Concall Summary: Tata Coffee Q4FY20

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Business update

  • The Vietnam facility is operating normally without any interruptions
  • Prices of both arabica and robusta variety were down during the quarter gone by but in March there was some price spike in Arabica prices
  • The instant coffee business in India and Vietnam continues to do well
  • The order book for the global market continues to be healthy for the coming quarters despite the problems of COVID 19
  • The Vietnam plant has operated at full capacity in March end and customers continue with interest

Participants

  • Care PMS
  • AP Advisors
  • INFINA Finance
  • IIFL
  • Securities Investment Management

QnA

  1. The EBIT margins for 8’o clock coffee business is around 20%
  2. The harvesting of Brazilian crop is expected to commence and it is expected to be a good crop for the year and pricing for coffee is expected to remain steady
  3. The outlook for the plantation part of the business is positive because over the last 5 years replanting is being carried out which should now start bearing fruits
  4. The whole plantation apart from one tea estate that is under long term lease is freehold land owned by Tata Coffee and the area under ownership should be around 10000 hectares/22500 acres
  5. No plans to enter into B2C space and that domain lies with Tata Consumer Products
  6. Coffee harvest majorly happens in Q3 & Q4 and hence harvesting has been complete and thus production shouldn’t be an issue
  7. The coffee plant in Vietnam will take around 3-4 years time to reach full capacity utilization when full 5000 MT can be achieved
  8. In Q1 FY21, there seems to be no problem from demand side for coffee as the order book is full but there are still problems in terms of evacuating production due to inability of containers and some ports not operating at full capacity
  9. Have not seen any demand due to the inability of global counterparts in supplying
  10. The Vietnam operations have been EBITDA positive for the last 3 quarters and EBIT positive for the last two quarters
  11. The debt for the 8’o clock business is gradually coming down
  12. No plans to sell the tea plantations to pare down debt but putting efforts to turnaround the plantation business
Also Read on FinMedium:  Concall Summary: V-Guard Q4FY20

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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