Tata Consumer Q1 Results: Net Profit Rises But Misses Estimates, Margin Expands
Tata Consumer Products Ltd.'s first-quarter profit missed estimates on a one-time loss even as cost cuts aided its margin.
Net profit attributable to shareholders of the maker of Tata Tea and Tata Salt rose 243.5% sequentially to Rs 185.1 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 205.9-crore consensus estimate of analysts tracked by Bloomberg.
The company reported an exceptional item amounting to Rs 63.9 crore.
Revenue fell 0.9% to Rs 3,008.5 crore, compared with the estimated Rs 3,093.4 crore.
Operating profit rose 33.1% to Rs 399.5 crore, against the Rs 380.3-crore forecast.
Margin expanded to 13.3% from 9.9%. Analysts had pegged the metric at 12.3%.
Operating margin expanded aided by lower expenses, including a 26.9% sequential fall in advertising expenses.
The company said in an earnings presentation its India business posted a "good performance" even amid the second wave of the Covid-19 pandemic, but its international markets witnessed a year-on-year decline owing to pantry loading in the base quarter.
Tata Consumer said the pantry stocking it witnessed in the quarter ended June 2020 was largely absent this year. It witnessed restricted store timings and disruptions to its last-mile logistics.
Volumes in beverages segment grew 3% year-on-year.
Volumes in food business grew 17% over preceding year.
E-commerce contributes 7.3% of domestic sales.
The company has a direct distribution reach in over eight lakh outlets, which it plans to ramp up to 10 lakh by September. It has onboarded over 3,000 distributors in the hinterland.
“We continue to streamline operations and drive synergies, including network optimisation in India and simplification of international business,” Tata Consumer said in the presentation.
Its U.S. coffee volumes contracted 16% year-on-year, as did its international tea business, which fell 9%. Tata Coffee, including Vietnam, witnessed 6% volume decline.
“Despite the severe second wave of Covid-19, our India businesses performed well with both the beverages and food businesses recording strong double-digit growth (year-on-year) and tea and salt recording market share gains,” Sunil D’Souza, managing director and chief executive officer of the consumer goods firm, was quoted as saying in a statement.
“Even though there was significant disruption on the ground, we sustained momentum in expanding our distribution reach, continued to drive innovation and invest behind our brands,” he said.
The company said it's witnessing a V-shaped recovery as demand for coffee and tea have returned to pre-pandemic levels since the latter half of June.
Among the consumer goods makers on the Nifty 50 that have so far announced earnings for the April-June quarter, Nestle India Ltd., and Hindustan Unilever Ltd. saw their margin narrow over the preceding three months as commodity costs rose, while Britannia Industries Ltd.’s remained steady. India’s largest consumer goods maker said it would need to navigate the next couple of quarters of “very high inflation”. Nestle India, too, highlighted rising commodity prices across oils and packaging materials. Britannia, too, witnessed an increase in the prices of palm oil and crude.
Shares of Tata Consumer closed 0.9% higher before the results were announced compared with a 1.5% rise in the benchmark Nifty 50.