Re: {LONGTERMINVESTORS} McLEOD RUSSEL..New thread..
RAJESH DESAI
In an interview with CNBC-TV18, Kamal Baheti, CFO of Mcleod Russel 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.
|
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
RAJESH DESAI
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.
EQUITY BULL
RAJESH DESAI
--
CA. Rajesh Desai
RAJESH DESAI
To up production from existing plants by 5%: McLeod Russel
Published on Fri, Apr 13, 2012 at 15:35 | Source : CNBC-TV18
Over the last seven years, McLeod Russel India Ltd (MRIL) has made quite a few acquisitions within the country. Kamal Baheti the CFO of the company says he is quite keen to make further acquisitions in India and in overseas locations like Africa.
As the largest tea producing company in the world, the company now plans to increase its production through further acquisitions.
McLeod Russel manages 47 tea estates in the Assam Valley and six tea estates in the Dooars region of West Bengal, three factories in Vietnam and six estates in Uganda. The company is now working towards upping its production from these existing facilities.
“We are looking at increasing our production from our existing plantations which should be up by around 4-5% to around 110 million kg,” says Baheti.
The company produces approximately 103 million kilos of high quality tea a year from their tea estates.
Below is an edited transcript of his interview on CNBC-TV18. Watch the accompanying video for more.
Q: There have been better and better prices coming in at tea auctions. Give us an idea of what kind of an increase in realisations tea companies like yourself can see in this season?
A: It started from the last quarter of the last season itself when we talked about an early winter and loss of crop in November and December. That had an impact on the prices in the month of January and February and we had another weather problem in the month of March so we lost maybe around 8-9 million kg in the month of March.
The opening in any case was expected to be much higher but it opened Rs 50 higher to the surprise of everybody including us. I don’t think it can remain there but as we come into the peak season we believe that the prices would settle down Rs 20-25 higher than last year which should not only take care of the prices but should increase the margins as well.
Q: You have been aggressive on the inorganic side. What are your plans there? Are there any acquisitions on the anvil or will consolidation help you improve your production this year? What are the targets?
A: We are looking at increasing our production from our existing plantations which should be up by around 4-5% compared to around 110 million kg against 103 million kg in the previous year. Acquisitions are something which we have been doing over the last six-seven years and we continue to look for opportunities both in India and overseas, particularly, in Africa.
Our target is to reach at least 30-40% increase in our own production, another 20-30% through the Borelli Tea segment and touch 140-150 million kg in two-three years time but it will depend on the kind of opportunities we get but as a company our strategy is to look for acquisitions both in India and overseas.
--
CA. Rajesh Desai
RAJESH DESAI
| Stock Idea [April 24, 2012] |
| STOCK IDEA
Mcleod Russel India Take a sip when it is hot Key points
|
--
CA. Rajesh Desai
RAJESH DESAI
See tea prices rising by 15-20% ahead: McLeod Russel
The tea industry has been seeing quite a bit of a slip in production because of poor weather conditions, which has caused spike in prices and a huge deficit in tea production.
Kamal Baheti, CFO of McLeod Russel told CNBC-TV18 that shortfall in tea production for the rest of the year was unlikely to get covered. He expects tea prices increase of Rs 25-30/kg to continue for the rest of the year.
"Internationally also there have been a loss of crop both in Kenya, Sri Lanka other places as well and the prices are higher by 15-20%. So believe around 15-20% increase in prices for the year is something which is likely," he elaborated.
Meanwhile, the company expects its margins to improve from 25-26% to around 30% post hike in tea prices. "We expect both topline and bottomline to increase by 15-20%," he added.
Below is the edited transcript of Baheti's interview with CNBC-TV18. Also watch the accompanying video.
Q: If you could tell us the immediate impact all of us has on prices of tea globally and the kind of impact it would have on average realizations for a company like McLeod Russel as well?
A: Till October last year, we had the record crop in India. At one point of time there was a talk of about crossing one billion kg of production and the shortfall in the month of November-December happened. Then we had an early winter, which affected the production. February-March-April got affected because of the drought.
So there was a five-six months of continuous crop loss and because of the shortfall in the inventories and further shortfalls in the production, the prices for the new season tea is opened at around Rs 25-30 higher and continues to be at that particular level.
We believe this production shortfall cannot be covered for the rest of the year and this price increase of Rs 25-30 will remain for the system for the full year. Internationally also there have been a loss of crop both in Kenya, Sri Lanka other places as well and the prices are higher by 15-20%. So believe around 15-20% increase in prices for the year is something which is likely.
Q: What kind of immediate impact would that kind of price increase have both in terms of margins and then the flow through in the bottom line for a company like yours?
A: This had been the year where there had been wage revision in Assam and the cost increase has been substantially more than the last year. Around Rs 25-30 increase in tea prices will improve our margins from 25-26% to around 30%. This would reflect at the bottomline as well. We expect both topline and bottomline to increase by 15-20%.
Q: What kind of average realizations per kg can you clock in starting this quarter, you ended up the year with around Rs 140 per kg or so and also what kind of tea sales are you targeting for the second half of FY13 after what you have done in the first half?
A: Normally tea is very seasonal in nature and doesn’t reflect in one quarter to another quarter. This quarter will have a little bit of a loss of crop impact. The prices are higher by Rs 30 per kg and that will reflect in the first quarter. The average prices for the full year, last year it been around Rs 150 per kg for India.
We are currently averaging at around Rs 185-190. So, around Rs 30-35 higher than last years full year average and Rs 30 higher than the first quarter last year is what will be there in the first quarter. As far as the prices for the full year is concerned, we will have this kind of an increase in the prices for full year.
The crop loss which had been there in the initial period in Indian overseas market for us, we will try to recover it through buying more from small growth. So, our internal plan is to either make the similar kind of volumes or improve a little bit. We will not loose the volumes at the end of the year. We will improve on the prices and margins would be higher compared to previous year.
Q: Have you taken any price increases up until now and do you have any more that is lined up June onwards?
A: We are not in the retail segment and don’t take the price increase per se, but I think we operate out of auctions. Since there had been shortages the auction prices had been higher by Rs 25-30 and I think this trend will continue for the full year for the similar teas from period to period.
July, August, September, October is the peak production months for tea. We will see how the prices pan out. But with the kind of shortages both in India and overseas market there should be this kind of a price increase to be there for the full year.
Q: What's the experience been in the expert market in terms of whether it’s been a similar price increase or even better because of the short fall as you indicated in countries such as Kenya?
A: In fact last two three weeks had seen a substantial increase in prices when the Mombasa auction where all the African teas are being traded. We had seen a 340 cents price for Kenyan tea against 280 cents last year. So there had been 25% increase in prices last couple of weeks. I don’t know how far it can really remain at that level.
But 30-35 cents higher than last year will be something which we will expect out of the international markets as well. Price increase has been across the board and this definitely brings in more demand for teas out of India. As a country I don’t know how much more we will be able to export because of this shortage of production in India.
But as a company we expect it to improve from 24 million kg last year and we expect it to be around 27-28 million kg this year. It would depend on prices both in the international and domestic markets and the kind of production we have for the rest of the year.
--
CA. Rajesh Desai
Rajesh Desai
Also read: McLeod Russel Q3 profit rises 5% YoY to Rs 123 cr
Khaitan also added that tea prices continue to show a robust uptrend and they have a production target of 25 million tonne this year. He expects volumes in fiscal year 2013-14 to be 10 million tonne higher than FY13. However, their Indian inventory remains at an all time low to support prices, he informed.
Going forward, Khaitan sees tea prices going up by Rs 15 to Rs 20 per kg (YoY) in FY14.
Here is the edited transcript of the interview on CNBC-TV18.
Q: Your margins were expected to go up because tea prices have been firm because of lower crop but, we saw a bit of a slip in margins. Can you take us through why?
A: It has nothing to do with higher prices. Yes, we did get a jump in prices. Now we are seeing that the buyers want their sale shipment to be staggered. We were expecting a higher percentage of sale to take place, a lot of the tea that have been already manufactured have been sold but not being accounted for because people want staggered shipment and they want delivery just in time.
That will get reflected in this quarter, which is the January to March quarter. We did lose around 7 million tonne of our own crop up to December and we try to make it up with about 4 to 5 million tonne in out growers leaf, though the margin pressures on our own leaf is much higher than out growers. We have tried to compensate it to a certain extent by doing about 5 million tonne extra in terms of bought leaf and overall, we have been able to maintain the profitability going forward.
The jump in prices this year has been quite good and last year at the same time, the prices were heading southwards. This time the prices are holding, if not going up. So, overall I am expecting to end the year at a higher EBITDA and profit after tax (PAT) level than last year.
Q: What about volumes, do you expect sales to be quite sluggish this year, barely skirting the 10 percent growth mark?
A: I look at it differently. For us volumes come in two areas, either it is our own leaf, which is basically linked to weather or it is the second vertical that we have now become quite prominent on and it is the out growers leaf, where this year we will be producing around 18 million tonne, which is higher by 5 million tonne from last year.
Our plans are to increase this to 25 million tonne in the coming year, which is an addition of around 7-8 million tonne. The weather last year was quite horrendous; we lost crop from the month of March all the way up to October. We saw a little bit of respite in November. Seeing the history of weather pattern, we expect this year starting March to make up some of the 7 million tonne. We hope to add around 5 million tonne being on the conservative side and going forward, we are adding another 5 million tonne on the out growers. So, this coming year, I am expecting the volumes to grow by around 10 million tonne over last year.
Q: Could you tie that in with what you are seeing in terms of global shortfall because there is a pretty significant global shortfall in terms of production whereas consumption itself is going up over the last few years?
A: There is a drop across the board. We are seeing a deficit in India where we will begin this year with an all time shortage in inventory levels in excess of around 150 million and this is getting reflected in the prices of tea. We are expecting the opening levels in the months of March and April when the new season’s tea comes up to be at an all time high because there is just no tea in the system.
We are also seeing Africa, which is the next big market for black tea at around 30 to 40 cents higher than last year at the same time. So, everybody is factoring in the shortage in the inventory levels and they are also now looking at the long rains, which is what we look at in Africa being lower.
If that happens there will again be a shortage in Africa. Looking at the
weather conditions in India, we still are in the early stage; we need
some rain in the month of February and March to start our production on
even keel and the way I look at it, we are expecting at least a minimum
of Rs 15-20 hike in price levels than the last year. Overall, I am
expecting the market to remain firm, if not move up as inventory levels
start getting depleted every year.
Q:
When you say prices remain in a robust uptrend, you mean that you are
looking for about Rs 20 higher this year and what would that mean in
terms of realisations for you?
A: It is very clear, if we have a normal year in terms of production, I am looking at Rs 10 to 15 increase in prices. If we have another year like we had last year, where we ended up losing crop every months, then the prices will be much higher.
From our point of view, it depends on certain factors because we are a fixed cost company. We will ensure that we make up some of the deficit by doing out grower’s leaf. Overall, every year we have been able to better our EBITDA and our PAT and I see the same trend happening next year also.
--
CA. Rajesh Desai
Rajesh Desai
Tea prices may rise further by Rs15-20/kg: Mcleod Russel
Kamal Baheti, CFO, Mcleod Russel expects tea price to rise by Rs 15-20 per kilogram going forward.
Kamal Baheti, CFO, Mcleod Russel expects tea price to rise by Rs 15-20 per kilogram going forward.
In an interview to CNBC-TV18, he said last year prices increased by Rs 20-25 per kilogram due to drop in crop both in North and South India .
"Stagnant production and increase consumption led to low inventory level which is impacting prices and the increase will continue throughout the year and in 2014 as well," he added.
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is the reason for the rise in tea prices at the Coonoor Tea Trade Association? Do you expect to see tea prices firming up even further?
A: Last year there was an increase in tea prices by around Rs 20-25 per kilogram due to drop in crop both in North and South India. These are the prices of South India. Season in North India will open by mid-March, when production will start, and we should see the first price. We expect prices to be higher by at least Rs 15-20 per kilogram or even more going forward.
Q: How much volume drop can we see on a year-on-year basis?
A: It is not the case of drop in volumes. Last year due to weather issues, the production has been stagnant and on the other hand the consumption was growing, low inventory level is having an impact on the prices and the increase will continue throughout the year. The same trend is likely to continue in 2013-14, so we may see an increase in price by Rs 20-25 in 2012-13 going into next year as well.
Q: How much improvement in margins do you expect?
A: I the crop output is normal this year then the cost increase impact could be minimal because we had a major cost impact in 2012-13. Any increase in prices, 90 percent of that should reflect at the bottom-line and the EBITDA level. We expect margin to be in the range of 28-29 percent in 2013-14.
--
CA. Rajesh Desai