A revival in the domestic plantations business and the healthy performance of its US operations saw Tata Coffee post a strong 13.4 per cent growth in consolidated revenues for the recent March quarter over the year-ago period. A jump in other income, a drop in interest costs, and cheaper inputs helped net profits grow 81 per cent for the quarter.

The results, which were announced after market hours on Friday, pushed the stock to a gain of 6.5 per cent in today's trade.

US operations help

The value-added products division accounts for most of the consolidated revenues, at 82 per cent. The bulk of this division is made up of the Eight O’ Clock coffee subsidiary in the US. The company has been pushing single-serve and smaller size packs to drive consumption in Eight O’ Clock.

Over the past two quarters, growth in the value-added products division has recovered. Revenues grew 5 per cent in the March 2015 quarter, building on a good 15 per cent growth in the December 2014 quarter over the year-ago period. Earlier quarters had seen growth slip. This apart, higher prices of coffee beans helped improve realisations in the plantations segment. Volume growth for the March 2015 quarter in both plantations and value-added products was healthy.

Margins improve

A sharp drop in promotional expenditure (consolidated), which shrank 27 per cent in the March 2015 quarter over the year-ago, helped operating profit margins jump 10 percentage points to 23 per cent compared to the year-ago period. Tata Coffee has been cutting back on its adspend and promotions for four quarters now.

The company also reduced interest outgo in the March 2015 quarter by a good 13 per cent. An ‘other income’ component, comprising compensation, received on account of crop damage due to Government activities, also helped net profit growth. The net profit margin for the March 2015 quarter, at 8.7 per cent, is a good improvement from the 5.5 per cent recorded in the March 2014 quarter.

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