 "Tea sector: Outlook neutral despite optimism for FY17")
Although domestic tea prices are stabilising and export price realisations are rising, the sector is concerned about rising input costs.
Till September last year, average CTC (crush, tear, curl) auction prices were down by Rs 3-4 a kg but had started picking up; they're now higher by Rs 10 a kg on a week-on-week basis. While CTC and dust leaves together fetched Rs 115 on an average in October, it reached Rs 130 a kg in November-December.
Majors like McLeod Russel India, Goodricke Group, Rossell India and Jay Shree Tea & Industries reported a fall in net profit during the quarter ended September 2015, although revenue had shown improvement.
April onwards, the company is expecting its CTC leaves to sell Rs 15-20 a kg more and the prized Darjeeling variety to fetch Rs 30-40 a kg more. However, it is concerned about rising labour wages in its 30-odd gardens.
McLeod Russel, renowned for being the world's largest integrated producer, is also upbeat about prices. In 2016-17, it is is optimistic about opening prices to be higher by Rs 20-25 a kg. It hopes to sell 81-82 million kg at Rs 175 a kg in India and another 27-28 mn kg at $2.2 a kg in the global market.
It owns 69 gardens in India, Africa and Vietnam. Though concerned abour rising input costs, it is expecting its global operationg earnings or Ebitda (earnings before interest, taxes, depreciatin and amortisation) to be higher. “Compared to the Ebitda of $3.5 mn in 2014, this year's global Ebitda will be $10 mn. On the domestic front, profitability will be somewhat similar to last year,” Kamal Baheti, director, told this newspaper.
Rossell India and Assam Company are also optimistic on 2016-17 in the wake of price stabilisation but wary of the general situation. “The stabilisation has happened after the peak sales season and, hence, might not have a substantial impact on the industry's top line (revenue).
However, I am concerned because the cost in Assam is going to hit an unsustainable level,” says C S Bedi, with 48 years of experience in the industry and now managing director at Rossell India.
This anxiety despite the price upturn will reflect upon the sector's stocks, expected to remain volatile through the rest of 2015-16 and the first quarter of 2016-17.
On these shares, Jimit Modi, chief executive of Samco Securities, is not expecting sunny days ahead. “The sectoral outlook is not very bullish for the coming months and remains neutral, as it is a globally-driven commodity. Further, the wage increase as it happens will hit the bottom lines (profits),” he said.
Till September last year, average CTC (crush, tear, curl) auction prices were down by Rs 3-4 a kg but had started picking up; they're now higher by Rs 10 a kg on a week-on-week basis. While CTC and dust leaves together fetched Rs 115 on an average in October, it reached Rs 130 a kg in November-December.
Majors like McLeod Russel India, Goodricke Group, Rossell India and Jay Shree Tea & Industries reported a fall in net profit during the quarter ended September 2015, although revenue had shown improvement.
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“The carryover stock has declined and the topline will definitely improve on account of higher price realisations but concerns remain on the profitability of the business as costs are rising,” A N Singh, managing director of Goodricke Group, told this newspaper.
April onwards, the company is expecting its CTC leaves to sell Rs 15-20 a kg more and the prized Darjeeling variety to fetch Rs 30-40 a kg more. However, it is concerned about rising labour wages in its 30-odd gardens.
McLeod Russel, renowned for being the world's largest integrated producer, is also upbeat about prices. In 2016-17, it is is optimistic about opening prices to be higher by Rs 20-25 a kg. It hopes to sell 81-82 million kg at Rs 175 a kg in India and another 27-28 mn kg at $2.2 a kg in the global market.
It owns 69 gardens in India, Africa and Vietnam. Though concerned abour rising input costs, it is expecting its global operationg earnings or Ebitda (earnings before interest, taxes, depreciatin and amortisation) to be higher. “Compared to the Ebitda of $3.5 mn in 2014, this year's global Ebitda will be $10 mn. On the domestic front, profitability will be somewhat similar to last year,” Kamal Baheti, director, told this newspaper.
Rossell India and Assam Company are also optimistic on 2016-17 in the wake of price stabilisation but wary of the general situation. “The stabilisation has happened after the peak sales season and, hence, might not have a substantial impact on the industry's top line (revenue).
However, I am concerned because the cost in Assam is going to hit an unsustainable level,” says C S Bedi, with 48 years of experience in the industry and now managing director at Rossell India.
This anxiety despite the price upturn will reflect upon the sector's stocks, expected to remain volatile through the rest of 2015-16 and the first quarter of 2016-17.
On these shares, Jimit Modi, chief executive of Samco Securities, is not expecting sunny days ahead. “The sectoral outlook is not very bullish for the coming months and remains neutral, as it is a globally-driven commodity. Further, the wage increase as it happens will hit the bottom lines (profits),” he said.