COIMBATORE: Low prices, sales from high cost stocks and increase in cane prices would impact the profitability sugar mills in the current sugar season (October-September), according to ratings agency ICRA.
Incidentally, ratings agency Crisil had estimated in June that the sugar industry's net losses would increase to over Rs 1000 crore in the season due to the widening gap between sugarcane and sugar prices. While the overall realizations are likely to be higher by about 10% over the previous sugar season due to abolition of levy obligations, the growth in cane prices is expected to impact the profitability of sugar mills adversely.
"Uttar Pradesh (UP) would be the most impacted, although other states such as Tamil Nadu, Maharashtra and Karnataka too would see an adverse impact," ICRA said. While profit margins are likely to deteriorate for UP-based mills largely because of higher cane costs offsetting the impact of higher volumes and improved recoveries, reduced crushing is expected to impact profits for most mills in Karnataka and Maharashtra.
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