(Reuters) – India’s Tata Consumer Products reported a smaller-than-expected third-quarter profit on Thursday, hurt by elevated domestic tea prices that squeezed the company’s margins.
The Tata group-owned company posted a consolidated net profit of 2.79 billion rupees ($32.2 million) for the October-December quarter, which was flat year-on-year. Analysts, on average, had expected a profit of 3.58 billion rupees, per data compiled by LSEG.
Tata Consumer, known for its ‘Tetley’ tea and its namesake brand of salt, was hurt by rising costs of domestic tea, the company said, as the commodity contributes nearly 60% to overall revenue.
Tea prices in India have been rising due to adverse weather conditions, higher production costs and supply chain disruptions, according to analysts.
Prices of tea in the northern parts of India increased 21% in the third quarter, while those in the southern parts jumped 38%, the company said, adding that this lifted raw materials costs by 34%.
Its Indian business, which sells packaged products including pulses and spices and accounts for 56% of profit, reported a 43% fall in profit during the quarter due to the surge in tea prices.
As a result, Tata’s margins on consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) contracted by 210 basis points year-on-year in the third quarter.
However, the company’s international businesses, which contributes nearly 30% to revenue, aided a 17% growth in overall revenue from operations to 44.43 billion rupees, beating analysts’ estimate of 43.98 billion rupees.
Revenue from the international business rose 8% and profit from the segment grew 53% year-on-year.
($1 = 86.6020 Indian rupees)
(Reporting by Ashna Teresa Britto; Editing by Sonia Cheema)
