The outlook for India sugar in 2009 is positive and the sweetener may buck the commodity trend, said Fitch Ratings in its latest assessment of the sugar sector. Sugar price increase was unavoidable because of lower output, the report pointed out.
Prices Range-bound
The report said the worst days for sugar are over, and prices are expected to remain range-bound through various regulatory measures. Sugar is an essential food item of mass consumption. The report maintains a stable outlook for the sector in the current calendar. Domestic rates
Despite the policy of duty-free import of sugar for processing into white sugar for domestic consumption and an export obligation to be fulfilled within 24 months, domestic prices would continue to rise to some degree mainly due to estimated decline in global sugar production and possible global deficit situation, Fitch pointed out.
Bright outlook
While most companies posted losses last year, Fitch expects the profitability of sugar companies to improve this year.
In the short-term to medium term, revenues as well as profitability continue to depend largely on sugar revenues, despite efforts to diversify, the report remarked.
Pointing out that diversified companies that are well integrated (distillery, co-generation) rather than pure sugar companies are well placed to enjoy profitability, Fitch said that growth and contribution of non-sugar business to incremental revenues flowing to the bottom line of sugar companies would remain marginal. (source: The Hindu Business Line)
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