Volume recovery encouraging; see stable tea price: McLeod

In an interview to CNBC-TV18, McLeod Russel India CFO Kamal Baheti said recovery in volumes in October has been very encouraging given the favourable weather and he expects tea prices to be stable this year.

The company reported 6.5 percent rise in second quarter FY14 profit at Rs 245.5 crore against the year-ago period. Its net sales grew 11 percent to Rs 491 crore. “This has been a year where operating wise there has been good increase in production, stable prices and very benign cost. All the three parameters had been in line. Our six months results have been one of the best ever,” he added. Also Read: Starbucks completes one year in India Below is the edited transcript of Kamal Baheti’s interview with CNBC-TV18 Q: It is a good set of numbers if you could tell us a little more on the realisation, analysts were building in that realisations would go up 9-10 percent but in fact in this quarter, realisations have declined, what led to that and going forward in the second half of the year, could you tell us where you expect realisations to be? A: No, in fact we had rates from the very beginning with an increase of 15 percent in prices last year. We are maintaining that the prices will be more stable this year with the recovery in the crop. In fact, prices for our own tea are little higher and it is lower for the small gross tea where leaf prices are also lower. I would say if we look at the total overall results, even if we are looking at 6.5 percent increase in profitability but if we take out the foreign exchange impact, we have gone up by 12 percent. It is little better than expectations. Q: Volumes have come in up by nearly 13 percent, street was working with around 10 percent, what is the volumes trajectory going ahead? A: Last year we had a period of drought. This time, recovery was very strong and in October it is better. So, we are in line with increasing 10 million kilograms of overall production in India from 78 million. So, 13-14 percent increase in volume is in line taking into account that for the rest of the year, weather will be normal as far as the tea production is concerned. We are not only looking at the overall volume, but also overseas operations. This has been a year where operating wise there has been good increase in production, stable prices and very benign cost. All the three parameters had been in line. Our six months results have been one of the best ever.