McLeod Russel sees tea prices up on rising demand, input cost hike

[K.Karthik Raja]

McLeod Russel sees tea prices up on rising demand, input cost hike
Thursday, May 22

MUMBAI - McLeod Russel India Ltd expects tea prices to rise,
especially
in the Oct-Dec period, which is the peak season for tea consumption.
"While the rise in tea prices is still behind the 1999 (calendar
year)
average price of tea, we expect the trend to continue, especially in
the last
quarter of the calendar year (2008), when demand picks up," Vice-
Chairman
Deepak Khaitan said on CNBC-TV18 today.
He said demand for tea was growing at a compounded annual growth
rate of
3.5%, translating into an increase in the requirement of tea by 30-35
kg.
"This, coupled with the drought in Kenya, which is the largest tea
exporting country, will ensure that tea prices rise," said Khaitan.
According to him, tea prices rose to about 80 rupees per 1 kg
"during the
start of the year" from 60 rupees per 1 kg last year.
"This augurs well for the industry, but costs are also
increasing," he
cautioned.
This includes rise in global crude oil prices and other
commodities, and
increasing labour costs, he said.
.
PROFITABILITY
Khaitan said he expects McLeod Russel's profitability in 2008-09
(Apr-Mar)
to increase by about 10-15 rupees per 1 kg, led by better crop
production,
rise in demand, and higher export earnings.
"The crop position is expected to be marginally better. Also the
rupee's
devaluation is going to help us," Khaitan said.
Since Apr 1, the rupee has depreciated around 8% against the
dollar. The
Indian currency is currently at 43.16 per $1.
McLeod Russel produces over 70 mln kg of tea annually from 53 tea
estates
in Assam and West Bengal.
At 12:30PM, McLeod Russel shares were at 110.95 rupees on National
Stock
Exchange, down 3.9% from Wednesday. End
.