November 14, 2011 year:
Definitely seems like overkill when the company's stock price plummets 24 per cent during one trading session after the announcement of quarterly results. Stock Sri Renuka sugars, the leading producer of sugar in India and sugar stock preferred institutional investors in listed space, suffered such a beating on Monday in the trade.
Unexpected loss
That has caused reactions and many leading brokers downgraded the stock, was in the last quarter's results, announced on Friday. The company reported net loss of 615.9 crore in its consolidated books for the quarter ended 30 September against profit 128 crore in the same period last year.
The loss surprised markets, because consensus expectations were for a profit. Other leading companies of sugar from a purely Indian operations to improve profitability in this quarter.
Breakdown of quarterly figures shows Renuka Sri three factors that proved his undoing.
One Indian company operations slipped from a net profit of Rs 8 crore losses 57 crore in September 2011 quarter, mainly on forex loss of borrowing and increasing interest costs, even when the company sold the lower volumes. This is not a significant concern, given that in July-September period meat was for Indian sugar Millers.
Two, the company consolidated operations, including its two major Brazilian subsidiaries have hit their profits at the working level. Drought affecting the largest Brazilian subsidiary, Renuka do Brasil, led to a sharp decline in cane gives 31 per cent and prevented it from use quite strong global sugar sales. This led to operating profits on foreign operations (expected to be significantly higher than 30%), decreasing.
Three, the company adopted the exceptional mark-to-market losses on loans to the dollar at the expense of a sharp depreciation in the value of the rupee and the dollar against the Brazilian Reai quarter. It has 569 crore conditional Forex losses contained in their book this quarter, compared with 69 crore forex companies get last year that the biggest contribution to his bad numbers.
Bearing in mind that forex losses were a common feature results this quarter, why Renuka rooms spark such a negative reaction? Well, the answer may be to current fears of market leverage levels Renuka in high debt and its reliance on its Brazilian subsidiary for cash to repay this debt.
Shoulder troubles
Since it acquired almost 45000 tcd cane crushing capacity in Brazil by two leading sugar refineries, Sri Renuka is considered attractive to play in global sugar prices.
Although the acquisition was financed by the relatively high levels of debt, Renuka was seen as a conveniently placed to regain it, given the high margins and healthy cash flows at its Brazilian subsidiaries.
Recent setbacks, climate-related operations in Brazil, has created uncertainty about these assumptions, while currency became liabilities.
That made investors uncomfortable about the impact of the balance of the company.
By the end of September 2011, consolidated figures showed total credits 8600 crore against a shareholder means 2.073 crore.
Consolidated interest expense in the last quarter were higher than the operating profit.
