Financial Daily from THE HINDU group of publications
Wednesday, Apr 17, 2002
Agri-Biz & Commodities
Corporate - Restructuring
Goodricke group may sell instant tea unit in Bengal
KOLKATA, April 16
HIT by poor business prospects, it is likely that Goodricke Group Ltd may sell its instant tea plant located in North Bengal.
According to industry sources, the plant has increased its production and exports to Japan in the last year but it is still not financially viable.
``There has been higher capacity utilisation of the instant tea plant with higher exports particularly to Japan. However, the plant continues to run well below capacity thereby making it economically unviable'', the directors stated in the annual report.
The company also tried to market the products from this unit to the US but the venture was unsuccessful. As a result, Goodricke has decided to exit from the instant tea project.
``During the year there was an attempt to establish a marketing set-up in the US market but due to various operational difficulties and uncertainty of adequate price recovery, the said project was abandoned. The company is looking at various option in respect of its Instant Tea plant,'' the directors' report stated.
Goodricke is also facing severe problems from Nepalese tea, which is being sold off in the global market as Darjeeling tea.
It may be noted that of its 17 gardens, three are located in Darjeeling and production from these gardens account for almost three per cent of the company's total production.
In most cases, green tea from Nepal is smuggled into Darjeeling. There it is processed and passed off as Darjeeling tea. Last year, 700 tonnes of such tea was sold in Japan and Germany and this quantity is increasing every year.
``With lower production costs and negligible statutory overheads, such teas produced in Nepal are being sold to overseas buyers at one-third the sale price of Darjeeling tea. This is a serious threat and will continue to remain a major factor affecting the Darjeeling industry's fame'', the directors' report stated.
The company has also firmed up plans to launch a packet tea brand in the "sub-economy'' category.
The move is aimed at countering the low cost packet teas offered by insignificant players from the unorganised sector.
This was announced by Mr K.S. David at the conclusion of its last annual general meeting of the company held earlier this month.
According to him, the packet tea industry in the organised sector is facing tremendous pressure from the unorganised players because they are offering teas of not so high quality though at uncompetitive rates.
Mr David said that the new brand, whose name is yet to be decided, will be launched in May and will be priced 10-12 per cent lower than the company's Zabardast brand.
During the year ended December 31,2001, Goodricke recorded a total income of Rs 174.74 crore against Rs 168.73 crore in 2000.
The profit before tax during the year under review was Rs 1.56 crore (Rs 1.29 crore) even as the profit after tax stood at Rs 86.60 lakh (Rs 69.21 lakh). The dividend for the year gone by has been maintained at 50 paise on every equity share of the face value of Rs 10 each.
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