Tata Tea : Reco Price Rs.711.80
Operating profit grew by 5% in Q4FY09 on the back of decline in advertisement expenses during as a % to sales from 21.7% in Q4FY08 to 11.8% in Q4FY09. Net Profit before tax & exceptional items declined by 1% y-o-y during Q4FY09 because of increase in depreciation.
Q4FY09 Results below our estimates – Tata Tea (consolidated) posted flat growth of 4% yo-y to 1,226.1 crore in Q4FY09. This was despite the 27% growth in domestic tea business during Q4FY09. Operating profit in Q4FY09 grew by 5% to Rs 168.9 crore and OPM was flat at 13.8%. Net Profit was reported at Rs 23.5 crore.
FY09 Results – Net sales grew by 12% to Rs 4,874.0 crore from Rs 4,336.3 crore in FY08 on the back 10% growth in tea business and 20% growth in coffee business. Operating profit was Rs 650.5 crore, 8% down compared to FY08 mainly because of increase in consumption of raw material on account of hardening of commodity prices. OPM declined by 303 bps to 13.4%. Interest cost declined drastically. Net profit before exceptional items increased by 21% to Rs 530.8 crore on account of increase in interest outflow. Other exceptional items include restructuring cost of Rs 23.8 crore, provision for retirement of Rs 54.9 crore, expenses of new business initiatives of Rs 5.9 crore and amortization of employee separation scheme of Rs 8.9 crore net of profit on sale of investment of Rs 5.1 crore. Net profit for the year was Rs 831.9 crore, not comparable with last year as it included one time item of profit on sale of investments in Energy Brands Rs 1,607.5 crore.
Valuations – More than 70% revenues and ~80% of EBIT come from tea business, which is likely to face margin pressure in FY10 as tea prices are likely to remain firm on account of decline in production by 5%.
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