CCL Products Upbeat On Growth Despite Rising Coffee Prices

CCL Products (India) Ltd. expects to sustain its growth momentum even as prices of green coffee surge globally because of pandemic-disrupted supply chains.

Revenue growth for the maker of Continental Coffee partly came on price hikes to offset a rise input prices, Challa Srishant, managing director of CCL Products told BloombergQuint’s Niraj Shah. Srishant, however, expects volume growth to sustain or even show "slight improvement" in the fourth quarter ending March.

Q3 FY22 Highlights (YoY)

• Revenue growth of 43% on a year-on-year basis.

• Ebitda margin declined 136 basis points.

• Improved demand with 18% year-on-year growth in exports through India in CY21.

Green coffee prices are at decadal highs but CCL Products does not expect it to impact profitability as it has “back-to-back contracts for raw material”, said Srishant.

Several factors have led to the steep inflation, including supply disruptions, a damaged coffee crop in Brazil, and increased demand. According to Srishant, while the Arabica crop suffered, the supply of Robusta coffee continues to be "normal and strong", and he does not foresee the shortage driving prices higher.

While Srishant refrained from giving exact outlook, he said the company maintains its target of doubling revenues and profits in four years.

Capacity Expansion

CCL Products is also confident of volume growth , aided by capacity additions. The company has already started trial production from agglomeration facility in India. And the 3,500 metric tonnes of augmented capacity in the Vietnam unit came on stream in the last quarter.

The Vietnam unit is expected to double its capacity from the third quarter of FY23, and the outlook for volume growth up to FY24 is strong, said Srishant.