In an interview to CNBC-TV18, Kamal Baheti, chief financial officer, McLeod Russel shares his views on the company’s Q3 performance.
Below is the verbatim transcript of the interview to CNBC-TV18.
Anuj: Your earnings have been volatile. The last quarter also didn’t look too good. Was it seasonally weak and would we expect better numbers in Q4?
A: In this year we had three quarters, which has not gone as per our estimates. In all the three quarters we lost crop in India, in fact out of nine months we lose eight months crop. In a fixed cost industry if one lose crop then there is nothing much one can do. Price increase is the only thing which should compensate.
This is the first time in the last 10-15 years that we as a company lost 7 million kg of our own crop till November-December. The price increase is only Rs 6-7 which is not good enough. So this year had a negative impact from Q1. Quarter four which is non-seasonal quarter for us, will have similar kind of impact but this year has to be considered as an aberration particularly in India because of weather.
Ekta: Why has there only been Rs 6-7 price hike that the company has taken and anything more that you would contemplate?
A: Going into next season, which starts from March-April, the prices will be much higher than what it has been in this year, so we expect higher prices when we open the new season.
If the crop recovers, which it should, by the estimate which has come for the monsoon then we should do far better in next year than this year. It is basically to do with the crop loss and completely to do with weather conditions; the monsoon has been much less for this year and it started with drought in the month of April-May.
However, the prices did not go up because of overall export during the year has been much lower particularly because there has been a price drop which has happened in African market. Therefore, both these factors put together did have an impact; one on the crop and other on prices.
Anuj: In terms of outlook for both domestic operations and international operations, what do you have for us in terms of next financial year? This financial year looks like would be lower than the last one but for the next financial year?
A: We should get back to what we did in 2013-14 into the next financial year. First, into the Indian operations, our prices will be higher next year and the crop recovery will help as far as overall topline and bottomline is concerned. On the overseas market because there has been geopolitical issues in the consuming countries particularly in the Middle East and Russia, the situation has started stabilising. We had seen a price increase of around 15-20 percent for the African operations and there is also a report of a dry weather condition in Kenya in the last 15-20 days. So, putting these two factors together we will see recovery in prices in international market, good prices, opening prices in Indian markets and recovery of crop. These three factors would bring us back to what we were there in 2013-14. We continue to believe 2014-15 has been an aberration, demand and supply side as far as fundamentals are concerned, continue to be very strong and so we should be back on track from the next financial year onwards.
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