Tata Consumer Products Q2 profit rises 5%, revenue climbs 11%

Tata Consumer Products Ltd reported a 5% rise in consolidated net profit for the second quarter that was in line with quarterly earnings growth of larger rivals Hindustan Unilever and Nestle.

The food and beverage arm of the Tata Group said Friday net profit for the July-September period rose to Rs 286 crore from Rs 273 crore a year earlier. Consolidated EBITDA also grew 5% to Rs 420 crore.

Revenue from operations, net of exits, grew by 11% to Rs 3,033 crore as compared with the corresponding quarter of the previous year, mainly driven by a growth of 14% in India beverages and 23% increase in India foods business.

The company said its international business was flat on a like-to-like basis due to an elevated base last year because of increased home consumption of tea and coffee.

Tata Consumer is the second-largest branded tea company in the world. Its portfolio of products includes tea, coffee, water, salt, pulses, spices, ready-to-cook offerings, breakfast cereals and snacks.

Its food portfolio includes brands such as Tata Salt, Tata Sampann and Tata Soulfull. Its beverage brands include Tata Tea, Tetley, Eight O’Clock Coffee, Tata Coffee and Himalayan Natural Mineral Water.

Earlier this week, bigger rival Hindustan Unilever reported an 8.8% rise in its quarterly net profit while Nestle India posted a 5% increase in its earnings.

Shares of Tata Consumer have fallen 10.5% from the one-year high touched in early September but are still up 73% over the past year. The shares ended 2.4% down on Friday at Rs 795.60 apiece in a weak Mumbai market.

Tata Consumer Products Q2: Other highlights

1) The India packaged beverages business recorded 10% revenue growth to Rs 1,266 crore.

2) The India foods business registered 23% revenue growth to Rs 712 crore.

3) E-commerce recorded 39% growth YoY and contributed around 7% of domestic sales.

4) The India beverages business recorded pre-tax profit of almost Rs 170 crore, up from Rs 145 crore.

5) The India foods business registered a drop in pre-tax profit to Rs 75 crore from Rs 93 crore.

6) Tata Starbucks revenue grew 128% in Q2 on last year’s low base that was impacted by reduced mobility.

7) EBITDA margin narrowed to 13.9% in Q2 from 14.4% but net profit margin widened to 8.6% from 8.4%.

Tata Consumer Products management commentary

The company said profit rose 5% despite a higher growth in revenue because of higher investments behind brands and other expenses as well as lower contribution from joint ventures and associates, led by tea plantation companies.

Sunil D’Souza, Managing Director and CEO of Tata Consumer Products, said the company delivered another quarter of double-digit revenue growth despite a high base last year.

“Our India business performed well. Both our beverages and foods businesses recorded strong revenue growth with both tea and salt seeing market share gains,” he said. The company continues to expand its distribution reach across channels while investing in its brands, he added.

D’Souza also said that the worst of tea inflation seems to be over but the company is now seeing inflationary trends in packaging and freight costs. “We will address these by further strengthening operating efficiencies and driving net revenue management,” he said.