McLeod Russel sees tea production up by 4 million kg Published on Fri, Aug 26, 2011 at 14:37 | Source : CNBC-TV18
Tea major, McLeod Russel , is all smiles at the estates. Tea production for the company is ahead of expectations this season due to lesser pest activity and timely rains. Aditya Khaitan, managing director of McLeod Russel joins CNBC-TV18 to give an overview of what is happening in the tea space and specifically, his company. *Below is the edited transcript of the interview. Also watch the accompanying video* *Q: How is this season looking in terms of volumes and tea realizations?* A: This season has gone off on a very strong note for us on our production front. Last year, we had huge pest activity and bad weather that created a loss in production. This year, it has been the other way round, where the pest activity has been lower and the rains came in at the right time. Hence, we have been able to recover the loss of crop from last year. We are ahead in our production by about 4-4.50 million kilograms and that too it’s come during the quality period. The prices also have remained firm, and in fact, are running higher than last year, in spite of North India having a better production pattern. This goes to show that the inventory levels in the market are very low and people are picking on a weekly basis. The overall deficit in the inventory levels remains the same, so entering into the year, we are expecting a strong second and third quarter for us. *Q: There were reports of a price slide of around Rs 10-15 per kg in tea and that tea companies actually might see some cash flow pressure in the second half of 2011. If not you, what is this report substantiated on?* A: I think what you are referring to is a seasonal dip that we are coming off the quality period in the months of May, June and July. As you come into August-September months, our quantity of tea produced and sold is at its all time high. So prices do come down which is relative to quality. We, as a group, have been able to slightly withstand that drop for certain reasons like our quality and also because of our exports. This year, our exports will be higher than last year because Africa is running way behind in production. Thirdly, our interest cost this year would be much lower because of our loan being repaid over the years. So I think we are slightly beating the system going forward with our improvements on all the fronts. *Q: Your debt, including working capital, stood at about Rs 300 crore last time we spoke. How much are you looking to trim that?* A: Tea is a cyclical business and we are at our all-time high production. So obviously, our debt today is at its highest, this particular month. *Q: How much?* A: We are expecting that by the end of the year, seeing our cash flows, we should be able to reduce our debt further by about Rs 80 crore. *Q: What would that take your debt to?* A: We would come down to around Rs 300 crore. If I remember correctly, we were at around Rs 350 crore on 31st March. We would reduce it and come down to our working capital limit which is well below our requirements. *Q: What is your guidance for the current fiscal? Q1 FY12 looked very strong in terms of margins for you, 30% versus 15%. Give us an idea what you could possibly end the year with?* A: It all depends upon how we finish the year. Our first quarter was strong simply because our production this year was better than last year. Our second quarter also will reflect the same kind of strength. So in terms of margins, it helps cover our costs or production and the prices also have been quite good. It depends upon the third and fourth quarter, in terms of sales, but overall, I would say that we would be higher in sale averages by about 10% which would really go to the bottomline of our business. On Wed, Aug 17, 2011 at 4:36 PM, RAJESH DESAI <[email protected]> wrote: > In an interview with CNBC-TV18, Kamal Baheti, CFO of Mcleod > Russel<http://www.moneycontrol.com/india/stockpricequote/plantations-teacoffee/mcleod-russel-%28india%29/MRI02>said > that trying to sustain last year's 28% margin would be a challenge > since tea is a seasonal industry. He is confident, however, to see margins > touch 33-35%, a jump of around 4-5% due to higher production and prices. > > Lower domestic production coupled with production cuts in the African > continent, especially, from countries like Kenya which has seen a drop in > output of 37 million kg, has led to price rises in India. > > <http://www.moneycontrol.com/video/business/positive-margins-will-touch-33-35-this-year-mcleod-russel_577305.html?utm_source=Article_Vid> > > > Mcleod Russel produces around 80 million kg in India. “We are targeting > to do around 25-27 million kg of exports this year,” said Baheti. > > *Below is a verbatim transcript of his interview with CNBC-TV18’s Ekta > Batra and Reema Tendulkar. For complete details watch the accompanying > video.* > > *Q: In the first quarter you saw your margins double close to about 30% at > an operating level. Are these margins sustainable? Are you seeing that kind > of an improvement in your realizations and exports?* > > A: Last year also for the full year we did a margin of around 28%. Tea > being a seasonal industry it is very difficult to grow quarter on quarter > but we are expecting margins for this year to be in the range of around > 33-35%, a jump of around 4-5% because of higher production and higher > prices. > > *Q: How is the export market doing for you currently in terms of > realizations and total quantity in terms of exports? We understand that > Africa has some production cuts?* > > A: Africa is already down by around 40 million kg in their production since > January till date and there had been a very strong demand. We did a total > export of 21 million kg last year. This year we expect it to be around 25-26 > million kg, Rs 15 higher than last year. So both on prices and higher > quantities we should be doing at least 20% higher as compared to last year. > > *Q: Out of total amount of sales how much are exports?* > > A: We produce around 80 million kg in India. We are targeting to do around > 25-27 million kg of exports this year. > > *Q: You had earlier indicated that you are likely to get a tax wavier from > Uganda which would be close to about USD 3-4 million. When are you likely to > hear on that front?* > > A: We have already got the certificate for the tax exemption. For the > earlier two years, we will get a refund of around USD 3-3.5 million, but > going forward every year there will be a saving of around USD 2.5 million > for a period up to 2017. > > In a way it is a big benefit which has been given. This benefit is > available for companies which export 90% of their total produce. We export > almost 100% of our total production out of Uganda. > > > > > -- > EQUITY BULL > -- EQUITY BULL -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
