EID Parry — Q2 FY25 earnings call

Call held 14 Nov 2024

Management summary

EID Parry faced a challenging Q2 FY25 characterized by significantly lower sugar recoveries in Tamil Nadu and reduced release quotas, impacting the core sugar business. However, the company saw exceptional growth in its Consumer Product Group and strong volume performance in the distillery segment. Management is navigating a period of high input costs (molasses) and compressed global white premiums in the refinery business while focusing on long-term efficiency and distribution expansion.

Highlights

  • EBITDA for the quarter stood at ₹29 crores, a decline from ₹47 crores in the previous year.

  • Consumer Product Group (CPG) achieved a turnover of ₹236 crores, registering a robust growth of 76% YoY.

  • Sugar segment revenue (excluding intersegment) fell 40% YoY to ₹216 crores due to lower release quotas.

  • Distillery revenue grew 48% YoY to ₹281 crores, driven by sales of 419 lakh liters.

  • Sugar recovery in Tamil Nadu dropped significantly to 7.6% from 8.22% YoY due to poor monsoon and pest issues.

  • Refinery operations (PSRIPL) reported a PBT of ₹5 crores on revenue of ₹1,116 crores.

  • Short-term debt increased to ₹278 crores from ₹34 crores in the previous quarter.

Concerns

  • Climate and Monsoon Impact

  • Global White Premium Compression

Key financials

  1. EBITDA ₹29 Cr -38%YoY
  2. Sugar Revenue ₹216 Cr -40%YoY
  3. Distillery Revenue ₹281 Cr +48%YoY
  4. CPG Turnover ₹236 Cr +76%YoY
  5. Short Term Loan ₹278 Cr +718%QoQ

What they filed

Q1 FY27: revenue down 3.6%, net profit down 217.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue755 848 814 760 754 −0%770 −9%846 +4%733 −4%
EBITDA-41 -34 88 -31 -50 −22%-41 −21%72 −18%-48 −55%
Net profit28 -146 -232 -28 -286 −1121%-54 +63%-340 −47%-89 −218%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Sugar Operations
    5.61 lakh mt Crushing Volume7.6% Recovery Rate₹3,301/mt Cane Landed Cost
  • Consumer Product Group (CPG)
    ₹236 Cr Total Turnover₹82 Cr Branded Staples Turnover
  • Distillery
    419 lakh liters Sales Volume₹64.2/liter Average Realization
  • Refinery (PSRIPL)
    ₹1,116 Cr Operational Revenue₹5 Cr PBT

Guidance & targets

Profitability

  • EBITDA per ton Profitability · next 3 years · Medium confidence 650
    we will ideally move into EBITDA per tons of about 650 odd, which I feel for a company like us will be a good level to get to as a good metric of profitability.

    — Muthiah Murugappan, CEO

Margin

  • Distillery EBITDA Margin Margin · Medium Term · Medium confidence 20%
    this would help us keep back up towards that 20% EBITDA margin on the distillery segment.

    — Muthiah Murugappan, CEO

Other

  • Ethanol Blending Target Other · Sugar Year 2024-2025 · High confidence 18%
    bids received for ethanol sugar year 2024-2025 are at about 18% blending.

    — Muthiah Murugappan, CEO

  • A&SP as % of Sales Other · next few quarters · High confidence 10-12%
    A&SP as a percentage to total sale as of now stays at around between 10% to 12% and it is expected to be at that level for some more time.

    — Balaji Prakash

Risks & concerns

  • Climate and Monsoon Impact

    high

    Poor monsoons in TN led to lower cane recoveries (7.6%) and pest issues, impacting sugar production and distillery margins.

    Management acknowledged

  • Global White Premium Compression

    high

    Refined sugar oversupply from EU/Ukraine has crashed premiums from $130 to $75, threatening refinery profitability.

    Management acknowledged

  • Policy and Regulatory Volatility

    medium

    Management noted the 'policy hiatus' last year regarding ethanol diversion and remains dependent on government MSP and offtake price announcements.

    Management acknowledged

Areas of evasion (1)

  • Specific volume details for trade segment sales were somewhat generalized.

Q&A highlights

2 direct
Refinery Profitability and White Premiums Direct
White premiums have also significantly dropped to $75 to $80 per metric ton, as against $110 to $130 dollars metric ton in September 24... we will not be in a position to repeat the levels of white premium that are there in H1.

Confirms that the refinery segment, a major revenue contributor, will face significant margin pressure in H2 FY25.

Asked by Gautam, Nalanda Securities

CPG Distribution and Channel Mix Direct
The share of e-commerce, quick commerce and modern trade put together will be about 25% to 30% of the total business.

Highlights the company's successful pivot toward modern, high-growth retail channels for its staples business.

Asked by Gautam

Tamil Nadu Recovery Challenges Partial
TN will be challenge for some time to come because that's structurally because of the way the state is... we will see that resolving over a period of about six months to one year as the new crops come in.

Indicates that the core sugar business's underperformance in TN is structural and will persist for at least another year.

Asked by Gautam

2 min read 5 chapters

Detailed narrative

Sugar Segment Hit by Low Recoveries and Quotas

The sugar business faced a difficult quarter with revenue declining 40% YoY to ₹216 crores. This was primarily driven by a reduction in release quotas and a sharp drop in recovery rates in Tamil Nadu to 7.6% from 8.22% in the previous year. Crushing volumes in TN also fell to 5.61 lakh metric tons compared to 8.54 lakh metric tons YoY, while cane landed costs rose to ₹3,301 per metric ton.

Consumer Product Group (CPG) Emerges as Growth Engine

The CPG segment was a standout performer, achieving a turnover of ₹236 crores, a 76% increase over the previous year's ₹134 crores. Branded staples like rice and dal contributed ₹82 crores to this total. Management is aggressively expanding distribution, with modern trade and e-commerce now accounting for 25-30% of the business, supported by a steady A&SP spend of 10-12% of sales.

Distillery Performance Bolstered by Volume

Distillery operations showed strong volume growth, selling 419 lakh liters compared to 304 lakh liters in the prior year. Revenue for the segment reached ₹281 crores with an average price realization of ₹64.20 per liter. Despite the volume growth, margins were somewhat diluted due to higher molasses prices resulting from poor sugar recoveries.

Refinery Business Faces Global Headwinds

The PSRIPL refinery operations reported revenue of ₹1,116 crores, down from ₹1,296 crores in the previous quarter. PBT fell to ₹5 crores from ₹14 crores. Management warned that global white premiums have collapsed from $110-$130 to $75-$80 per metric ton, which will likely prevent the segment from repeating its H1 performance levels in the second half of the year.

Strategic Outlook and Efficiency Focus

Following a heavy CAPEX phase, EID Parry is shifting focus toward 'ruthless execution' and driving manufacturing efficiencies. The company aims to reach an EBITDA of ₹650 per ton of sugar in the next three years. While TN remains a structural challenge, robust outputs from Karnataka are expected to provide balance, and the lifting of ethanol diversion restrictions is viewed as a major positive policy shift.

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