Tata Global Beverages ' consolidated net profit for the third quarter fell 11% year-on-year to Rs 64.06 crore, hurt by exceptional losses and volatile coffee prices, apart from increased ad spends.
The maker of Tetley Tea reported net sales of Rs 1,793.20 crore, up 12% from a year ago.
Sales rose on the back of improved performance in most major markets and price hikes taken in some countries, Tata Global Beverages said.
While tea prices have been quite stable, volatile coffee prices hurt operations, especially in the US, where the company owns the Eight O'Clock Coffee Co., said MD Percy Siganporia.
"In the US, higher trade spends to gain volumes and significantly higher green coffee prices eroded margins," he said in a interaction with reporters.
The company's total raw material costs in third quarter were Rs 698.29 crore versus Rs 615.86 crore in the year ago quarter. Advertising and sales costs were also sharply higher at Rs 340.62 crore, compared with Rs 278.59 crore a year ago.
That apart, Tata Global Beverages also had exceptional loss of Rs 16.03 crore, related to redundancy costs incurred on business restucturing and costs incurred on new initiatives and projects.
Meanwhile the company has hired consulting firm AT Kearney to execute a cost saving exercise across the group in the current uncertain economic conditions. As a part of this, Tata Global will focus only on relevant and fast selling products like black tea and green tea in UK, while niche brands will take a backseat for now.
In India the company has phased out the tea based beverage T!ON, which it had launched in Tamil Nadu.
Siganporia said all of its core tea brands in India had shown strong growth in the quarter. Tata Tea is No 1 in India with a volume market share of 19.5% and value market share of 21.3% in December, Siganporia said, citing AC Nielsen figures.
The company gets a majority of its revenue from its global operations and is hungry for more. Siganporia said the company was open to acquisitions and US and Russia would be key regions for buyouts going ahead.
"We see exciting opportunities in the beverage space in US and Russia," he said.
Shares of the beverage maker ended today's trade up 2.14% at Rs 95 a piece.
Source: www.moneycontrol.com
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