After suffering a crop loss of 15 million kg in India during 2014-15, primarily due to insufficient monsoon, McLeod Russel, the world's largest tea producer, is hoping to recover its lost ground, expecting tea prices and its exports to rise.
According to the director of the company, Kamal Baheti, an increase of 10-15 percent in global pricing is now predicted owing to the shortage of global tea supplies while a 9-10 percent price hike in India is projected.
"If we recover the lost crop, that itself will bring in 10 percent of extra revenue, and price increase will bring in 15-20 percent more revenue. In total, we expect 15-20 percent profits in India", Baheti told IANS.
The company posted an income of Rs.1,645.95 crore for the fiscal year ended March 31, 2015 against an earning of Rs.1,788.76 crore in 2013-14. But it was hit the hardest in its bottomline.
Against a profit of Rs.257.15 crore during 2013-14, the firm was able to only make Rs.31.17 crore, barely managing to keep its margins positive.
Baheti is now optimistic to generate atleast Rs.1,400 crore as standalone revenues from its 55 Indian gardens for the ongoing fiscal year and expects its produce in India to touch 85 million kg, while maintaining the global produce of 26 million kg.
The produce from its Indian gardens during 2014-15 was 80.1 million kg while the produce from the same gardens stood at 87.1 million in the year before.
"We should consider last year as an abarasion year and we should be able to come back to normalcy in the current year -- both on the crop front in India and the prices front in the international market", he said.
It is further hoping to regain its hold on the exports front.
"We should be able to go back to the 200 lakh kg export figurea Since there has been lower crop last year, the carry forward tea (in stock) supposedly has to be much lower. The demand should really pick up but only during June-end-July this year we'll be able to tell the exact picture", he said.
The company's exports fell by 9 million kg last year at 13 million kg, compared to the mark of 24 million kg in 2013. Despite increasing the export price by Rs.23 a kg, the company's export revenues fell by nearly 40 percent.
Baheti blamed the geopolitical scenario in tea-consuming countries like Russia, Middle East, Egypt and Pakistan, currency instability and higher production in Kenya which had hurt its exports badly.
Asked about the rising cost and the stagnancy in its international operations, Baheti said: "From our previous experience we have seen whenever there has been a cost increase of this nature, it gets reflected in the prices also. With international prices higher, our exports should be better."
"On the domestic front, bad weather severely affected production and on the international front there were many causes right from geopolitical issues to currency fluctuationsa These (currency fluctuations) can really put you off," he said.
The tea producer, however, is faced with the challenge of rising input costs in face of a predicted 12 percent deficit monsoon this year.
"The wage revision has raised labour cost in the gardens by over 20 percent. With wages accounting for 50 percent of input costs, the cost of production has gone up significantly," the top official said.
The previous wage agreement between the tea-garden workers in Assam and the management expired on the last night of 2014 calling in for a new settlement which raised the wages to Rs.115 each day for the ongoing year from the last year's ceiling of Rs.94.
The company, which focuses on the Assam CTC leafs has laid down its strategy to consolidate itself and recover from last year's dismal crop scenario this year and has no plans of either organic or inorganic expansion.
The CTC tea variant demand in India is growing at a rate of 3 percent to 3.5 percent per annum.
It employs over 20,000 permanent labourers and another 20,000 seasonal workers across the gardens. It also has seven factories each in Vietnam and Rwanda and another six tea gardens in Uganda.
