Mcleod Russel
Mcleod Russel is the world's largest tea producer, producing around 100 million kgs of tea per annum from its tea estates in Assam, West Bengal, Vietnam, Uganda and Rwanda. In all, McLeod owns close to 97,710 acres of tea plantations in India, Vietnam, Rwanda, and Uganda. It provides direct employment to over 90,000 people.
For Q1FY15, lower production and a mere 96 paise rise in tea selling price from previous Q1, lower sales, higher staff expense on account of wage revision since 1st Jan’14, all together pushed the company into a loss. the company ended the quarter with an operating loss of Rs.39 crore and net loss of Rs.32 crore compared to net profit of Rs.26 crore in previous Q1. In terms of production, it was down by 62 lakh kgs (YoY) at 178 lakh kgs and sales was down 43 lakh kgs at 56 lakh kg. Sales realization was at Rs.176.89/kg compared to 175.93/kg in Q1FY14.
There has been substantial crop loss this year and tea prices are expected to rise and hence new higher prices could be seen from second quarter. More importantly, the company is looking at de-risking its plantation business and is looking at venturing into branded packet tea business and also into other agriculture commodities. Given the rising vagaries of climate, especially in Assam where it holds maximum tea plantations and high cost of acquiring new plantations, for the future, the company feels a diversification is essential. News on this front and expected hike in tea prices as auctions for the new season could be the next trigger for the stock.