Sugarcane companies are forecasting ‘modest’ profits for the 2023-2024 fiscal year following a record breaking profit year.
Son La Sugar Joint Stock Company (stock code: SLS) recently reported a 50% drop in Q2 2023-2024 net profit, totaling 188 billion VND. Despite a decrease in the cost of goods sold exceeding the drop in sugarcane revenue, the company’s gross margin improved from 30% to 32% in the last quarter. However, after expenses, the company’s net profit was nearly 70 billion VND, marking a 35% decrease from the same period last year, and the lowest in the past six quarters.
According to Son La Sugar, due to the seasonal nature of its production, the revenue for the first six months of the fiscal year came mainly from inventory carried over from the previous year. In Q2 2023-2024, the low inventory from 2022-2023 resulted in lower sales, reduced gross profit, and consequently decreased overall profit
For the first half of the fiscal year, Son La Sugar achieved a total revenue of 618 billion VND, down 14%, and a net profit of 189 billion VND, nearly unchanged compared to the same period last year. With these results, the company has completed 59% of its revenue target and exceeded its annual profit target by 38% after the first two quarters.
Another company in the sugarcane industry, Kon Tum Sugar (stock code: KTS), also reported a decline compared to the previous year. Unlike Son La Sugar, Kon Tum Sugar saw a 26.7% increase in revenue year-over-year. However, a 200% rise in financial expenses to 9.2 billion VND led to a loss of nearly 1 billion VND, whereas it had a profit of 1.6 billion VND in the same period last year.
For the first half of the 2023-2024 fiscal year, Kon Tum Sugar reported revenue of 73 billion VND, a 30.3% decline compared to the previous year. After deducting expenses, the company incurred a loss of nearly 500 million VND, compared to a profit of over 2 billion VND the previous year.
The period of strong profits for many companies following the 2022-2023 fiscal year has ended as global sugar prices have plummeted since December. Since late November, global sugar prices began to ‘plummet,’ at one point falling below 20 USD per pound, the lowest level since early 2023 and nearly 26% below the peak. However, prices have shown some recovery in 2024.
For the 2023-2024 fiscal year, Son La Sugar targets a revenue of 1,046 billion VND and a net profit of 137 billion VND, reflecting decreases of 39% and nearly 74% respectively compared to the previous year. The company anticipates these declines due to challenges in the market, rising material costs, and the impact of climate change, which is expected to reduce sugarcane yield.
The company reports that in 2023, the sugarcane industry continues to face significant difficulties, especially due to climate change and severe ElNino conditions causing drought and heat in Son La and the Northwest region. This has heavily impacted sugarcane cultivation, with many areas experiencing severe drought, leading to potential deep reductions in yield and production.
Additionally, high agricultural input costs are reducing income for sugarcane growers, and competition from other crops is increasing.
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