Financial Daily from THE HINDU group of publications
Wednesday, Sep 08, 2004
Tetley cuts debt equity ratio
Kolkata , Sept. 7
THE Tetley Group Ltd, which was acquired by Tata Tea four years ago, has substantially improved its financial position to end 2003-04 with a debt equity ratio of 1.3:1.
In 2000, when the Tatas acquired the Tetley Group for £271 million , its debt equity ratio was 3:1 as the acquisition cost was highly tilted in favour of debt.
According to Mr R.N. Tata, Chairman of Tata Tea, in the last four years the worldwide operations of the Tetley Group has been restructured substantially.
It included disinvestments in non-core activities, restructuring of global productions facilities, new product launches and entrance into emerging markets.
In a statement in the latest annual report of Tata Tea, he mentioned that all factors have enabled "the profitability of the business to improve, year on year, steadily since the acquisition".
For the financial year 2003-04, Tetley Group's earnings before interest, tax and depreciation was £46 million against £28 million at the time of the acquisition.
Mr Tata further added that with increasing cash flows and overall improvement in performance, "the value of the Tetley Group's business today is significantly higher than the price paid" by the company.
In this context, it was mentioned that the Tetley Group has achieved highest ever market share in the UK, Canada, Australia and France.
Tetley brands have recorded a 4.9 per cent sales growth on like-for-like basis.
The profit before tax improved by 86 per cent and with higher cash flows, the company has repaid £10 million worth of debt.
Tetley products were launched in Russia, Pakistan and Bangladesh.
During 2003-04, Tata Tea's turnover increased by four per cent to end at Rs 770 crore.
The consolidated turnover of the company, including all its subsidiaries, was Rs 3,112 crore.
Out of it, Rs 2,668 crore was generated by the branded products. Mr Tata stated that the company could achieve it, despite a decline in the overall branded packet tea market. According to him, Tata Tea has become the second largest branded tea global player.
In the domestic market, Tata Tea's branded products recorded growths both in terms of value and volume.
All its major brands such as Tata Tea Premium, Chakra Gold and Kanan Devan were well received by the consumers.
During 2003-04, the company introduced Tata Tea Gold with 15 per cent long leaf.
"Tetley tea bags launched two years ago continue to receive encouraging response from customers and have grown volumes during the period," he stated.
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