Mumbai: Tata Global Beverages, the world’s second largest tea group, saw its June quarter profit more-than-treble to Rs161 crore boosted by a one-time gain, but cost pressures and competitive intensity continued to challenge growth.
The company posted a net profit of Rs161 crore in the June quarter from Rs455.6 million in the same period a year earlier. Its sales grew 6% to Rs1,455 crore.
“The impact of lower interest costs and exceptional items which include sale of non-core investments such as shares held largely by Tata group firms have benefited the consolidated profit,” said managing director Percy Siganporia said.
“That has partially offset the impact of commodity cost increases and expenditure on growth initiatives,” he said.
The company posted a consolidated exceptional income of Rs889 million.
However, Tata Global’s profit before exceptional items fell nearly 14% to Rs990 million year-on-year on the back of rising tea and coffee prices.
“Tea prices have increased quarter-on-quarter and that has impacted our India operations, although in July we have witnessed some easing. But tea prices will remain firm on the back of strong demand from the Middle East and Russia.”
The company raised the price of some of its domestic brands in June and July and expects margins to get a boost in coming quarters.
“Coffee prices are still higher and have risen and the increase has been as steep as 150%,” he said.
This has impacted the performance of the company in the US, where it operates under the ‘Eight O´ Clock Coffee’ brand, which mostly buys coffee from the international market.
“The US operations are on a road to recovery, the pressure is likely to remain at least in the September quarter,” he said.
The company’s unit Tata Coffee, however, more-than-doubled net profit as it procures coffee from its own plantations.
Tata Global, which has also been facing severe competion overseas, has restructured its various businesses in an effort to fuel growth and control costs.
It has now integrated all the companies it owns globally, into three regions South Asia, EMEA (Europe and Middle East) and CAA (Canada, America, and Australia).
The firm also said Nourishco , its joint venture with Pepsico, will launch a health drink in the coming months.
Shares of the company ended up 3.8% at Rs106.65 in a firm Mumbai stock market.