NAIROBI: The stock prices of tea companies are in focus as Kenya faces drought like conditions. Being the world’s biggest tea producer, Kenya could lift global tea prices. The higher tea prices could boost export revenues for domestic tea companies.
In an interview with CNBC TV18, Kamal Baheti, CFO of tea producing company, McLeod Russel, said that from the month of January till March period, Kenya has lost production of 15-20 million kilograms and therefore tea prices are higher by 25-30 percent for the year.
The company is hopeful to see positive impact of the calamity on quantities and price point of view for the exports from India. Though the drought will not have any positive impact Q4 results of the company, but moving towards Q1 FY16, they will see improved quarter compared to last year.
In Q3 the company’s realisation for domestic companies remained weak. Giving the reason behind the same, he said the domestic companies got impacted due to two factors. Firstly, the crop loss because of lower rainfall during monsoon in Assam. Secondly, the domestic companies suffered because the quantities and the prices of exports were lower as compared to the previous year.
With drought in Kenya, the company believes that the quantity and price counts will improve for the industry to move forward, particularly domestic companies in India. Overall, the company is expecting 10-15 percent increase in prices with recovery in crop.
The exports from the tea industry dropped from 23 million kilograms in the previous year to around 13-14 million kilograms last year. But looking at the international market conditions, they believe to go back to 20-22 million kilograms of exports at the higher price which will help overall averages on the prices.
For FY15, the company had intended Rs. 100 crore capex. Talking about by when the entire capex will start generating revenues, he said, “Rs. 40-50 crore of total capex has been the maintenance capex and another Rs. 40-50 crore had been for the additional capacities into our existing factories.
That should bring in around 3-4 million kilograms of additional production as compared to what we have done in the previous years plus the additional production because of the weather. So, what we are expecting this year that our overall production will be 7-8 million kilograms higher than the previous years.
We should get back that 85-86 million kilograms of production which we did only 77 million kilograms last year. So, this is how Rs. 100 crore of capex is been done”.
In 2014, the company’s total consolidated EBITDA was around Rs. 450 crore. But, looking at 2015, they see a drop by around Rs. 200 crore. And, as the industry looking positive, the company is hopeful to get Rs. 400 crore of consolidated EBITDA next year
