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Dhampur Sugar Mills

Profitability hinges on cane price

Dhampur Sugar Mills reported a 12.3% increase in its sales to Rs667.9 crore in FY2008primarily due to the revenues generated from the sale of power from the cogeneration division. The cogeneration division had a surplus power generation capacity of 80MW that led to the sale of power to the grid and fetched Rs128.7 crore of gross revenues (as against nothing in FY2007). The operating profit for the year stood at Rs113.8 crore against an operating loss of Rs20.9 crore in FY2007 because of a 42% profit from the cogeneration division (no profit in FY2007) and a 12% year-on-year (y-o-y) lower sugar-cane cost of Rs110 per quintal.

Thus, the adjusted net profit stood at Rs21.6 crore against a loss of Rs68.8 crore in FY2007 despite higher interest and depreciation charges due to the expansions carried out in the sugar, cogeneration and chemical divisions. The company had foreign exchange loss of Rs18 crore on its external commercial borrowing (ECB) of $15 million and forward contract hedges. As a result, the reported net profit stood at Rs3.6 crore against a reported loss of Rs60.8 crore in the previous year.

The results for FY2008 are based on a sugar-cane cost of Rs110 per quintal as the state advised price (SAP) of Rs125 per quintal declared by the Uttar Pradesh state government is under litigation. A decision mandating a sugar-cane price of Rs125 per quintal will lead to a prior-period expense in the FY2009 results.