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Dip in output, rising costs dent McLeod Russel’s profit

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Hopeful: Mr Aditya Khaitan, Managing Director of McLeod Russel India.
Hopeful: Mr Aditya Khaitan, Managing Director of McLeod Russel India.

The world’s largest tea producer, McLeod Russel India Ltd, today reported nearly 49 per cent drop in net profit to Rs 19 crore on the back of a stagnant topline during the first quarter of this fiscal as against the same period last year.

Though average realisation increased by over Rs 30 a kg, this was clearly not enough to compensate the decline in production due to unfavourable weather conditions and rise in costs. In the net effect, operating profit declined by as much as 60 per cent.

Its Managing Director, Mr Aditya Khaitan, however, is hopeful to maintain the profitability in the current quarter through higher price realisation.

July-September, generally contributes 65 per cent of the company’s output. Overall the first half of the fiscal contributes nearly three-fourth of the production. Naturally, any dent in profitability during the period may leave an impact on the company’s annual performance.

“We hope to cover increase in costs and production losses through higher realisations,” Mr Khaitan told reporters after the company’s annual general meeting on Friday.

Exports

According to him, dip in production has impacted tea exports to markets such as the UK, Ireland and Germany in the first two months of the fiscal.

However, he is expecting export realisations for the year to improve primarily riding on rupee devaluation and increase in exports to Iran. Also, dry weather conditions in Africa and a payment crisis between Iran and Sri Lanka may benefit Indian exporters.

The company’s stock closed at Rs 319.05, down by nearly 5 per cent, on the BSE.

Abhishek.l@thehindu.co.in

(This article was published on July 27, 2012)
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