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Tata Coffee Directors Report, Tata Coffee Reports by Directors
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Tata Coffee
BSE: 532301|NSE: TATACOFFEE|ISIN: INE493A01019|SECTOR: Plantations - Tea & Coffee
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Download Annual Report PDF Format 2014 | 2013 | 2012 | 2011 | 2010
Directors Report Year End : Mar '14    Mar 13
The Directors are pleased to submit their Report together with the
 Audited statement of accounts for the year ended 31st March, 2014.
 
                                             2013/14            2012/13
                                             Rs. in 
                                             lakhs              Rs. in 
                                                                Lakhs
 
 Profit from Operations before 
 Other Income & Interest                    11796.38            12307.96
 
 Add: Other Income
                                             3518.07             2220.69
 
 Operating Profit before 
 Interest                                   15314.45            14528.65
 
 Less: Interest                               491.30              454.97
 
                                            14823.15            14073.68
 
 Add: Exceptional Income/
 (Expenses)                                                     (958.78)
 
 Profit Before Tax                           14823.15            13114.90
 
 Provision for Tax                           4166.14             3745.64
 
 Profit After Tax                            10657.01             9369.26
 
 Add: Surplus brought 
 forward from 
 Previous Year                              16786.63             9986.07
 
 Amount available for 
 appropriation                              27443.64            19355.33
 
 General Reserve No. I          (1100.00)             (950.00)
 
 General Reserve No. II          (175.00)             (251.95)
 
 Debenture Redemption 
 Reserve A/c                               (1275.00)  1357.45    155.49
 
 Dividends
 
 Interim Dividend                                     (933.85)
 
 Final (Proposed)               (2428.02)             (1400.78)
 
 Tax on Dividend                 (412.76)   (2840.78)  (389.57) (2724.19)
 
 Balance carried forward                    23327.86            16786.63
 
 TURNOVER
 
 Your Company''s turnover during the year under review was Rs. 650.92
 Crores as compared to Rs.598.08 Crores in the previous year, registering
 an increase of 8.83% over last year.
 
 PROFITS
 
 Profit from Operations before ''Other income and interest'' for the year
 ended 31st March, 2014, stood at Rs.117.96 Crores as against Rs.123.08
 Crores in the previous year. Profit before Tax for the year 2013-14 is
 Rs.148.23 Crores vis--vis Rs.131.15 Crores in the previous year 
 effecting an increase of 13.02%. Profit after Tax in 2013-14 stood at 
 Rs.106.57 Crores as against Rs. 93.69 Crores in the previous year. 
 
 Your Directors are also pleased to advise that the Profit earned in 
 2013-14 is the highest recorded so far for the Company.
 
 DIVIDEND
 
 Your Directors have recommended a Dividend of Rs.13 /- per share
 aggregating to Rs.2428.02 Lakhs for the year 2013-14. The Dividend Tax
 amounts to Rs.412.76 Lakhs.
 
 COFFEE SCENARIO
 
 The Arabica futures market prices witnessed wild swings during the
 year. Starting at around 150 cents/lb in April 13'' it dropped steadily
 to 105-110 cents/lb levels before picking up marginally in December 13.
 On account of a severe drought in the major Coffee producing countries,
 Brazil and anticipated drop in 2014/15 harvest of Arabica Coffee, the
 market started hardening to end at around 200 cents/lb in March 14''.
 
 The Robusta prices, traded in the London terminal, also saw hardening
 along with Arabica but not to the same extent. The market which was
 range bound at $ 1450-1650 per tonne and moved up to $ 2000 plus per
 tonne.
 
 The Indian Robusta production have also shown a significant decline with
 some growing regions registering over 30% fall. This has led to
 strengthening of the differential for Robusta Parchment which forms a
 major part of your Company''s Coffee production.
 
 The global production of the 13-14'' season is estimated at 145.7
 million bags and consumption was 145.8 million bags. As per ICO
 estimates, the total consumption grew at the rate of 2.7% in the year
 2013-14. The consumption in the exporting countries continues to
 increase significantly.
 
 OPERATIONS:
 
 Plantations:
 
 Coffee:
 
 The Company has harvested a higher Arabica Crop of 2076 MT as against
 1542 MT of previous year; Being an of year, Robusta production has been
 lower at 4781 MT as against 6800 MT in the previous year. This decline
 has been witnessed across all growing areas due to a long period of
 drought, followed by an extremely harsh monsoon which led to soil
 saturation and wet feet conditions resulting in defoliation, berry drop
 and incidences of stalk rot and black rot.
 
 The plantations are experiencing an unusual weather pattern wherein
 there has been a long drought after the cessation of monsoon in October
 with only sporadic drizzles thereafter till the end of March 2014.
 Added to this, the prevailing day temperatures has been touching 36C
 as against the normal range of 32 - 34C.
 
 In view of untimely and insufficient blossom showers, the Company has
 taken up blossom irrigation in all Robusta areas followed by backing to
 the extent possible, depending on the availability of water in the
 tanks.
 
 Tea:
 
 The Company produced 6.545 Million Kgs of Made tea in the financial year
 2013-14 as against 6.640 Millon kgs in the previous year. The long
 drought in the month of January to April, with high day temperatures
 followed by incessant rains during monsoon had its impact on tea
 production. The selling prices were marginally better than the previous
 year.
 
 Pepper:
 
 The Company has achieved a total pepper crop of 368 MT as against 1148
 MT in the previous year. The steep decline in production is due to the
 prolonged dry period in the previous year experienced across all
 growing regions in India .The pepper crop was also affected by root wilt
 and quick wilt disease and the Company has taken all proactive measures
 to mitigate and minimize the damages.
 
 Curing Works:
 
 The Company''s Curing Works at Kushal nagar cured a total of 11988 MT
 Coffee during the current year as against 12509 MT in the previous year.
 In addition, 306 MT of Monsooned Coffee was processed as against 307 MT
 in the previous year.
 
 The unit handled marginally lower volumes during the year due to the
 lower crop arrivals during 2013-14 season and continued to achieve good
 financial performance due to the sustained cost reduction initiatives in
 the factory and better husk sale realization.
 
 exports
 
 During the year 2013-14, your company exported 5237 MT of Coffee as
 against 4831 MT in the previous year. Your company continues to focus
 on growth through differentiated Coffees with volumes at 1205 MT with
 very good premiums.
 
 Quality Awards:
 
 Sustained and continued focus on quality has been the main focus of the
 Company over the years. In the year under review, the Company has won
 awards as the best exporter of Coffee to the Far East Russia, CIS
 Countries, USA and Canada at the Indian Coffee Export Awards . The R&G
 Unit at Kushalnagar has bagged the best Roaster Award in the India
 International Coffee Festival (IICF) held in the current calendar year.
 The Valparai, Nullore, Mylemoney, Goorghully, Margolly and Gubgul
 Estates of the Company have been adjudged as the best for their Arabica
 and Robusta Coffee.
 
 Your company is committed to growth through quality and continues to
 participate in domestic and International forums to popularize the
 company''s Coffee.
 
 Instant Coffee Division:
 
 The year 2013-14 was challenging for Instant Coffee Division. The
 Division achieved a production of 6955 MT in the year under review as
 compared to 6639 MT over the previous year, representing an increase of
 4.76 % and achieved sales of 6472 MT as against 6444 MT in the previous
 year. The Theni unit has just completed the pre-commissioning of a new
 Agglomeration plant to cater to the growing customer requirements viz.,
 Aroma infusion, Color, higher Cup Profile Rating (CPR), Granule strength
 etc. The new Agglomeration plant can produce upto 8 MT per day with an
 annual capacity of 2640 MT, in addition to the existing capacity of
 1650 MT. This is expected to cater to the demand of Agglomerated Coffee
 in the African and Russian geographies.
 
 The focus on other geographies over the traditional Russian market has
 resulted in 30% growth over the previous year thus contributing 55% of
 the total sales volume in 2013-14. While the dip in Russian market
 volumes has staggered the growth momentum, the division is confdent to
 overcome the fall in demand in the Russian region in the coming year
 with dynamic marketing strategies.
 
 With the shift from the Russian Market where the requirement was mostly
 in bulk sales, the necessity to pack in consumer packs (SKU''s) took on
 high priority. A modern packing line with automated filling and weighing
 equipment has been commissioned at Theni to cater to this new
 requirement.
 
 New product development has been a focused endeavour during the year;
 one such initiative micro grind impregnation in Freeze Dried Coffee has
 won market acceptance with consistent repeat orders.
 
 During the year the division demonstrated continual improvement in
 energy conservation initiatives. With 100% spent Coffee utilization, the
 division achieved reduction in fuel usage by 15%. As a part of its
 efforts to source non fossil based energy, the Theni unit has made
 arrangements to source upto 60% of its energy requirements through wind
 energy for the current financial year which will enable it to reduce its
 carbon foot print.
 
 Further to the certification of ISO 9000, ISO 22000, HALAL, Kosher and
 SA 8000 , the division focused on ISO 140001 / ISO 18000  EMS & OSHAS
 certification as a continual focus on sustainability. While Theni was
 certified for ISO 140001 in March 2014, the Toopran unit is in the
 process of getting certifications from ISO 140001 & ISO 18000.
 
 OTHER OPERATIONS
 
 Plantation Trails
 
 Divisional focus continues on improving margins by positioning the
 Plantation Trails brand in the premium segment. The Cottabetta Bungalow
 has performed well and continues to exceed guest expectations. The
 Thaneerhulla Bungalow has been recently launched after renovation and
 has received encouraging feedback. The overall top box scores for
 Customer Satisfaction were at 74%.
 
 There have been media articles recognizing the uniqueness of our
 product and the Coffee experience as a distinct strength of the
 business. International media familiarization trips has resulted in
 several brand mentions across international markets. A significant
 impact of this campaign has been an increase in the inbound business.
 
 Plantation Trails was a recipient of several industry awards &
 recognitions for its continuous customer focus and excellence in
 service & delivery. Emphasis continues to be on improving occupancies
 by building sales & distribution using digital and social media
 channels.
 
 STARBUCKS
 
 Your Company has commissioned a state of art Coffee roasting facility at
 Kushalnagar to cater exclusively to the requirements of Tata Starbucks
 in India. The facility is certified by Food Safety Standards Authority
 of India, and under ISO 22000:2005 and SA8000:2008. The facility also
 won the prestigious India International Coffee Festival (IICF) 2014
 award.
 
 The Coffee beans used in this roastery are being supplied exclusively
 from the Company''s estates. The Company is expected to benefit
 substantially in the long run from this alliance in terms of technology
 and process know-how and expansion into new geographies by supplying
 Starbucks requirement.
 
 CAPITAL EXPENDITURE
 
 During 2013-14, Rs.3011.78 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 (eOC)
 
 EOC''s total Income during the year stood at Rs.1026.25 Crores over the
 previous year''s Income of Rs. 1099.27 Crores.
 
 EOC''s top-line income reflects the trend of increasing single serve
 sales where EOC gets only royalty Income compared with its traditional
 sales formats.
 
 As reported in the previous year, EOC had moved into this very
 important Single Serve segment through K-Cups, with a brand licensing
 and royalty arrangement. Single serve K-Cups continue to show brand
 strength, building up a 6.2% volume share in its first full year. Volume
 growth in this segment for EOC at 7.3 Million lbs was over 300% against
 the previous year.
 
 In the fiscal year, the green Arabica commodity costs declined steadily
 which allowed EOC Coffee to improve margins.  Investment was made in
 brand re-launch, with new package graphics, new blends and a television
 advertising campaign.  Increased investment was made in trade promotion
 to compete in the current market. EOC continues to perform Profitably
 and the Profit from the core business has been in line with the previous
 year after higher investment.
 
 Consolidated Coffee Inc (CCI)
 
 As reported last year, CCI had made an investment in Rising Beverage
 Company - a US based functional beverage company as a part of the
 diversification plan of the product portfolio of its operations in the
 USA.
 
 A new marketing team was put in place and a major marketing campaign
 was also launched to market the product portfolio.  Initially the
 product showed a lot of promise but over time, the operating
 performance of this product fell below the expected levels. Whilst all
 efforts were made to revive the business, based on changed market
 conditions, its performance and significant future funding requirements,
 a decision was taken during the year to divest its holding in this
 Company.
 
 Consequent to the divestment of its stake, CCI incurred a pre-tax loss
 of $ 16.931 Million. Net of minority interest and taxation the loss was
 $ 6.533 Million. The net performance of US operations including the
 Profits of EOC was a net loss of Rs. 1.95 Crores as compared to Profit
 after taxes of Rs. 33.50 Crores in the previous year.
 
 Alliance Coffee limited
 
 During the year under review, Board of Tata Coffee decided to merge the
 Company''s Subsidiary - Alliance Coffee Ltd. (Alliance) with itself. The
 requisite approvals from the Stock Exchanges as required under the
 Listing Agreement have been obtained in this connection and the
 necessary petition has been fled with the Bangalore High Court for
 amalgamating Alliance with the Company with effect from the 1st April
 2013.
 
 REVIEW OF SUBSIDIARY COMPANIES:
 
 a.  As required under the Listing Agreement with Stock Exchanges, the
 audited consolidated financial statements of the Company incorporating
 all its Subsidiary Companies prepared in accordance with applicable
 Accounting Standards are attached.
 
 b.  The Ministry of Corporate Affairs has granted a general exemption to
 Companies as per which the provisions of Section 212 of the Companies
 Act, 1956 shall not apply in relation to subsidiaries, subject to the
 fulfilment of certain conditions. Accordingly the consolidated financial
 statements of the Holding Company and its Subsidiaries duly audited by
 its Statutory Auditors have been presented and the individual accounts
 of the Subsidiary Companies have not been attached.
 
 c.  Any shareholder may either ask for a copy or inspect at the
 Registered Office , a copy of the audited accounts of the subsidiary
 companies.
 
 CORPORATE GOVERNANCE
 
 The Company is in compliance with all the conditions of Corporate
 Governance as stipulated in Clause 49 of the Listing Agreement with the
 Stock Exchanges. The Compliance Report on Corporate Governance together
 with Management Discussion & Analysis Report is attached and forms an
 integral part of the Director''s Report .
 
 The Company has an adequate system of Internal Controls and Risk
 Management which are detailed in the Management Discussion & Analysis
 Report.
 
 EMPLOYEES WELFARE
 
 The Company''s focus on welfare and improving the quality of lives of
 its people has continued as before. In order to improve the standard of
 living of our employees, we have been providing educational assistance
 to the children of employees, crche and child care facilities,
 transport at subsidized rate to the school going children, supply of
 provisions at cost 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.
 
 During the year, the Company was assessed for re-certification under the
 standards as mentioned in the Rainforest Alliance (RA) re-certification
 program. This reflects 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. R.K. Krishna Kumar who was Chairman of the Board, demitted his Office 
 as a Director in accordance with the Group Guidelines with effect from
 18th July, 2013. Your Directors wish to place on record their sincere
 appreciation for the valuable contribution made by Mr. Krishna Kumar
 during his tenure as a Director of the Company.
 
 Mr. Harish Bhat was nominated as the Chairman of the Company with effect
 from 26th July, 2013.
 
 Mr. D.R.Kaarthikeyan was appointed as an Additional Director of the
 Company with effect from 2nd July, 2013 and in terms of Article 101 of
 the Articles of Association of the Company read with Section 161 of the
 Companies Act, 2013, (the Act). He holds Office  upto the ensuing Annual
 General Meeting. The Company has received a notice from a shareholder
 in terms of Section 160 of the Act signifying his intention to propose
 the appointment of Mr. D.R.Kaarthikeyan as a Director in the
 forthcoming Annual General Meeting.
 
 Mr. T.Radhakrishnan was appointed as Additional Director of the Company
 with effect from 26th July, 2013. At the same meeting, he was also
 appointed as Executive Director- ICD Operations and in terms of Article
 101 of the Articles of Association of the Company read with Section 161
 of the Companies Act, 2013. He holds Office  upto the ensuing Annual
 General Meeting.  The Company has received a notice from a shareholder
 in terms of Section 160 of the Act signifying his intention to propose
 the appointment of Mr. T.Radhakrishnan as a Director in the forthcoming
 Annual General Meeting.
 
 Mr. Deepak Kumar was reappointed as Executive Director- Finance of the
 Company by the Board at its Meeting held on 18th October, 2013 for the
 period 25th October, 2013 to 24th October, 2014.
 
 Mr. Hameed Huq was reappointed as Managing Director of the Company by
 the Board at its Meeting held on 7th November, 2013 for the period 3rd
 January, 2014 to 31st March, 2015.
 
 It is proposed to appoint Mr. S.Santhanakrishnan, Mr. D.R.
 Kaarthikeyan, Mr. Venu Srinivasan and Prof. Arun Monappa as Independent
 Directors at the forthcoming Annual General Meeting in compliance with
 Section 149(6) of the Companies Act, 2013 and revised Clause 49 of the
 Listing Agreement.
 
 CORPORATE SOCIAL RESPONSIBILITY - SERVICE TO THE COMMUNITY
 
 The Coorg Foundation, a Public Charitable Trust (Foundation)
 established by your Company continues to provide admirable support to
 various individuals and institutions in the field of health care,
 education and culture during the year.
 
 The Foundation continues to provide aid to top ranking students who
 have studied in the Institutions based in Kodagu in the form of
 scholarships. New initiatives have been undertaken to support students
 from lower income group to enable them to pursue Non-professional
 Courses. In addition, vocational training are being provided 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 (RIHP), Ammathi, which is managed
 by the Company, continues to serve the needy sections of the society.
 The Foundation provided grants to RIHP for treatment of patients
 belonging to the lower income group.
 
 Swastha which is established by The Coorg Foundation as a fully
 residential institution for diferently abled, continues to extend its
 support to the needy children in the Coorg and neighbouring areas
 through its centers in Suntikoppa and Pollibetta by imparting required
 education and training. In addition, the Community Based Rehabilitation
 programme (CBR), reaches out to a larger number of challenged people in
 the district by moving away from a central location and has rendered
 commendable service in the area. This is a novel and cost effective way
 of reaching out to a larger number of needy persons.  Regular awareness
 programmes are conducted in the villages in Somwarpet Taluk and health
 camps are organized to identify needs and provide supportive devices to
 needy participants.
 
 Three diferently abled participants from Swastha who were part of the
 Indian contingent which participated in World Special Olympics games
 won 1 Gold, 1 Silver and 2 Bronze Medals in the Games held at
 Newcastle, Australia.
 
 In addition, the Company has continued its initiatives for the
 development and protection of the girl child by conducting regular
 camps 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 Annamallais.
 
 The Company has constituted a Corporate Social Responsibility Committee
 in compliance with Section 135 of the Companies Act, 2013.
 
 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) of the Companies Act 1956, 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.
 
 FIXED DEPOSIT
 
 The Company has not accepted any Fixed Deposit from the public during
 the year under review.
 
 SHARES
 
 96.21% of the Company''s paid up Equity Share Capital has been
 dematerialized and the balance of 3.79% is in physical form as on 31st
 March 2014. The Company''s Registrar''s are M/s TSR Darashaw Private
 Limited and the addresses of their branches are detailed in the
 Compliance Report on Corporate Governance forming part of this report.
 The Listing Fees for the Financial Year 2014-15 has been paid to the
 National Stock Exchange, Bombay Stock Exchange and Bangalore Stock
 Exchange.
 
 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
 conform:
 
 (i) that in the preparation of the accounts for the financial year ended
 31st March, 2014, 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 judgments 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 sufcient
 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, 2014
 on a ''going concern'' basis.
 
 The audit observations on the Financial Statements are suitably
 explained as and where necessary in the notes on accounts.
 
 AUDITOR
 
 M/s SNB Associates, Auditors of the Company hold Office  till the
 conclusion of the ensuing Annual General Meeting. They have furnished
 the Certificate of their eligibility for re-appointment as required
 under the Companies Act.
 
                                                  On behalf of the Board
 
                                                  HARISH BHAT
 
                                                  Chairman
 
 Place: Chennai 
 
 Dated: 13th May, 2014
Source : Dion Global Solutions Limited
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