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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf
Tea
ƒ Domestic realisations to improve in coming year, CY12
Tea production in India in CY11 stood at 988.3 million kg (mkg)
(expected: ~1000 mkg) against 966.4 mkg in CY10, an increase of
almost 2.3%. Consumption during the period increased at a higher rate
of ~3.5%. With the dry weather in February-March 2012, domestic
production is expected to marginally decline in 2012. Simultaneously,
production in Kenya is likely to remain similar to 2011 levels. We believe
export demand for Indian tea would increase in 2012 and would push
Indian tea prices by ~10-12%. In the January-March quarter, we expect
tea companies to post higher losses due to wage increase in Assam and
West Bengal by ~| 7/kg, which is substantially higher than regular
increase of | 2.5-3.5/kg
: Company specific view
Company Remarks
Harrison
Malayalam
We expect higher volume sales (YoY) at 4.8 mkg of tea and 2910 tonnes of rubber
with realisations remaining almost flat for tea at |73.5/kg & a slight dip in rubber
realisation at |197/kg. However, higher employee cost witnessed throughout the year
would pull down margins YoY by ~400 bps to 9.1%
Jayshree Tea Being a subdued quarter for tea companies as sales consist of dust tea mainly, we
expect sales to remain flat with sales volume being ~5 mkg at | 125/kg. However,
reduction in raw material costs would improve margins to ~7%, thereby reducing the
reported loss for the quarter
McLeod Russel Sales in Q4FY12 are expected to be lower YoY due to dip in sales volume to 17.5 mkg
(10.8 mkg domestic & 6.6mkg exports) & realisations to | 117.2/kg. Sales from Africa
are estimated at 6.5 mkg at | 88/kg. Going ahead, we expect, tea prices to improve
significantly, thereby benefitting McLeod
Source: Company, ICICIdirect.com Research
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