Expect performance to improve in Q2, Q3: Mcleod Russel

Mcleod Russel has reported a net profit of Rs 19.31 crore for the quarter ended June 2012.

In an interview to CNBC-TV18, Kamal Baheti, chief financial officer of McLeod Russel says, crop loss in Q1 impacted performance. He expects performance to improve in Q2, Q3. He expects India production at 960 million kg this year against 988 million kg last year. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Q: Why we have seen such a big drop in EBITDA? Why are operating profits under such a lot of pressure? A: The first quarter for a tea plantation company, which operates out of North India, is not very significant. It has been reported earlier that we have lost a lot of crop in the first quarter. The entire impact of the cost of this crop loss has actually come in the first quarter. However, the prices are higher by around Rs 30 per kg, but we have sold only 10%. This is because of the seasonal nature of the business. I think it will majorly reflect in the second and third quarter. In tea business, particularly seasonal in nature, it is very difficult to really work on EBITDA margins on a quarter to quarter basis. Q: Where are prices ruling at now? A: They are around Rs 30 higher. We averaged Rs 180 per kg against Rs 150 for the full year last year. As far as the overall price trend in the current market is concerned, it is also ruling Rs 25-30 higher. The price trends are very good. Major sales have been accounted for the second and third quarter. The impact will also be seen in those quarters. Q: What kind of a production dip should one be prepared for? A: As of May 30, which has been reported number by Government of India or the tea board, we have lost around 28 million kg in India. As a company we have lost around 2.7 million kg on our own teas. We expect that this kind of a shortfall will continue for the full year. We expect the weather to again be okay for the rest of the year. Based on that, we should be ending at around 960 million kg this year against 988 million kg last year. The crop loss, which is not only there in India across the global in this year, will have its impact on prices and should be actually good for the tea industry.