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

ROIC

Return on sales
(net profit /sales)
Capital turnover
(Sales/Invested capital)
 Renuka sugars
Sep Sep Sep Sep Sep
2005 2006 2007 2008 2009

RETURN ON SALES 6.09 6.44 6.72 5.27 6.41

(net profit / sales )

CAPITAL TURNOVER 4.75 5.26 1.26 2.26 1.59

(sales/invested capital)

ROIC
(net profit/invested 43 17.23 10.44 12.18 12.40
capital)
RETURN ON SALES
Renuka: 6.41
Balrampur: 13.43
Bajaj: 9.06
EID: 15.96
Triveni: 8.86
 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.