Mcleod Russel
Loss of crop due to unfavorable weather did not go too well for the company. McLeod Russel’s Q3FY15 performance was disappointing. The company’s net sales for the quarter rose by a tepid 3% (YoY) at Rs.473 crore. Operating cost came in at 83% of the net sales compared to 74% in previous Q3. Employee cost remains the highest outgo at Rs.140 crore which is 36% of the entire expenses of the company.
EBITDA was down 26% at Rs.107 crore and net profit for the quarter was down 38% at Rs.80 crore. During the quarter, its total crop was down by 15 lakh kgs at 216 lakh kgs. It sold 271 lakh kgs which is up 3 lakh kgs. The selling price for the quarter was at Rs.173.44/kg, which is Rs.2.51/kg higher. This price is much lower than the Q2 price, which was at Rs.186.43/kg. The company expects tea prices to pick up from next quarter, subject to improvement in geopolitical environment in Middle East and Russia. In India, though tea prices are expected to climb up, it could be offset by higher revision in wages, effective 1st Jan 2015. The company is expected to begin negotiations of wages for the next three years and it expects wage hike to be around 13 -15% for the first year. This wage revision is sure to have an impact on the margins of the company in the coming months.