TATACOFFEENSEOctober 20, 2022

Tata Coffee Limited

5,217words
88turns
11analyst exchanges
3executives
Management on call
Chacko Thomas
MANAGING DIRECTOR
K. Venkataramanan
EXECUTIVE
Aniruddha Joshi
- ICICI SECURITIES LIMITED
Key numbers — 18 extracted
38%
tty rewarding. So to begin with, I think the stand-alone revenue from operations went up by about 38% compared to the same quarter of the previous year, INR 261 crores as opposed to INR 190 crores in
INR 261 crore
revenue from operations went up by about 38% compared to the same quarter of the previous year, INR 261 crores as opposed to INR 190 crores in the previous year. The standalone PAT is also up to INR 144 cror
INR 190 crore
t up by about 38% compared to the same quarter of the previous year, INR 261 crores as opposed to INR 190 crores in the previous year. The standalone PAT is also up to INR 144 crores. And I think what these nu
INR 144 crore
NR 261 crores as opposed to INR 190 crores in the previous year. The standalone PAT is also up to INR 144 crores. And I think what these numbers reflect are few of these things, that is basically the performan
INR 147 crore
les. And last but not the least, of course, this also includes one-time exceptional item of about INR 147 crores on account of sale of a property. Now moving to the individual businesses, I think first th
rs,
ur sales in a very effective and efficient manner. I think these augurs well for the coming quarters, too. Of course, I mean we had some impact of bad weather on tea, we did make some recovery of so
INR 718 crore
count of the weather. A word on the consolidated results, I think the revenue from operations was INR 718 crores as compared to INR 549 crores, an increase of 31%. The consolidated profit is INR 147 crores, a
INR 549 crore
n the consolidated results, I think the revenue from operations was INR 718 crores as compared to INR 549 crores, an increase of 31%. The consolidated profit is INR 147 crores, a growth of INR 174 crores compa
31%
hink the revenue from operations was INR 718 crores as compared to INR 549 crores, an increase of 31%. The consolidated profit is INR 147 crores, a growth of INR 174 crores compared to the same perio
INR 174 crore
red to INR 549 crores, an increase of 31%. The consolidated profit is INR 147 crores, a growth of INR 174 crores compared to the same period last year. I think while our subsidiary Eight O'Clock Coffee registe
INR 138 crore
very helpful. Sir, my next question is a bookkeeping question regarding your exceptional item of INR 138 crores. Can you please help us regarding the details of it? K. Venkataramanan: No, it is sale of a su
INR 200 crore
tever was, that specific land parcel has been fully sold. And, of course, we are sitting on about INR 200 crores of cash in the company as such and it is in the stand-alone entity, there is positive cash and c
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Guidance — 9 items
Chacko Thomas
opening
“And I think some of the pillars that I mentioned above, which are on cost, planning, utilization, etcetera, I think and also of course, execution of orders that we have, we should see good performance going forward, too.”
K. Venkataramanan
opening
“So that is something that will be recovered with a lag and we hope in the coming quarters the same would be affected.”
Chacko Thomas
qa
“I think that is what we would see coffee to be hovering around going forward.”
K. Venkataramanan
qa
“On pepper, while the prices are kind of slightly declining, but we hope that over a period of time, we should -- there again, the margins will be protected.”
K. Venkataramanan
qa
“So as we see along the coffee prices, so we expect the prices and margins to kind of restore or definitely do well.”
Aniruddha Joshi
qa
“So when do you see the, finally the merger going through or the guidance about Q1 FY '24 that remains largely stable?”
K. Venkataramanan
qa
“And we expect, we are hopeful that as of now, we expect that the merger process should be through before the end of the financial year.”
Chacko Thomas
qa
“So, I do expect us to take a little bit more time to work through.”
K. Venkataramanan
qa
“There is no issue there because, see again, once again, the prices of the coffee, et cetera, will be there, which will kind of get into the pricing.”
Risks & concerns — 7 flagged
Very specifically on Vietnam, while the impact of the ocean freight and logistics, etcetera, which we were facing have come down substantially, I think these are still there and obviously, it will take a little bit longer for it to actually normalize.
— Chacko Thomas
Of course, I mean we had some impact of bad weather on tea, we did make some recovery of sorts in the month of September, but I think largely on account of some of the better prices that we see prevailing for Orthodox variety.
— Chacko Thomas
There is no issue, there is no cause of concern there, of course, only one call out is on the crop front, which, of course, so far, we have had -- there doesn't seem to be any major concern on the coffee crop.
— K. Venkataramanan
My question is regarding there was a volume demand challenge in Africa...
— Pranjal Garg
So is it more difficult during such times?
— Rahul Ranade
Because see, the movement of Arabica also, the prices when they are moving up very sharp, it becomes very difficult to pass on the entire increases at one shot.
— K. Venkataramanan
It's difficult to put a number to that, but as we clearly see in, for example, Vietnam, if you take that of the specialty Arabica or differentiated blends would contribute.
— K. Venkataramanan
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Q&A — 11 exchanges
Q
Congratulations on a good set of number. Sir, my question is regarding what is your outlook for the coffee prices, global outlook? As we have seen that coffee prices have corrected and the inflation which was there has now come in place. Where do you see the prices moving forward? And what is your outlook for the margin as well?
Chacko Thomas
I'll take the question on coffee prices and I think I've been very consistently, over many of these quarters been saying that, the coffee prices would move in a very specific range. And I think almost to that effect, I think I've been fairly accurate. What you see the prices at the moment, Arabica's generally around $2 to $2.2 level. I think that is what we would see coffee to be hovering around going forward. Few things which you need to keep in mind, of course, there is this harvest of Brazil that needs to come in and obviously, sentiments are quite positive in terms of a decent enough harve
Q
So sir, in terms of Eight O'Clock, basically there is very high inflation in the western world in USA, and most likely there is likely to be a recession. So how do you see Eight O'Clock business in terms of volumes, revenues moving ahead? And also, how do you see the margins? Secondly, is there any downtrading and downtrading from the premium brands, has it benefited Eight O'Clock or is there any downtrading that has happened from Eight O'Clock, which has gone down to the relatively smaller or cheaper brands than Eight O'Clock? So how do we see the situation panning out in, let's say, next fou
K. Venkataramanan
So as regarding the recession etcetera, see coffee it's an essential kind of drink beverage. So we are not seeing any impact on the demand, coming from the demand as such. As regards the increase in prices on margins, what we see is that obviously, quite a bit of linkages to the green costs. So as we see along the coffee prices, so we expect the prices and margins to kind of restore or definitely do well. So we are not seeing any kind of downtrading as such. We haven't seen any impact of that. In fact, we have taken up prices and the volumes have held on rather. So we are not seeing downtradin
Q
Yes. So one question we was on the Eight O'Clock part of it, because if you look at the exchange prices for coffee, Arabica Coffee, they don't seem to have gone up in the last 6, 9 months. So can you give us a sense what kind of contracts and what kind of inventories you run in Eight O'Clock and what lags it impacts the costing for you?
K. Venkataramanan
So it's like this. So typically roasters hold about 30, 40 weeks of green bean stock. But, obviously, as the prices move up, there is also a bit of kind of they're taking a view on the market and the depletion of stocks, which happens. So while the replacement of these greens are coming at a lower cost, obviously, some of the impact on account of the earlier increase in green costs are yet to be sort of fully passed on. So that will take a couple of, it will take about three to four months, couple of -- two to three months in fact, to pass on the increases fully. So that's what we, sort of thi
Q
Sir, I just missed the last line about what you said regarding the merger. Can you please repeat it? By what time it will be completed?
K. Venkataramanan
See the NCLT process is on both in Calcutta for TCPL and for Tata Coffee at Bangalore. This process is on like, there is a shareholders' meeting of Tata Consumers, which is happening around 12th of November also. So Tata Coffee is to be fixed up. So at this stage, we are of hoping that it should get over by the end of the financial year.
Q
My question is regarding there was a volume demand challenge in Africa...
K. Venkataramanan
I couldn't hear, Pranjal. Can you hear me now? Yes, slightly better. The company was facing volume demand challenges in Africa due to high inflation till the last quarter, while there must have been some relief, so I would like to know what is the situation right now. And apart from that, which geographies are the most affected and which ones are the least affected right now from Tata Coffee point of view? I'll answer the first question. Africa still continues to be a problem and it hasn't really opened up as much. And this is again, because of the purchasing power and the inflation that Afric
Q
Most of my questions are answered. Just one question, you made a comment on the tea pricing.
Chacko Thomas
Yes. Yes. So I just wanted to understand how is that segment doing? And, I mean, what is the current price trends that we're seeing? Are they looking at some bit of inflation? Or they also look like to be range-bound level like you said for coffee? So that is the question. Yes. So as I also mentioned in my statement, there is, obviously, a sudden improvement and a lot of interest in the Orthodox variety of tea. And these teas are of interest at the moment because unfortunately or fortunately for India, Sri Lanka went through the turmoil and the fact that they're almost close to 20 million down
Q
Just one clarification on Eight O'Clock. So would it be fair to say that in terms of taking price increases, it is generally easier for roasters to do that when the prices for Arabica greens are trending up versus a time like now when underlying prices have been trending down, but all of you are sitting on high cost inventory? So is it more difficult during such times?
K. Venkataramanan
No, it's like this. They have the window has agreed as per the contracts to take up prices. So it would be based on that because we are also looking at a historical way of how the prices have moved. So it's not at a particular point of time that the pricing action would get initiated. The pricing action would get initiated based on the movement in costs. So based on that the prices would be taken up with a lag. And typically you would also find others following suit generally, a couple of months here or there or whatever it is. Because see, the movement of Arabica also, the prices when they ar
Q
Sir, my first question is on the demand of freeze dried coffee versus spray dried coffee. Are we seeing any divergence? Has there been any downtrading where the consumers have shifted from FDC to SDC because of the price inflation and probable talks of recession?
Chacko Thomas
So I'll answer that. I think for the fact that we are running all three units. So for us, Vietnam is a 100% FDC unit and the other two units in India are largely spray and aglow and of course, a decent enough quantity of freeze dried. We're running all the plants at 100% capacity. So we do not see such an issue at the moment. But going forward, anything can happen. So it's a little different. But at the moment, I don't see any downtrading happening like what we had actually seen during the period when we had COVID, etcetera, I don't see that now. And second question is on the Instant Coffee pr
Q
Sir, in terms of the domestic business, now Tata Consumer has also rolled out the Tata Coffee Grand. So overall, how has been the feedback? And Tata Coffee being the manufacturer, so how do you see the acceptance of the new product that has been rolled out in the market? And how do you see overall that business going ahead?
K. Venkataramanan
So I will talk. See Anirudh, you should probably get more, you'll get more details from Tata Consumer on the market response, rather we are concerned compared to the previous year, definitely volumes are looking up and the product has been very well received in the market. And that's the feedback that we get very, very clearly. Correct. Sir, last question. In terms of now exports to global markets, like Eight O'Clock Coffee or even Starbucks, we have been supplying some products from India and our other locations. So how do you see overall opportunity for exports over a 2- to 3-year period? Wh
Q
Thank you very much for joining in the call. We hope to see you next quarter. Thank you very much.
K. Venkataramanan
Thank you very much.
Q
Thank you. ********
Management
Speaking time
K. Venkataramanan
29
Chacko Thomas
16
Moderator
12
Pranjal Garg
9
Aniruddha Joshi
7
Aman Batra
5
Akhil Parekh
5
Suvarna Joshi
2
Rahul Ranade
2
Nageshwar Nerurkar
1
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Opening remarks
Aniruddha Joshi
Yes. Thanks, Michelle. On behalf of ICICI Securities, we welcome you all to the Q2 FY '23 Results Conference Call of Tata Coffee. We have the senior management represented by Mr. Chacko Thomas, Managing Director and CEO; and Mr. K. Venkataramanan, Executive Director, Finance and CFO. Now, I hand over the call to the management for initial comments and then we will open the floor for question-and-answer session. Thanks and over to you, sir.
Chacko Thomas
Thank you, Aniruddha. Good morning, everyone. This is Chacko here. Thank you for joining in for the call today. I'm obviously here to present the quarter 2 performance of the company. Very, very pleased to inform you that we witnessed a very strong quarter 2 across almost all the businesses. While there have been challenges pertaining to cost, logistics and demand, particularly in some parts of the world, these are ongoing trends, but I think our efforts to reduce the same and the impact that we've been able to reduce by doing some of the work that we've done has been pretty rewarding. So to begin with, I think the stand-alone revenue from operations went up by about 38% compared to the same quarter of the previous year, INR 261 crores as opposed to INR 190 crores in the previous year. The standalone PAT is also up to INR 144 crores. And I think what these numbers reflect are few of these things, that is basically the performance in the Instant Coffee business, which is where our highe
K. Venkataramanan
Good morning to all. We have a few financial highlights I’ll mention. One is, as Chacko has mentioned, the performance across the segments of the standalone entity, which includes, of course, I'm including Vietnam as well, have been quite strong. The plantations have done exceptionally well, especially coffee on account of higher prices, which is being realized. And the Instant Coffee, though, there has been some dip in volumes, but we have sort of improved the realizations and margins have been protected, that's on the standalone front. There has been a one-time exceptional book profit on sale, which has been the property, which has been booked, which has been included in the results. And on the consolidated, as we mentioned, Eight O'Clock has – while, there has been a good growth in revenue, the recovery of prices from the market has not fully offset the increase in green costs. So that is something that will be recovered with a lag and we hope in the coming quarters the same would b
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