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Tata Consumer's salt, food business to drive growth but low tea prices may hurt

Tata Consumer's salt, food business to drive growth but low tea prices may hurt

Tata Consumer's salt, food business to drive growth but low tea prices may hurt
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By Mangalam Maloo  Oct 19, 2022 11:46 PM IST (Published)

Tata Consumer Products will report its financial results for the July to September period on Thursday in which its revenue is likely to grow but profit not as much while margins may even shrink, according to analysts polled by CNBC-TV18.

Tata Consumer Products (TCP) will report its financial results for the July to September period on Thursday in which its revenue is likely to grow but profit not as much while margins may even shrink, according to analysts polled by CNBC-TV18.

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The FMCG firm’s revenue is likely to see a 10 percent growth to Rs 3,340 crore, up from Rs 3033.2 crore in the second quarter of the last fiscal, according to the CNBC-TV18 poll. Analysts expect profit after tax (PAT) for the three-month period to rise only a marginal 3 percent annually to Rs 270 crore.
According to them, Tata Consumer’s branded business in India shall grow by nearly 8 to 10 percent led by more than 20 percent growth in the salt business. The food business in India is likely to witness 20-25 percent, they said.
However, estimates suggest that the margin may shrink to 12.7 percent, down year-on-year from 13.6 percent.
Lower tea prices in India, i.e a 5 percent decline in domestic tea sales due to price cuts is expected while depreciation of the British pound sterling⁠ (GBP) versus the US dollar would erode gross margins, analysts said. They added that higher power costs in the UK are likely to further hurt business.
It must be noted that TCP, the second largest branded tea company globally, has a consolidated annual turnover of Rs 12,425 crore with operations in both Indian and International markets. Its key brands include Tata Tea, Tata Salt, Tetley, Eight O'Clock Coffee, Tata Coffee Grand and Himalayan Natural Mineral Water.
According to analysts, another factor that may affect margins is the renewal of purchase contracts of coffee at spot (higher) price.
The analysts are also awaiting the management's commentary on cost savings on account of the simplification of the group structure.
Ahead of the financial results for the September ended quarter, Tata Consumer shares ended 1.3 percent lower at Rs 764.35 on BSE. At this level, the stock is 11 percent below its 52-week high of Rs 861.75.
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