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Informist, Friday, Oct. 18, 2024

 

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--Tata Consumer: Revenue from Starbucks JV up 2% in Jul-Sept 
--Tata Consumer: Revenue from UK grew 7% on year in Jul-Sept 
--Tata Consumer: Jul-Sept avg robusta coffee procurement prices up 82% on yr 
--Tata Consumer: Jul-Sept tea procurement cost from south India up 25% on yr 
--Tata Consumer: Jul-Sept tea procurement cost from North India up 28% on yr 
--Tata Consumer: Raised Tata Salt prices Jul-Sept to combat input cost rise 
--Tata Consumer: Jul-Sept salt sales up 2% on year, volumes flat on year 
--Tata Consumer: Spent 7.5% of India ops sales on advertising and promotions 
--Tata Consumer: Jul-Sept coffee business grew 29% on year 
--Tata Consumer: Price increases actioned across tea brands in Jul-Sept 
--Tata Consumer: Jul-Sept tea volumes in India down 4% on year 
--Tata Consumer Jul-Sept India beverages sales INR 13.80 bln, up 3% on year 
--Tata Consumer Jul-Sept India foods ops sales INR 13.68 bln, up 28% on yr 
--Tata Consumer: Gained salt market share by 150 bps in Jul-Sept  
--Tata Consumer: India tea business value share loss of 20 bps in Jul-Sept 
--Tata Consumer Jul-Sept consol EBITDA margin 14.9% vs 15.2% year ago 
--Tata Consumer Jul-Sept consol EBITDA INR 6.29 bln vs INR 5.69 bln year ago 
--Tata Consumer Jul-Sept consol operating margin 11.39% vs 12.71% year ago 
--Tata Consumer Jul-Sept Intl ops revenue INR 11.16 bln vs INR 9.50 bln 
--Tata Consumer Jul-Sept India ops revenue INR 26.55 bln vs INR 24.04 bln 
--Tata Consumer Apr-Sept consol sales INR 85.67 bln vs INR 74.75 bln yr ago 
--Tata Consumer Apr-Sept consol net profit INR 6.55 bln, unchanged on year 
--Tata Consumer Jul-Sept consol revenue INR 42.14 bln vs INR 37.34 bln 
--Tata Consumer Jul-Sept consol net profit INR 3.64 bln vs INR 3.38 bln 
--Analysts saw Tata Consumer Jul-Sept consol net profit INR 3.40 bln 
--Tata Consumer Jul-Sept consol net profit INR 3.64 bln 
--Tata Consumer on Starbucks: Saw soft demand trends across sector
--Tata Consumer: Erratic weather hit tea output, leading to input cost rise
--Tata Consumer: Erratic weather hit salt output, leading to input cost rise
--Tata Consumer: Coffee demand faces headwinds globally on record high prices
--Tata Consumer: Increase in Tata Salt prices effective October 

 

By Apoorva Choubey 

 

MUMBAI – Tata Consumer Products Ltd. managed to beat the Street's expectations for Jul-Sept earnings as the benefit of a one-time tax credit, robust domestic food business, and strong traction in international sales offset the impact of weakness in the tea business and extraordinary costs. The company's consolidated net profit rose 8% on year to INR 3.64 billion, marking the highest growth rate in five quarters. This also surpassed the consensus estimate of INR 3.4 billion. A one-time tax credit of INR 740 million due to merger of wholly-owned subsidiaries underpinned the bottom line.

 

During Jul-Sept, the Tata group company also incurred a one-off cost of INR 110 million relating to recent mergers and professional fees for acquisitions, along with a post-acquisition integration, and restructuring and redundancy cost of INR 160 million. "With the integration completed for both Capital Foods and Organic India, we are starting to see strong synergy benefits and both businesses witnessed strong quarter-on-quarter growth," Managing Director and Chief Executive Officer Sunil D'Souza said in a press release. 

 

The company recorded continued growth and market share gains in the India salt business in Jul-Sept, and strong growth in Tata Sampann and Tata Soulful brands, D'Souza said. The domestic tea business was impacted by subdued category trends, he added.

 

Tata Consumer's consolidated revenue rose 13% to INR 42.14 billion in Jul-Sept, missing the Street's estimate of INR 43.5 billion. In constant currency terms, the year-on-year sales growth was 12%. Excluding acquisitions, the revenue growth was 5%, driven by underlying growth of 2% in the India business, 5% in the international segment, and 19% in the non-branded business, the company said.

 

Tata Consumer's international business saw revenues jump to INR 11.2 billion from INR 9.5 billion a year ago. Revenue from the UK rose 7% on year, the company said.

The India business saw sales rise to INR 26.6 billion from INR 24.04 billion in the year-ago period. The company's India business comprises the branded tea, coffee and water operations, as well as the food products segment. The non-branded business houses the plantation and extraction operations for tea, coffee and other produce. 

 

During the September quarter, Tata Consumer's earnings before interest, tax, depreciation, and amortisation, or EBITDA, rose 10.5% on year to INR 6.29 billion, a tad lower than the projected INR 6.4 billion. The company's EBITDA margin fell to 14.9% from 15.2% a year ago. Operating performance in India was impacted by higher tea costs, which was partly offset by an improvement in the international and non-branded businesses, the company said. The earnings before interest and tax margin, or EBIT margin, fell to 11.39% from 12.71% a year ago.   

 

SEGMENTS' PERFORMANCE 

Tata Consumer's key beverages vertical saw a 3% on-year rise in revenues to INR 13.80 billion. In a report, brokerage Nuvama Wealth Management Ltd. had said that Tata Consumer's beverage business in the country, which largely comprises tea and accounts for 30% of its overall business, is likely to report a 4?cline in revenue backed by a 3?cline in volume.

 

Tea volumes for India's second-largest tea retailer fell 4% on year. The company lost 20-basis-point revenue share in the tea market amidst higher prices of the beverage. Despite measures like new product launches tailored for specific regions, Tata Consumer's tea business has been feeling some heat from regional players. In Apr-Jun, despite the company's efforts to scale up the tea business, it reported a flat growth in tea volumes.

 

Erratic weather has hit tea output in recent months, leading to higher input costs. The company had to increase product prices in Jul-Sept, with tea procurement costs from south and north India jumping 25% and 28%, respectively, on a year-on-year basis.

 

The saving grace for the beverage business was the coffee segment, which saw sales surging 29% on year in the quarter. However, coffee demand faces headwinds globally due to prices being at all-time highs, the company warned. Average robusta coffee procurement prices have soared 82% from a year ago, it noted.    

 

Tata Consumer's sales from the joint venture that operates and owns the Starbucks coffee chain rose 2% on year in Jul-Sept, as demand remained soft. Tata Starbucks reached the milestone of being the largest cafe operator in India in terms of store count, with 457 stores across 70 cities, the company said. 

 

Tata Consumer's foods business in India witnessed a 28% rise in sales to INR 13.68 billion, led by market share gains in the salt market. Some brokerages had expected the company's foods business in India to grow 14%. For the past few years, the company has been focussing on the foods segment to grow its business and to enter new foods categories where it hitherto was absent. 

 

During Jul-Sept, Tata Consumer gained 150 bps of market share in the salt market, but volumes were flat on year. Tata Consumer is the market leader in edible salt in the country. Overall, salt sales improved 2% on year during Jul-Sept, the company said. 

 

The company had to raise prices in order to pass on the rise in raw material costs, which was impacted by erratic weather. Owing to further increase in input costs, the company hiked Tata Salt prices again, which will be effective from this month.
 

The value-added salt portfolio continued its strong momentum and grew 26% during the quarter, with rock salt registering record volumes. The Tata Sampann portfolio also continued its strong momentum and grew 26% for the quarter. 

 

OTHER METRICS 

During the reporting quarter, Tata Consumer's largest expense item, the cost of raw materials consumed, jumped 22% on year to INR 16.4 billion. This was the sharpest increase in raw material cost in 13 quarters. Input costs make up 43% of Tata Consumer's total expenses.

 

The company's total costs increased 15.6% from a year ago to INR 38.4 billion for Jul-Sept. Other expenses, which typically comprise advertising costs, rose 14% to INR 8.5 billion. The company said it spent 7.5% of its India operations sales on advertising and promotions. Tax outgo fell a massive 71.4% on year to INR 377.3 million, presumably due to a tax credit received by the company. 

 

On a sequential basis, Tata Consumer's consolidated net profit for Jul-Sept jumped 25.5%, while revenue fell over 3%. For Apr-Sept, consolidated sales were INR 85.67 billion, up 14.6% on year, while net profit was unchanged at INR 6.55 billion. 

 

On Friday, shares of Tata Consumer ended flat at INR 1,093.25 on the National Stock Exchange. The company reported its earnings after market hours.  End

 

Edited by Tanima Banerjee

 

 

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