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Monday, December 28, 2009

Mawana Sugars Ltd:Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

Scripscan:Mawana Sugars Ltd

Story:Diversified sugar producer and chemical firm Mawana Sugars (MSL) continued to post losses despite a sharp increase in selling price of sugar, due to lower sugar volumes and losses in the chemical business. Although it has cut losses both for the fourth quarter ended September’09 and the full year ‘08-09, the decline in sales and a fall in sugar recovery factor have not allowed the company to generate profits like the rest of the sugar firms.The company posted a loss of Rs 29 crore in the Q4FY09 quarter compared to Rs 97 crore in the year ago period on a standalone level. It managed to cut losses due to a decline in raw material cost that almost halved. In the same period, it posted a 55% decline in sales to Rs 154 crore. Despite moderation in non-operating costs such as interest expenses and depreciation allowance, the company was not able to post profits.Even as the last quarter doesn’t have much significance for sugar companies as it marks the end of the crushing season, MSL has generated a similar performance for the whole of ‘08-09. On a consolidated basis, for the financial year ended September ‘09, the company has seen a 2% decline in sales to Rs 737 crore and reduced net loss to Rs 56 crore as compared to Rs 112 crore a year ago. This is after adjusting previous years’ 18 months’ data to 12 months for making the figures comparable.The company operates in four segments, of which sugar contributes two-thirds to the total revenue with chemical, edible oil and power accounting for the balance. The sugar business posted a 9% sales growth for the full year whereas the chemical unit that accounts for a little less than one-fifth of total revenue, comprising caustic soda and hydrochloric acid, posted a decline in sales. Sugar sales growth for the whole year also helped the unit to report a turnaround compared to last year, but chemical business that was in profits in ‘07-08 slipped into losses. The power segment also posted a decline in profits despite sales growth.The future growth would depend on how MSL manages to achieve the target of crushing 10% more cane during the current sugar season of ‘09-10 (October ‘09 -September ‘10). Further, the company also has plans to refine 25,000 tonnes of imported raw sugar, which will add to the output.Altogether a sell on rally.

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