The Hindu : Business : Tata Tea suffers setback

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Thursday, Jun 11, 2009
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Business

Tata Tea suffers setback

Special Correspondent

Board recommends a dividend of Rs. 17.50 per share
Volatility in commodity and currency markets

MUMBAI: A sharp rise in input costs and fluctuations in the commodity and currency markets have impacted Tata Tea during 2008-09 and it reported a decline of 55 per cent in the consolidated net profit at Rs. 700.55 crore for the year ended March 31, 2009 against Rs. 1,542.55 crore in the previous year. The company’s total income was at Rs. 4,874 crore (Rs. 4,336 crore), a rise of 12.14 per cent.

The board of directors has recommended a dividend of Rs. 17.50 per share.

According to the company, the net profit is not comparable to the previous year due to impact of the one time profit last year on sale of investments in Energy Brands Inc. and North India Plantations in the previous year amounting to Rs. 1,607.52 crore. The consolidated results include those of the Tetley Group, Tata Coffee and other businesses.

Addressing the media, Tata Tea Managing Director Percy Siganporia said, “the company has reported a strong performance despite difficulties. There was volatility in commodity and currency markets, both of which impacted the company because 75 per cent of our business comes from outside India.”

The company’s profit before exceptional items at Rs. 531 crore (Rs. 437 crore) was up 21 per cent after absorbing the adverse impact of hardening commodity prices and costs relating to new initiatives partly offset by savings in interest costs which were lower at Rs. 54.20 crore (Rs. 220 crore). The increase in the input costs includes the cost of tea going up by around Rs. 22 a kg in India or 30-35 per cent for the industry and this rise was passed on to consumers. “The focus for us is value share and not volume. We are looking at value growth,” said Mr. Siganporia.

The standalone Tata Tea results saw the net profit lower by half at Rs. 159.06 crore (Rs. 312.86 crore) and the total income of the company up 17 per cent at Rs. 1,524.64 crore. This increase was driven by a strong performance of the company’s branded tea operations.

The profit prior to exceptional items at Rs. 239 crore was up 4 per cent and was impacted by higher input costs, adverse movement of exchange rates and higher actuarial charge on revaluation of employee benefits.

However, the net profit and the profit before tax at Rs. 229 crore (Rs. 386 crore) are not comparable to the pervious year due to the one-time profit last year on the sale of North India Plantation Division amounting to Rs 162 crore.

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