INDUSTRY UPDATE

PONNI SUGARS (ERODE) LIMITED

Ponni Sugars (Erode) Ltd Industry Update

1. World Sugar
1.1 World Sugar Scenario

International Sugar Organization (ISO) in its Quarterly Market Outlook May17 has made its
third revision of global sugar balance for 2016-17 that underpins the following:

o World statistical deficit up-revised to 6.5 million tons.

o A further decrease in global sugar stocks by Oct17.
o An end of the deficit phase in 2017-18.
o World market values under downward pressure.
o Weakening USD and Brazilian Real
o Formidable fall in Stock-Consumption ratio (by 4.57%) to 47.56%, the lowest level
since 2010-11

Preliminary estimates by ISO for 2017-18 point to a global surplus of above 3 million tons.
Surplus phase might run through 2018-19 season as well. This tentative forecast is based on
the assumption of normal weather conditions in all producing regions.

1.2 World sugar prices

Raw sugar futures (basis Oct17 contract) have lost further ground during Q2-2017, falling
from 17.1 c/ lb at start of January to below 13.0 c/lb in late June. ISO White sugar price
Index also experienced extended losses in June. From USD 414/ t at start of the month, the
price fell to USD 378/ t on 26th June, the lowest daily quote since Feb16.

A bearish trend in sugar price has been caused by a combination of negative factors; China
boosted import tariff; Pakistan produced far more sugar than expected. In Brazil, ethanol
prices are at a seasonal low. Despite such negative news, global fundamental has not
changed greatly over the quarter.

Source: CMIE

July 2017
Ponni Sugars (Erode) Ltd Industry Update
2. Indian Sugar
2.1 Sugar production
State-wise Production ISMA
(Lakh tons)

States 2017-18 2016-17 2015-16 2014-15

(Forecast) (Estimate)
U.P. 100 85 68 71
Maharashtra 74 42 84 105
Karnataka 25 21 41 49
Tamil Nadu 6 11 14 13
Others 46 44 44 45
All India 251 203 251 283

Indian sugar production is set to rebound during SS 17-18 from a seven year low. Brighter
production outlook follows IMD projection of a normal monsoon for a second year in
2017 after back to back droughts. Higher Indian production will add to an expected global
surplus, further pressurizing NY Futures that have already tumbled more than 30% in the
past year and are hovering near 16 month lows.

2.2 Sugar prices in domestic market

Sugar prices in domestic market witnessed a growth of 3.9% in February 2017. However,
they were stable during Feb-June17 with a little correction in first week of July17. Price
stability is attributable to sufficient supply to meet domestic demand.

2.3 Sugar Futures

Fig.14

Source: ISMA

July 2017
Ponni Sugars (Erode) Ltd Industry Update

2.4 Import duty on sugar

The Government had hiked import duty on sugar from 25% to 40% effective 29.04.2015.
By Notification dated 10th July17 it was further increased to 50% with immediate effect.
This move by the Government is likely to keep the sugar prices stable.

2.5 Jute packing

Ministry of Textiles by Notification dated 23.06.2017 has further extended the mandate of
jute packing for sugar at 20% till 30th September 2017.

2.6 Weather forecast

Indian Meteorological Department revised the forecast in June17 increasing the estimate
from 96% to 98% of normal rainfall this year. The cumulative rainfall is 1% below normal
(previous year 4% above normal) for the ongoing season until 13th July.

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July 2017