Analysing profitability

‡ It is important for a company to analyse the financial performance of their company, identifying how its strategies contribute to profitability ‡ This helps them to detemine
whether they are less or more profitable than competitors whether their performance is improving or deteriorating through time

whether their company strategies are maximizing the value being created whether their cost structure is out of line with those of competitors whether they are using the resources of the company to the greatest effect.

Drivers of profitability
COGS/Sales Return on sales (net profit /sales) SG&A/Sales R&D/Sales Capital turnover (Sales/Invested capital) Working capital/sales PPE/Sales

ROIC

Renuka sugars
Sep 2005 Sep 2006 Sep 2007 Sep 2008 Sep 2009

RETURN ON SALES (net profit / sales )

6.09

6.44

6.72

5.27

6.41

CAPITAL TURNOVER (sales/invested capital)

4.75

5.26

1.26

2.26

1.59

ROIC (net profit/invested capital)

43

17.23

10.44

12.18

12.40

RETURN ON SALES
Renuka: 6.41 Balrampur: 13.43

ROIC
Renuka: 12.40 Balrampur: 16.13 Bajaj: 5.4 EID: 16.56 Triveni: 21.51

Bajaj: 9.06 EID: 15.96 Triveni: 8.86

CAPITAL TURNOVER
Renuka: 1.59 Balrampur: 0.95 Bajaj: 0.47 EID: 0.94 Triveni: 1.17

Location of SRSL
‡ SRSL s business model is complemented by its south India location. ‡ Southern sugar mills operate in a freer market; cane supply in north Indian states is regulated, creating incremental risk on the cane procurement price front.

‡ SRSL specifically, operates in the high recovery area of south-west India, where sucrose content of cane is 10-20% higher than elsewhere in the country.

Versatile and scalable business model
‡ On the front-end, the company interfaces with the domestic and export markets, providing custom manufacturing solutions and hedging price and volume risk. ‡ The backbone is a scalable model which combines leasing-in operating facilities along with owning integrated production facilities. ‡ SRSL s back-end is versatile enough to accommodate two types of feedstock and also vary output mix.

Integrated business model of SRSL

Double Feed Versatility

Double Feed Versatility
‡ Double feed provides operational flexibility - the uniqueness of SRSL s business model is that its operations can run on two feed stocks - cane and/or raw sugar. ‡ SRSL, in the intermediate stage, extracts raw sugar from cane and then processes this intermediate raw sugar into refined white sugar. ‡ In the off-crushing season,the company runs the second intermediate process, producing refined white sugaron a raw sugar feed.

‡ The benefits of such an operating layout are two : greater distribution of fixed overheads; and far higher scale of operations on a like-to-like basis ‡ The Company multi-folded its capacity, growing organically and inorganically: sugar producing capacity increased from 5,000 TCD to 35,000 TCD in 2008-09. ‡ The company is completely integrated more than Rs. 3,223 mn revenues accrued from co-product businesses, accounting for 14% of the Company s revenues.

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