The Hindu Business Line : Tata Tea keeps its options open on plantations

ALL options with reference to Tata Tea's plantations are being kept open, senior company officials said declining to specify whether that could amount to an exit from the business.

"We shall have a sustainable plantation business existing though not necessarily under a Tata Tea P&L. At this stage, please do not speculate on what option we will exercise," Mr Percy Siganporia, Managing Director, said at the company's press briefing on its first quarter results here today.

According to him, the solution for Tata Tea's loss making plantation business could vary from case to case and any move taken will respect the Group's stance on corporate social responsibility.

Across its estates - in West Bengal, Kerala, Assam and Tamil Nadu - the company's losses at last fiscal's close were higher than in the previous year.

While Tata Tea has taken steps to contain costs at its estates, the Indian plantation business has for long been attached to high operating cost. Asked if the current paradigm of operation was still attractive for getting foreign direct investment into the sector, Mr Siganporia merely said, "Till recently, people were buying."

For the quarter ended June 30, 2004, Tata Tea reported a profit after tax of Rs 22.45 crore (Rs 22.33 crore for the previous corresponding period) on income from operations of Rs 205.75 crore (Rs 181.22 crore). Officials pointed out that some of the dividend income which traditionally accrues in first quarter was expected now only in the second.

The company's consolidated worldwide turnover was Rs 707 crore (Rs 679.39 crore) with a profit after tax of Rs 56.03 crore (Rs 53.57 crore). Tetley's contribution included an eight per cent rise in profit after tax to Rs 28.04 crore but a marginal dip in turnover to Rs 450 crore (Rs 459 crore) due to reduced promotional activity and adverse impact of currency fluctuations.

Mr Siganporia said these results were turned in despite a spurt in competition globally. Tetley, which has improved its share in main markets, is now studying the global ready to drink (RTD) market for a possible foray. With Tata Tea, it is already present in a third of the global black tea market and has a growing presence in the segment of fruit, herbal and specialty teas.

Recent firming up in tea prices have improved unit realisation at the company's plantations but there is also the impact of reduced crop owing to adverse weather to cope with.

Domestically tea prices have been slowly rising to the extent that low cost players in the tea business have been feeling the pressure.

Caused by a shortfall in crop in both South and North East India, the impact on prices is being felt through the traditional peak season as well.

Added to it is a slow firming up in orthodox tea prices as a cascading effect of price rise in Sri Lanka, Indonesia and Vietnam. Overall, there is slight buoyancy in black teas for the West Asia, CIS and sub-continental markets.