The Hindu Business Line : Tata Tea net zooms 127% on branded tea sales growth

TATA Tea Ltd (TTL) today reported a 127.44 per cent rise in profit after tax for the quarter ended December 31, 2005, to Rs 62.41 crore from the previous corresponding Rs 27.44 crore.

At a press briefing addressed in the main by Managing Director, Mr P. Siganporia, officials attributed the quarter's profit growth to improvement in branded tea sales and the impact of amalgamation of the Kochi-based Tata Tetley with TTL.

The company's income from operations for the quarter moved up 16.21 per cent to Rs 278.47 crore (Rs 239.62 crore for the year-ago period). Its branded sales in value terms grew by eight per cent while its overall value market share touched 21.6 per cent. "That is a gain of one per cent year-on-year, which is significant,'' Ms Sangeetha Talwar, Executive Director in-charge of branded sales, said. The contribution of branded tea sales to profitability was despite the fact that competition from local players gets tougher every time the commodity price softens.

For the first nine months of the fiscal, TTL had a profit after tax of Rs 167.61 crore (Rs 103.09 crore) on income from operations of Rs 770.13 crore (Rs 680.28 crore). According to an official statement, Tata Tetley contributed Rs 45 crore to TTL's nine-month topline. This partly offset the reduction in earnings from auction sales caused by exiting the South Indian plantation business.

Notwithstanding higher profit at TTL, the company's consolidated profit after tax, including the Tetley business, took a beating. Consolidated PAT dipped by 32.37 per cent to Rs 60.39 crore (Rs 89.29 crore) for the quarter while income from operations inched up by 0.69 per cent to Rs 811.70 crore (Rs 806.14 crore).

This was mainly due to its accounting policy, now tracking international norms and reduced profits at Tetley. The latter happened through higher promotional expense, non-recurring additional costs related to new packaging styles and the impact of currency exchange rates. "I think you will see some reversal in the fourth quarter. This time there was a little more than the normal bunching of these factors,'' Mr L. Krishna Kumar, Senior Vice-President (Finance), said. For the nine-month period consolidated PAT was Rs 246.67 crore (Rs 213.44 crore) and income from operations, Rs 2,307.20 crore (Rs 2,268.13 crore).

TTL's board has approved a VRS to be implemented across its offices. It does not apply to plantations. "We are not looking at more than 80-100 people. The VRS is based on the Tata Motors model," Mr Siganporia said.

The company has been experimenting with various sustainable business models for its plantations in the North-East. "Only a sustainable business model will endure," he said, explaining TTL's openness to a business model for these plantations that drew on both agricultural and non-agricultural income.

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