 million tons. We estimated closing inventory at the end of sugar year ’24-’25 will be at about 8.5 million tons and this will be quite ample for policymakers to have some leeway to relook at some of the policy decisions.
Ethanol blending has been at about 15% in ethanol sugar year ’23, ’24 and bids received for sugar — ethanol sugar year ’24, ’25 are about 18% blending. The target for ethanol sugar year ’25, ’26 is about 20% of blending. So I think we’re on the path to getting there. Starting November 1, the government has lifted all restrictions of sugar diversion for ethanol production post a brief policy hiatus last year. We are expecting an announcement — well, we remain hopeful that there will be announcements around the MSP and the ethanol offtake prices and perhaps exports, given a healthy closing stock this year, as well as next year. And also the FRP increases this year of about 8% and the prior year of about 3%.
At EID Parry, it has been a challenging quarter. We’ve been challenged on recoveries in Tamil Nadu basis on account of fair monsoon last year, which had a cross-impact this year as well. On account of the substantially lower recoveries that we faced, there was also increases of molasses price, and this also impacted the business. While we had good volumes on our distillery business, the margins have been diluted for the same reasons. The Consumer Product Group made good progress with the scale-up of the staples launch, expansion of distribution at large and with launch of new products.
The refinery has also had a fair quarter. But as commented earlier white premiums are we are starting to see the pressure in the subsequent quarters. We will talk more about that in this call.
I now hand over to my colleague, Mr. Y. Venkateshwarlu, our CFO, to take you through the financial parameters.
Y. Venkateshwarlu — Chief Financial Officer
Thank you, Muthu, and good afternoon to all participants. It’s a great pleasure to be part of the earnings call and to share the key information of the operational and financial performance of the Company. I would like to share with you the key operating parameters of each segment. So sugar operations, the crushing operations in Tamil Nadu at Nellikuppam we crushed, we operated at 81 days and the Pugalur at 67 days. Overall Tamil Nadu, we operated, we crushed about 71 days.
So I would like to share the quantitative details as under. So we crushed about 5.61 lakhs metric tons, against 8.54 lakhs metric tons of the corresponding quarter of the previous year. As far as the recovery is concerned, the current quarter registered 7.6% against 8.22% of the corresponding quarter of the previous year. We produced 149,000 metric tons during the current quarter — current quarter and 170,000 metric tons of the corresponding quarter of the previous year.
So as far as the cane cost [Indecipherable] 3,300 per metric ton as against [Indecipherable] metric ton of the corresponding previous year. As far as the sugar volumes is concerned, sales volume is concerned in Q2 sugar sales, we sold about 94,000 including the CPG segment. And the previous year, the same period which was a 1.27 lakh. This reduction largely which has come due to the reduction in release quota. As far as the selling price is concerned, slightly we have increased. We have closed at INR39.39 per kg against a INR37.57 of the previous quarter, previous corresponding previous quarter.
So we carried about INR1.1 lakh — 1.19 lakh metric tons of sugar, already which is carrying about INR36.50. So revenue from sugar biofuel, our revenue in quarter two was INR216 crores. This is excluding intersegment transfer in current quarter against the corresponding previous year of INR361 crores, registering a decline of 40% on account of the lower release quota. All of our debts were paid as per the timeline.
As far as the CPG Consumer Product Group is concerned, the Consumer Product Group has achieved a turnover of INR236 crores, including a turnover of INR82 crores from the branded staples during the quarter two as against INR134 crores for the corresponding period of the previous year, registering a growth of 76%.
So as far as the cogen operations is concerned, we generated about 505 lakhs units as against 730 lakhs units in the corresponding previous period of the previous year. We have exported about 233 lakhs units as against 374 lakhs units in the corresponding period of the previous year. So our tariffs are slightly lower than the corresponding previous year quarter, we are — current quarter we are at 3.94 per unit against 4.59 per unit in the corresponding period of the previous year. As far as the revenue is concerned, our current quarter we were at INR15 crores as against INR32 crores in the corresponding period of the previous year.
As far as the distillery is concerned, we have another strong performance in current quarter, we sold about 419 lakh liters against the previous year of 304 lakh liters, which ENA we sold about 159 lakh liters and the ethanol is around 260 lakh liters. The price realizations in quarter two, the price relation — the average price realization is at INR65.20 as against previously realized INR60.61. As far as the revenue is concerned, for the current quarter, at INR281 crores as against INR190 crores during the corresponding period of the previous year.
As far as the Nutraceuticals segment is concerned, Nutra turnover from Indian operations is for about INR7 crores for the quarter, against the INR9 crores in the previous year. At the consolidated level, the Nutra business turnover is INR37 crores as against the corresponding previous period which was about INR58 crores. As far as the PSRIPL refinery operations is concerned, operational revenue for the current quarter is INR1,116 crores, previous quarter for the same period was INR1,296 crores.
PBT for the current quarter is about INR5 crores, Q2 of the same previous quarter [Technical Issues] Refined sugar production for the current quarter is at 2.65 lakh metric tons against the previous quarter of 2.44 lakh metric tons. As far as the short term loss is concerned, we stood at INR278 crores against the previous year — the previous quarter of INR34 crores. As far as EBITDA is concerned, for the current quarter, we are at INR29 crores, previous period quarter is INR47 crores.
These operations have been listened. Now the floor is open for the question.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Gautam Dedhia from Nalanda Securities. Please go ahead.
Gautam Dedhia
Yeah, hi. Can you just give more insight on the refinery operations for the second half because you said the white premiums are going to decrease? So are we going to still make a profit?
S. Suresh
Yeah, Gautam, good afternoon this is Suresh here. As far as the second half of the year is concerned there is of course, the spot white premiums have come off since the last couple of months. We have a forward book which is having a hedge against this, and of course, the white premiums are unlikely to stay at current levels because at these levels, no refinery can operate covering even its variable cost of production. So we are expecting the white premiums to recover and the recovery will coincide with the improved demand that will come up from the month of December, as was explained in the opening remarks as well.
So with that, we should not be in a position to repeat the levels of white premium that are there in H1, but we are hopeful that recovery in white premium will be able to make us make and sneak for the second half.
Gautam Dedhia
Sir, what percentage are we hedged for the second half or for Q3?
S. Suresh
We are fairly hedged for the second half.
Gautam Dedhia
Okay. And just one clarification. So on the sugar division, in the trade segment, what would be the volume that we would have sold for the quarter?
S. Suresh
Gautam, looking at the release quota is drastically reduced. We have done a salience between the industry and the retail. So trade will not have to — can’t give them much realization. We are more concentrated on the industrial side and the retail side.
Gautam Dedhia
Okay. Thank you.
Operator
Thank you, sir. [Operator Instructions] The next question is from the line of Gautam from Nirzar. Please go ahead.
Gautam
Could you talk a little bit about the sales of growth that we are looking at in staples and in sweetener? I think the retail sweetener sales have — the growth has reduced a little. If you can talk and what geographic expansion plans are we planning in these two areas?
Muthiah Murugappan
Yeah, so I think first, I’ll take your question on geographical expansion. On geographical expansion, we are looking at being present in the South here for the staples business. And for the sweetener also, it is largely South. There is a little bit of presence that we have in Mumbai and East on modern trade, but otherwise it’s largely in the South. With regard to sweetener sales dropping down, one reason is that as the CFO said, the release quota itself had come down in absolute numbers. Within the release quota, we prioritized retail and institution, but the absolute number of release quota itself was very less and so we had to — we had to manage with a little bit of growth on the sweetener business.
On the non-sweetener business, we are at about — as shown in the slide, we are at about INR29 crores approximately per month is in sale value and we are expecting to grow on this as per the business plan in the next second half.
Gautam
Thank you. We were also looking at getting into tolling arrangement with other factories, you know for the sweetener side of the business. So can we not manage our constraint of production by that?
Muthiah Murugappan
Yeah. I mean, I think there is — there is some discussions and thought process around — happening around that in terms of how are we going to manage the future growth opportunities on account of the release quota. I think as and when it gets finalized, we’ll let you know.
Gautam
Okay. And can we also talk a little bit about the advertising and promotion expenditure for this consumer product business? How is it currently and what we are looking at and share of modern trade and the e-commerce players and quick delivery players in our total mix?
Muthiah Murugappan
So the share of e-commerce, quick commerce and modern trade put together will be about 25% to 30% of the total business. AMSP as a percentage to total sales as of now stays at around between 10% to 12% and it is expected to be at that level for some more time.
Gautam
Okay. And within our staples or which category of products is growing better?
Muthiah Murugappan
Both are growing equally, rice and dal are both contributing — increasing about 52% and 48% of the total sales. So both are growing equally.
Gautam
Okay. I will come back later. Thank you.
Muthiah Murugappan
Thank you. Thank you.
Operator
Thank you, sir. [Operator Instructions] The next question is from the line of Gautam. Please go ahead.
Gautam
Yeah. Could you also talk about the outlook for the sugar business, given that yields have also come down a little and so how do we see the progress after the monsoons maybe outlook for the other seasons?
S. Suresh
Overall, between the geographies we are operating, TN will be challenged for some time to come because it’s structurally because of the way the state is. We see very robust outputs coming from Karnataka. So I think that will balance the TN challenges a bit. But you will see that resolving over a period of about six months to one year as the new crops come in.
Last year, if you are — if you need to know, we have had challenges in terms of late monsoon and also Nira fish related issue in TN. The fish related issues are beyond us and currently weather we are seeing in terms of monsoon, it’s been good. We are catching up on monsoons in TN. So both augur well further we found. But the recovery challenges might be there for some time because that’s related to soil fertility, et cetera across organizations are working on that, we should see some benefits over a couple of years on there.
Gautam
And any update on the ethanol side and pharma ethanol what kind of realization production are we looking there in the normal ethanol and pharma ethanol business?
Muthiah Murugappan
Gautam, as far as the pharma ethanol market is concerned, it is a very limited market. We have clarified in the last call also because we have specified customers and we dedicated at one particular plant, whatever the volume which comes from the pharma, we will cater from that. So it is not like a big ethanol borrowing business kind of thing.
Gautam
Right. Okay. Thanks.
Muthiah Murugappan
Thanks.
Operator
Thank you, sir. [Operator Instructions] The next question is from the line of Manoj from KSA Securities [Phonetic] Please go ahead.
Manoj
Good evening and thank you for the opportunity to ask the question sir. Sir, my first question is pertaining to the staple business of EID Perry. See, currently we are there into rice and daal only. So are we going to take this business in the other varieties of staples? And apart from the South market, are you going to go Pan India also and maybe say globally?
Muthiah Murugappan
So I think we are — we are looking at consolidating ourselves largely in the South of India. And with regard to the product portfolio, there will be a constant upgradation and addition on products. As and when we see an opportunity in the market and we think there is a fitment with the brand, we will be launching those products and increasing our portfolio.
S. Suresh
I think millets also is —
Muthiah Murugappan
So we have daal, rice and millets and other daals, we are evaluating them and we are looking at where there is an opportunity. We will definitely be operating in that segment.
Manoj
So continuing with the staples business also, Government of India is also promoting many for the millets business, especially in U.S., Europe and other markets. And do you see the good opportunity for the export purpose also rather than restricting ourselves to Indian markets only?
Muthiah Murugappan
Yeah. So there is a good opportunity definitely. So we are building the domestic business. We are building our supply chain and once the supply chain is built robust enough, we will be looking at export opportunities.
Manoj
Okay, okay. Sir, my third question is, couple of our businesses are — there are not many challenges are we facing in the cogen business, distillery business and all that. Do you see a turnaround in those businesses over a period of time maybe say one or two years down the line?
S. Suresh
Gautam, the distillery business is a robust business, which is why we are focused around that. We see substantial margins in the business by operating efficiently, and also given the support of the government for the ethanol blending program. Obviously, you’ll be hearing in the news that there is a lot that the government is doing in terms of policy and all. We have a costly outlook on the kind of focus the government is having on this sector. I think with the kind of capacities we have established, we are cushioning way to leverage and benefit from this focus.
Ethanol blending targets the Indian government would keep taking up and they seem to be fairly focused on this program. So we see distillery operations as an opportunity to strengthen our business foundations. In terms of cogen, yes, it’s a challenge, but it’s also stake-specific. We have green shoots in Karnataka where there is some amount of support from the government. But I think overall, the way the industries would start looking at this to keep costs low and leverage the benefits of both sugar, premiumization of sugar and leverage the ethanol blending program to get a good margin in the distillery business.
Manoj
My last question would be to the management. So what would be the honest endeavors on the part of the management where one could see if we make — if we could focus those areas, which could really help in improving the margins in terms of EBITDA and PAT level at the consol and the standalone business level. What are the areas which we have to focus on it? So it could be a win-win situation for the investor community as well sir.
Muthiah Murugappan
So, Manoj, thanks for the question. So I think you know, we’re just coming off a capex phase, way last 4, 4.5 years where we’ve added substantial distillation capacity because of the ethanol blending program. Now about a year ago, we were very well forged to move towards a 20% EBITDA margin given the way the program was structured.
Obviously, that is a challenge now. It’s a challenge because of climate, it’s also a challenge because of policy. So we’re nowhere near those — in fact, I think we’d be at single-digit EBITDA margin. So I think we’re really hopeful — I think we’re seeing better times on climate, and we’re also hopeful that there will be a more robust and more sustainable policy framework which comes in, and this would help us back up towards that 20% EBITDA margin on the distillery segment.
So this is an element around policy and an element around climate, both of which are largely not controllable by the industry. Of course, we would, at least from a policy perspective, have a voice in our viewpoint. Beyond that, I think beyond this capex phase and the capacity that we’ve created, I think we’re quite comfortable that we’ve balanced our milling as well as our distillation lines and you can actually see that in our capacity utilization. I think going forward, the next three year phase would really be about two-plus focus on execution and implementation and driving efficiencies around the entire manufacturing process of milling and distillation.
And I think in this sort of process optimization, cost control and driving better throughput, we would be able to see more margin accretion. But of course, it has to be supported by a practical and robust policy framework and we need to be lucky around climate. And I think once we’re an amalgamation of three states to see, we will always see different yields, different recoveries across states, Karnataka being the best.
Now on an amalgamated basis, if some of these things sort of fall in place, then we will ideally move into EBITDA per tons of about INR650 odd, which I feel for a Company like us will be a good level to get to as a as a good metric of profitability. Now that is a core focus area. This is also the cash generator, which will help us fund a growth business. Now growth business, of course, is the Consumer Product Group business. There I think we are in invest mode. As you can see, the business is expanding and the focus is really around building distribution, which is very, very sort of first platform and canvas that we need to build over the next couple of years to get to a certain critical mass. We will obviously continue to overlay with new products and build our brand equity in this segment. But I think once we reach that critical mass, you know, you’ll start to see a profitable flywheel of a business model being developed.
That said, with this business, while we are in invest mode, you will not see a very, very heavy cash burn. I think you will see a very prudent approach. We will burn cash, but it would be quite measured and prudent so that we don’t burn a big core. We realize that there are constraints around the core business and we’ll continue to build and strengthen that platform which will then enable further growth and breakout.
So I think these would really be two priorities. I hope that sort of kind of answers your question.
Manoj
Thank you. And there is a small suggestion, which if you could allow me, I would like to give to the EID management.
Muthiah Murugappan
Sure.
Manoj
Hello. So one, in EID there is one may — one may operate — all the — all the different businesses as a separate CEO, CFOs, marketing organization that would be a good lean and linear organization for EID as a whole, which could catapult it as a linear organization over a period of time.
Muthiah Murugappan
I didn’t quite get the question. Maybe you want to repeat it?
Manoj
Maybe I may take the question separately, sir. I’ll later take it sir. Thank you. That’s all from my side, sir.
Muthiah Murugappan
Thank you.
Operator
Thank you, sir. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to management for closing comments.
Muthiah Murugappan
Thank you and look forward to connecting with all of you at the next quarter. Thank you. [Operator Closing Remarks]