The April-June quarter, impacted by second COVID-19 wave, was one of the "toughest" quarters to manage for Tata Consumer Products Ltd (TCPL) due to uncertainty and pressure on margins due to rising tea prices, and it may have impact on the firm's topline, said its Managing Director and CEO Sunil D'Souza. The Tata group FMCG firm expects growth on a quarter-on-quarter basis for the first quarter of 2021-22, in which it has come back in black, but expects it to be not as good as the corresponding quarter of 2020-21 having high base because of pantry loading in the international market.
In June, TCPL has witnessed a comeback from the second half, after restrictions were eased and expect better margin and topline (revenue) growth going forward. "In terms of performance, I would say Q1, which is actually just going to end, is probably one of the toughest quarters we have seen in terms of managing the quarter.
After tea, it’s time to brew some coffee for Tata Consumer Products
"April was great but May was probably the toughest month that we have dealt with and I am accounting the first wave along with it," D'Souza told PTI. Prices of tea, which TCPL expected to taper down, actually had gone up due to second wave and a bit of drought-like conditions and pressurised the margins.
"So, while quarter and quarter, we will see an improvement in terms of metrics and margins. "I think overall, at least from a Tata consumer perspective, we are not exactly where we would have wanted to be. And, the reasons would be this whole uncertainty and therefore the topline impact," he said.
While talking about TCPL's international business, D'Souza said lockdowns were opened faster and life is coming back far faster and, therefore, it is recycling last year pantry loading. "It's probably been faster recovery there and, therefore, a reverse impact on the business," he said.
In the fourth quarter of 2020-21, TCPL had reported a consolidated net profit of Rs 74.35 crore. Its revenue from operations was up 26.29 per cent to Rs 3,037.22 crore. While in Q1/FY21, TCPL's revenue from operations was up 13.44 per cent to Rs 2,713.91 crore. D'Souza said that in April, TCPL was on a "very strong wicket" with a high double-digit growth and was impacted in May and was under pressure till the first week of June as the market was still opening up in phases.
"But, now, we are seeing things coming back very strongly like I said, but overall if you look at the quarter I would say overall it will be still under pressure, but I will say last fortnight of June is looking good," he said. He added: "Our calculation is that will continue going forward and, therefore, going forward, whether it is the topline or it is margins, we should be in a far better place from where we are."
Terming the first quarter of 2020-21 as a "bumper quarter", D'Souza said it was led by reasons as huge pantry loading in international business and lower price inventory of tea. TGBL maintain 60 to 90 days of inventory of tea. "So, if you look at that, compared to this year, there is no pantry loading in international and we are entering the quarter with higher-priced inventory which going into Q2 will ease off yeah.
"So, overall, quarter and quarter, it has improved. But, the good news is we are seeing now everything coming back as states have opened," he said. The company's MD and CEO also said the only catch is it is coming too late in the quarter for it to make a material impact in Q1 itself. "But I would say Q2 onwards, we are seeing topline coming back. We are seeing margins starting to improve."
While talking about the fast-moving consumer goods (FMCG) industry, D'Souza said it expects a 'U'-shaped recovery. Rural areas, which last year recovered quickly after the first wave and resumed its growth journey, would come back led by factors such as good monsoon this year and hike in the minimum support price by the government.
TCPL, which was formed by merging the consumer products business of Tata Chemicals with Tata Global Beverages, has ambitions to be a leader in the FMCG segment. "We have got strong ambitions of becoming one of the largest FMCG players in the country. I think we have laid the right building blocks in terms of the foundation for the company.
"We had a few hiccups during the pandemic but that does not deter us from our long-term goals and we remain focused on driving very strong top line and profitable growth," he said. The company, which is sitting on huge cash reserves, is open to acquiring more assets besides organic growth opportunities.
"I am sitting with Rs 2,500 crore on my balance sheet," he said adding that "for organic, we have plans as capex (capital expenditure), and investment plans lined up and on the acquisition front, we will keep looking at options". D'Souza also said that as long as all the boxes are ticked, and "we are creating extra value for our shareholders, I think you will see action there".
Recently, TCPL did some acquisitions such as Kottaram Agro Foods, the maker of Soulfull brand of breakfast cereals and millet-based snacks. It has reported consolidated revenue from operations of Rs 11,602.03 crore for FY21.
