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Tata Coffee
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Download Annual Report PDF Format 2013 | 2012 | 2011 | 2010
Directors Report Year End : Mar '13    Mar 12
The Directors are pleased to submit their Report together with the
 Audited statement of accounts for the year ended 31st March, 2013.
 
                                          2012-13            2011-12
                                          Rs. in Lakhs       Rs. in Lakhs
 
 Profit from Operations before 
 Other Income & Interest                   12307.96             9503.76
 
 Add: Other Income                          2220.69              805.43
 
 Operating profit before 
 Interest                                  14528.65            10309.19
 
 Less:Interest                               454.97              732.02
 
                                           14073.68             9577.17
 
 Add: Exceptional Income                    (958.78)             838.57
 
 Profit Before Tax                         13114.90            10415.74
 
 Provision for Tax: 
 
 Current Year                    4079.85             2811.80
 
 Deferred Tax                    (334.21)            (281.34)
 
                                            3745.64             2530.46
 
 Profit After Tax                           9369.26             7885.28
 
 Add: Surplus b/f 
 from PY                                    9986.07             4585.04
 
 Amount available for 
 appropriation                             19355.33            12470.32
 
 General Reserve No.I            (950.00)            (792.03)
 
 General Reserve No.II           (251.95)            (365.46)
 
 Debenture Redemption 
 Reserve A/c                     1357.44     155.49  1060.99     (96.49)
 
 Dividends
 
 Interim Dividend                (933.85)                  -
 
 Final (Proposed)               (1400.78)           (2054.47)
 
 Tax on Dividend                 (389.56)  (2724.19) (333.29)  (2387.76)
 
 Balance carried forward                   16786.63             9986.07
 
 TURNOVER
 
 Your Company''s turnover during the year under review was Rs.598.08
 Crores as compared to Rs.508.52 Crores in the previous year,
 registering an increase of 18% over last year.
 
 PROFITS
 
 Profit from Operations before ''Other income and interest'' for the year
 ended 31st March, 2013, stood at Rs.123.08 Crores as against Rs.95.04
 Crores in the previous year, reflecting an increase of 29%. Profit
 before Tax at Rs.131.15 Crores vis-a-vis Rs.104.16 Crores in the
 previous year reflects an increase of 26%. Profit after Tax in 2012-13
 stood at Rs.93.69 Crores as against Rs. 78.85 Crores in the previous
 year. Your Directors are also pleased to advise that the Profit earned
 in 2012-13 has also been the highest in the history of the Company.
 
 DIVIDEND
 
 Your Company has already paid an Interim Dividend of Rs. 5/- per share
 aggregating to Rs. 933.85 Lakhs with a Dividend Tax of Rs. 151.49
 Lakhs. Your Directors have recommended a Final Dividend of Rs.7.50 /-
 per share aggregating to Rs. 1400.78 Lakhs for the year 2012-13. The
 Dividend Tax amounts to Rs.238.07 Lakhs.
 
 COFFEE SCENARIO
 
 The Arabica futures market prices started the year at around 178
 cents/lb and dropped marginally in June and picked up again in July
 12''. Thereafter on expectations of a bumper harvest in Brazil, declined
 steadily to close in March, 2013 at 133 cents/lb levels a level last
 recorded in June, 2010.
 
 The Robusta futures market prices started at 00/mt levels, picked
 upto 00 by August 12''; Thereafter it steadily declined to close at
 00 levels in December. The market was steady thereafter and firmed
 up to 00 by March 13'' on news of lower crop forecast due to drought
 conditions in Vietnam which is the largest producer of the Robusta
 variety.
 
 The global production of the 12-13'' season is at a record 150 million
 bags and consumption was 140 million bags, leaving a surplus for the
 first time in recent years, thereby putting pressure on the prices. As
 per ICO estimates, The total consumption grew at the rate of 2% in the
 year 2012-13 with traditional markets growing at 1%. The consumption in
 the producing countries and emerging markets have grown at 3 %.
 
 TEA SCENARIO
 
 The Global Tea Production declined as compared to the previous year.
 Tea production in major producing countries during January/December
 2012 was 2770 Mn. kgs as against 2793 Mn. Kgs in 2011
 
 In India, the northern states recorded an increase in overall
 production, while in the South it declined due to drought conditions.
 At present due to the reduced supply position, the domestic prices have
 witnessed a sharp escalation as compared to the previous year. These
 prices are expected to witness a correction when the new season teas
 arrive in the market.
 
 The Indian exports in 2012 were estimated at 201.08 Mn. kgs as against
 215.42 Mn. kgs in the previous year. The domestic consumption has risen
 approximately 7.8% over the previous year.
 
 OPERATIONS:
 
 Plantations:
 
 Coffee:
 
 The Company''s overall Coffee production has increased by 7.7% from 7797
 MT last year to 8396 MT during the current financial year.
 
 In the biennial cycle, the production of Arabica crop has been lower at
 1542 MT for the current year as compared to 2129 MT the previous year.
 The decline in Arabica production has been witnessed across all
 districts in Karnataka due to irregular rainfall and prolonged dry
 spell during the crucial period, which apart from reducing the crop
 yield, has increased the incidence of pest and disease especially white
 stem borer. Your Company has taken all proactive measures to mitigate
 the spread of pest & disease.
 
 As regards Robusta, The Company has achieved a production of 6800 MT in
 the current year as against 5667 MT in the previous year. The Coffee
 Board has downscaled its post-blossom India Robusta estimates from
 221,300 MT to 215,275 MT.
 
 The Plantation regions are experiencing an unprecedented dry weather,
 with the day temperatures ranging between 18 C to 34 C. Though the
 rains received during February & March 13'' were useful, the same was
 insufficient for blossoming in certain areas. This shortfall was
 covered with irrigation in all Robusta estates. Backing irrigation has
 also been provided depending on the availability of water in the
 irrigation tanks.
 
 Tea:
 
 The total tea production of the Company in the current year was 6.640
 Million Kgs as against 6.775 Million Kgs in the previous year. The
 Glenlorna Estate of the Company at Kodagu District has achieved an all
 time record crop of 922 MT of Made Tea with a yield of 3762 Kgs/Ha.
 
 Pepper:
 
 The Company has achieved a total Pepper crop of 1148 MT in the current
 year as against 864 MT in the previous year, which constitutes an
 increase of 33%. Due to prolonged dry weather which has been prevailing
 continuously for the last two years, pest & disease in Pepper has
 become a major cause of concern. The Company has taken all proactive
 measures to counter these attacks and for irrigating Pepper vines
 during the crucial periods.
 
 Curing Works:
 
 The Company''s Curing Works at Kushalnagar cured a total of 12509 MT
 Coffee during the current year as against 12010 MT in the previous
 year. In addition, 307 MT of Monsooned Coffee, a value added product
 was processed as against 304 MT in the previous year.
 
 The unit handled higher volumes during the year due to the better crop
 arrivals during 2011-12 season and continued to achieve good financial
 performance due to the sustained cost reduction initiatives in the
 factory and better husk sale realization.
 
 The ISO 22000:2005 certified Pepper Unit inside the Kushalnagar Curing
 Works premises handled the grading and steaming operations of the
 Company''s entire pepper produce.
 
 Timber Value Addition:
 
 The manufacture of Marine Plywood at the outsourced job work location
 has been temporarily discontinued and negotiations are on hand to
 locate a new vendor. The business model is being reworked to optimize
 the cost of conversion on a lower quantity of Timber now available.
 
 Exports
 
 During the year 2012-13, your Company exported 4831 MT of Coffee as
 against 5735 MT in the previous year.
 
 Your Company continues to focus on growth through differentiated
 Coffees with volumes at 1870 MT with very good premiums.  Quality
 Awards:
 
 Your Company''s continues to focus on quality and participated in
 various International Competitions to show case it''s coffees.  In the
 current year, we have won 14 awards at the Fine Cup Award Cupping
 Competition 2012 held in Melbourne, Australia as against the previous
 year''s 12 awards. Your Company has also participated in the Rainforest
 Alliance Cupping for quality in December ''2012 and four of your estates
 were rated a score of 80 and above and these coffees will be publicized
 by Rainforest Alliance in the SCAA event to be held in Boston. Your
 Company is committed to growth through quality and will continue to
 participate in International forums with a clear focus to promote its
 products.
 
 INSTANT COFFEE DIVISION
 
 During the year under review, the instant coffee division has
 successful carried out capacity balancing of equipment to achieve
 higher product output per anum. The prime focus was on consistent
 quality, customer centric initiatives and work force development. The
 Division achieved record production of 6639 MT as compared to 6347 MT
 in the previous year - an increase of 4.6%. Total exports in volume
 terms increased to 6493 MT as against 6331 MT in the previous year - an
 increase of 2.56%.  High capacity utilization was attained at all the
 units and across all product variants. The improvement in production
 levels were achieved due to successful completion of extraction
 debottlenecking at Theni.
 
 A 2000 TPA premium extraction unit for the Freeze Dried Facility is
 under commissioning at Theni supported by the technologies from GEA
 Niro''s Extraction Plant and Roaster from LILLA. The new project is
 expected to go on stream in the month of June 2013.
 
 Focus on Non-Russian markets has enabled the Company to make inroads
 into West Africa and Japan. Key customer relationship building
 approaches are under progress. This will give your Company a balanced
 market approach covering most of the key geographies.
 
 The division consumes twenty percent of its total power requirement
 through renewable energy sources. The Freeze Dried unit operates its
 equipment with wind power, thereby contributing to Company''s green
 initiative.
 
 The Instant coffee units are certified by FSSAI (Food safety standards
 authority of India), ISO 9001 and 22000:2005, Kosher (Toopran), Halal
 and SA - 8000 (Theni). The Theni unit won the certificate of
 appreciation from Ministry of Commerce and Industry, Govt. of India for
 highest growth in exports amongst the manufacturing units (TN and
 Pondicherry) for the year 2011-12.
 
 OTHER OPERATIONS
 
 Plantation Trails
 
 Plantation Trails, our hospitality business has performed well in the
 year under review as compared to the previous year. The growth rate is
 in the range of 16% over the previous year in terms of turnover.
 
 This Division has been the recipient of several awards - The Platinum
 Pick Hotel by Make My Trip, which is a leading online travel portal.
 Holiday IQ another online review website has awarded us the
 Exceptional Service Award. Trip Advisor the world''s number one travel
 review website has endorsed Plantation Trails for its excellent
 services based on the customer feedback.
 
 The newly renovated Cottabetta Bungalow has been well received by the
 market as a premium product and has exceeded the targeted
 profitability. The restoration work at Thaneerhulla Bungalow has
 commenced and will be completed by May 2013.
 
 Our focus has been to strengthen the sales & marketing processes in
 order to build strong distribution channels, improve our online
 presence and build the brand. Skill Enhancement sessions for the staff,
 kitchen and food hygiene, safety processes have been given prime
 importance during the year and regular audits were conducted. The
 implementation of technology and innovation to automate systems and
 improve efficiency are in process.
 
 STARBUCKS
 
 As a sequel to the Joint Venture Agreement entered into by our Holding
 Company - Tata Global Beverages Ltd with Starbucks Inc., USA, your
 Company has commissioned a state of art coffee roasting facility at
 Kushalnagar which would be catering exclusively to the requirements of
 the chain of outlets established by Tata Starbucks in India and to the
 Starbuck''s supply chain in South-East Asia. This facility was
 inaugurated on the 8th February, 2013. The Coffee beans used in this
 roastery are being supplied exclusively from the Company''s own estates.
 
 CAPITAL EXPENDITURE
 
 During 2012-13, Rs.5806.63 Lakhs was incurred primarily on account of
 welfare, modernisation, up-gradation and other programmes undertaken in
 the various units of the Company.
 
 SUBSIDIARY COMPANIES EIGHT O'' CLOCK COFFEE COMPANY
 
 Eight O''Clock Coffee''s Turnover during the year stood at Rs. 1099.27
 Crores over the Previous Year''s turnover of Rs. 1040.50 Crores, despite
 the increased competitive intensity as many competitors, including
 Starbucks and Kraft, were very aggressive with deeply discounted
 promotions. During the year, Eight O''Clock also saw continued strong
 competition from single serve PODS which consumed shelf space as more
 consumers moved into the single serve arena. During the year, Eight
 O''Clock single serve K-Cups were launched through Keurig and quickly
 gained a 6% market share of the single serve market.
 
 In the fiscal year, the green Arabica commodity costs declined steadily
 which allowed Eight O''Clock Coffee to improve margins as we maintained
 current pricing levels. The Landover manufacturing facility performed
 admirably this year improving the efficiencies of the roasting and
 processing departments leading to lower costs of production. Profits in
 Eight O''Clock Coffee improved considerably this year recording a Profit
 after Taxes of Rs. 66.89 Crores which was a significant improvement
 over the Previous year''s profit after Taxes of Rs. 4.71 Crores.
 
 Rising Beverage Company
 
 During the year Consolidated Coffee, Inc. made an investment in the
 Rising Beverage Co., LLC. taking a 47.30% stake, @USD 22.366 million
 
 Rising Beverage Co. LLC (RBC) is a US-based performance beverage and
 bottled water manufacturer that sells products under the brand
 Activate. This product has a unique delivery system whereby vitamins
 stored in a chamber inside the bottle cap are released when the bottle
 is opened. This ensures the efficacy of the vitamins, which would else
 deteriorate if it sits in water for a period of time. Activate products
 also do not contain sugar or any calories and is targeted at the
 discerning customer.
 
 Eight O'' Clock Holding (EOH):
 
 Your Company''s overseas subsidiary in the U.S. - Consolidated Coffee
 Inc. (CCI) acquired 100% stake in newly floated subsidiary EOH, which
 currently holds the entire stake in Eight O'' Clock Coffee hitherto held
 by CCI .
 
 Alliance Coffee Limited
 
 During the year under review, the Registered Office of the Company''s
 Subsidiary -Alliance Coffee Ltd. (Alliance) was shifted from Kolkata to
 Bangalore after receiving the necessary approvals from the Company Law
 Board, Eastern Region Bench, Kolkata. It is proposed to merge Alliance
 with the Company.
 
 The Ministry of Corporate Affairs has exempted holding companies from
 attaching the accounts of its subsidiaries to its balance sheet. In
 terms of the said Circular and as required under the Listing Agreement
 with the Stock Exchanges, the consolidated financial statements of the
 Company together with its subsidiaries are attached. Any shareholder
 may ask for a copy or inspect at the Registered/Head Office a copy of
 the Annual Accounts of Alliance Coffee Limited and the consolidated
 financial statements of Consolidated Coffee Inc., USA which includes
 the Eight O'' Clock Coffee Company financials.
 
 The Joint Venture (JV) Tata Coffee (Uganda) Limited incorporated in
 Uganda during 2006 has been closed. In connection with the above, the
 closure intimation has been filed with Reserve Bank of India.
 
 CORPORATE GOVERNANCE
 
 The Company has been in compliance with all the conditions of corporate
 governance as stipulated in Clause 49 of the Listing Agreement with the
 Stock Exchanges. The detailed Report on Corporate Governance in terms
 of Clause 49 of the Listing Agreement and a certificate of the Auditors
 thereon is attached to the Annual Report.
 
 REDEMPTION OF DEBENTURES
 
 The 7% debentures which were alloted in pursuance of Rights Issue in
 2006 have been fully redeemed during the year. The redemption was made
 in three equal installments at the end of 4th, 5th and 6th year from
 the date of allotement.
 
 EMPLOYEES WELFARE
 
 The Company''s focus on welfare and improving the quality of lives of
 our people has continued as before. Initiatives to improve the standard
 of living have been undertaken by providing educational assistance to
 the children of employees, providing drinking water at the work spot,
 providing transport at subsidized rate to the school going children of
 employees, supply of provisions through Co-operative store branches
 located at each Unit/Estate, to name a few.
 
 The Company''s commitment to comply with the international requirements
 under Social Accountability has been re-validated by the
 re-certification of Social Accountability 8000-2008 Certificate by the
 Certification Auditors.
 
 The re-certification of the Company under Rainforest Alliance also
 shows the Company''s commitment towards protecting and preserving the
 environment & eco system. Safety in all aspects of work and even
 personal safety is of utmost importance and the Company is taking all
 possible steps to ensure a safe working condition for all employees.
 
 DIRECTORATE
 
 Mr. P.T. Siganporia who was the Director on Board demitted his office
 as a Director in accordance with the Group Guidelines with effect from
 11.07.2012. Your Directors wish to place on record their sincere
 appreciation for the valuable contribution made by Mr. Siganporia
 during his period of association with the Company.
 
 Mr. Harish Bhat was appointed as Additional Director of the Company
 with effect from 27th July, 2012 and in terms of Article 101 of the
 Articles of Association of the Company read with Section 260 of the
 Companies Act, 1956, (the Act), he holds office upto the ensuing Annual
 General Meeting. The Company has received a notice from a member in
 terms of Section 257 of the Act signifying his intention to propose the
 appointment of Mr. Harish Bhat as a Director in the forthcoming Annual
 General Meeting.
 
 Mr. Hameed Huq was re-appointed as Managing Director of the Company by
 the Board at its Meeting held on 14th December 2012 for a period
 commencing 3rd January, 2013 to 2nd January, 2014.
 
 Mr. U. Mahesh Rao who retires by rotation at the forthcoming Annual
 General Meeting has informed the Company that he does not wish to offer
 himself for re-election as a Director of the Company. As required under
 Section 256(4) of the Companies Act, 1956, a resolution for not filling
 the vacancy caused by Mr. Mahesh Rao''s retirement has been included in
 the Agenda of the Annual General Meeting. Your Directors wish to place
 on record their appreciation of the contributions made by Mr. Mahesh
 Rao during the period of association with the Company.
 
 Mr. R.K. Krishnakumar and Prof. Arun Monappa retire by rotation and are
 eligible for re-appointment.
 
 SERVICE TO THE COMMUNITY
 
 The Coorg Foundation, a Public Charitable Trust established by your
 Company continues to provide support to various individuals and
 institutions in the field of Health Care, Education, Sports and Culture
 during the year.
 
 The Foundation continues to provide scholarships to top ranking
 students who have studied in the Institutions based in Kodagu. In
 addition, an initiative has been launched to provide vocational
 training to underprivileged students to enable them to seek alternative
 forms of employment in association with an NGO firm based in Bangalore.
 
 Rural India Health Project Hospital, Ammathi, which is managed by the
 Company, continued to serve the needy sections of the society.
 
 Swastha - The project established by The Coorg Foundation as a fully
 residential institution for differently abled, continues to extend its
 support to the needy children in the Coorg and neighbhouring areas
 through its centers in Suntikoppa and Pollibetta by imparting required
 education and training. In addition, the Community Based Rehabilitation
 programme, initiated with the intention of reaching out to a larger
 number of challenged people in the district has rendered commendable
 service in the area. Regular awareness programmes are conducted in the
 villages in Somwarpet Taluk and health camps are organized at Swastha
 Premises to identify the needs and to provide supportive devices to
 needy participants.
 
 In addition, the Company has launched initiatives for the development
 and protection of the girl child by instituting a checkup for detection
 of nutrition deficiency in Girl Children and promotion of self
 employment opportunities for women in Theni; Providing clean drinking
 water to the residents near the Toopran Unit and operating primary
 schools at Annamalai''s.
 
 PARTICULARS OF EMPLOYEES
 
 Information required under Section 217(2A) of the Companies Act, 1956
 read with The Companies (Particulars of Employees) Rules, 1975 is given
 in the Annexure forming part of this report. However, as per the
 provisions of Section 219(1)(b)(iv), the report and accounts are being
 sent to all Shareholders of the Company excluding the Statement of
 Particulars of Employees.  Any Shareholder interested in obtaining such
 particulars may inspect the same at the Registered Office of the
 Company or write to the Company for a copy.
 
 PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
 FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 The Statement pursuant to Section 217(1) (e) of the Companies Act, 1956
 read with The Companies (Disclosure of Particulars in the Report of the
 Board of Directors) Rules, 1988 is attached.
 
 RESPONSIBILITY STATEMENT OF THE BOARD OF DIRECTORS
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
 based on the representation received from the operating management
 confirm:
 
 (i) that in the preparation of the accounts for the financial year
 ended 31st March, 2013, the applicable accounting standards have been
 followed and that there are no material departures;
 
 (ii) that they have selected such accounting policies and applied them
 consistently and made judgements and estimates that were reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company at the end of the financial year and of the profits of the
 Company for that period;
 
 (iii) that they have taken proper and sufficient care to the best of
 their knowledge and ability for the maintenance of adequate accounting
 records in accordance with the provisions of the Companies Act, 1956
 for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities;
 
 (iv) that they have prepared the accounts for the financial year ended
 31st March, 2013 on a ''going concern'' basis.
 
 AUDITORS
 
 M/s. N.M. Raiji & Co. (NMR) and M/s. SNB Associates (SNB) Auditors of
 the Company hold office as joint auditors till the conclusion of the
 ensuing Annual General Meeting. The Company has received a written
 communication from a shareholder proposing the non reappointment of NMR
 as the Joint Auditors of the Company. The Audit Committee and the Board
 of Directors have considered the matter and have recommended the
 reappointment of SNB as sole Auditors of the Company and the non
 reappointment of NMR as the Joint Auditors in the forthcoming Annual
 General Meeting.
 
                                             On behalf of the Board
 
                                                 R.K. KRISHNA KUMAR
 
                                                           Chairman
 
 Place: Mumbai 
 
 Dated: 24th May, 2013
Source : Dion Global Solutions Limited
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