Tata Coffee Limited Q2FY22 Result Analysis & Conference Call Highlights –

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Q2FY22 Result Analysis:

Tata Coffee- Q2FY22 Result
  • The Consolidated revenue of the company is Rs. 548.5 Cr. in the quarter ended 30th September 2021 against Rs. 533 Cr. in the quarter ended 30th June 2021 and Rs. 543 Cr. in the Quarter ended 30th September 2020, up by 3% QoQ and 0.9% YoY.
  • The Earnings before Interest, Tax, Depreciation & Amortisation (EBITDA) of the company for the quarter ended 30th September 2021 is Rs. 102 Cr. against Rs. 88.7 Cr. in the corresponding quarter in the last financial year, amounting to growth of 15.3%, while sequentially, the EBITDA has increased by 13.3% from Rs. 90 Cr. in the Q1FY22.
  • EBITDA Margin stood at 18.6% in Q2FY22 expanding by 160 bps QoQ and 230 bps YoY from 17% & 16.3% in Q1FY22 and Q1FY21 respectively.
  • The Profit Before Tax (PBT) of the company has increased by 12.2% QoQ from Rs. 62.7 Cr. in Q1FY22 to Rs. 70.3 Cr. in Q2FY22 and 21.6% YoY from Rs. 57.9 Cr. in Q2FY21.
  • The company has registered a Net Profit of Rs. 34 Cr. for Q2FY22 up by 18.9% QoQ and 46.7% YoY from Rs. 28.6 Cr. in Q1FY22 and 23.2 Cr. in Q2FY21.

H1FY22 Performance:

Tata Coffee- H1FY22 Performance
  • In H1FY22, the Revenue from Operations of the company is down by 4.4% from Rs. 1,131 Cr. in H1FY21 to Rs. 1,081 Cr. in H1FY22.
  • The EBITDA in the half-year period of FY22 is Rs. 192.5 Cr. up by 3.4% against Rs. 199.3 Cr. in H1FY21.
  • The EBITDA Margin is 17.8% in H1FY22 expanded by 20 bps.
  • The PBT of the company is Rs. 133 Cr. for H1FY22 from Rs. 136.9 Cr. in H1FY21.
  • The Net Profit of the company is Rs. 62.7 for the H1FY22, up by 6% from Rs. 59.1 Cr. in H1FY21.
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Segment-Wise Revenue & EBIT:

Tata Coffee- Segment-Wise Revenue & EBIT
Tata Coffee- Segment-Wise Revenue & EBIT

Tata Coffee Limited has 2 major segments namely Plantations and Value Added Products

i) Plantations:

  • Plantations include Cultivation, Manufacture, and Sale of Coffee and other plantation crops.
  • The Plantations revenue of the company has decreased by 18.1% YoY from Rs. 96.6 Cr. in Q2FY21 to Rs. 79.1 Cr. in Q2FY22. Quarter-on-Quarter, the Plantations revenue was Rs. 89.2 Cr. in Q1FY22 down by 11.3%.
  • The EBIT Mix of Plantation segment stood at Rs. 3.4 Cr. in Q2FY22 against Rs. 2.08 Cr. in Q2FY21 up by 61.5% YoY and down by massive 47.5% QoQ from Rs. 6.4 Cr. in Q1FY22.

ii) Value Added Products:

  • The revenue from Value Added Products has increased from 6.05% YoY from Rs. 451.2 Cr. in Q2FY21 to Rs. 478.6 Cr. in Q2FY22. Quarterly, the revenue from Value Added Products has increased by 6% from Rs. 451.4 Cr. in Q1FY22.
  • The EBIT Mix of the Value Added Products segment has gone up by 23% YoY from Rs. 69.3 Cr. in Q2FY21 to Rs. 85.2 Cr. in Q2FY22. But sequentially, this has gone up by 20.5% from Rs. 70.7 Cr. in Q1FY22.

Management Commentary:

Despite challenging conditions of unprecedented freight cost increases and inflationary pressures on input costs, including power and packing material, our overall performance has improved.

Our India Instant Coffee performance has been robust. We have seen stable performances across key geographies.

Our Vietnam operations continue to be healthy despite higher sea freight costs, and order pipeline continues to be encouraging. Our Subsidiary, Eight O’clock Coffee [EOC] has during the quarter recorded improved performance on account of favorable channel mix and better cost management.

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Conference Call India Highlights:

Business Performance:

  • Faced hindrances in the front of supply chain due to non-availability of shipping containers, and surge in input prices
  • Both India and Vietnam has reported strong sales performance across all key markets despite several hindrances
  • Plants in India are running at peak capacity.
  • Eight O’clock has a decent quarter. Instant Coffee side too had a good business but was impacted by Tea Business.
  • The coffee realization has remained higher maybe about 8%-10% YoY.
  • Coffee demand remains to be elastic being an essential commodity.
  • The rise in coffee prices will benefit the plantation business, but on the instant coffee side, being a branded play, the company can pass on the price.
  • Focusing more on Coffee Trading.
  • There is a pipeline of products that will be helping the Eight O’Clock business.
  • Launched 2 new brands: Tata Coffee Grand & Tata Sonnets.
  • The company is saturated in terms of capacity in India as well as Vietnam.
  • Commercialized some parts of Avocado plants.

Plantations:

  • Tea performance is affected on account of the weather issues in de-growing regions.
  • The New Seasonal Crop will come into commercialized from Q4FY22 only.
  • Majority of the Plantation business accounts to export. Started a project for Honey production.

Inventory:

High Inventory Levels due to rising prices and biological produce evaluation on the side of the plantation.

Vietnam Business:

  • The Plants in Vietnam operated at 95% capacity.
  • Covid-19 Situation is almost back to normal, but container issue easing will take some time.
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What Should Investors Do?

The Tata Coffee Stock has delivered a significant return of above 90% in this current year on account of rising coffee and tea prices and mismatch of Demand & Supply of the coffee stocks.

From investing viewpoint, one needs to deeply understand the sector especially Tea & Coffee to be able to decide on Coffee Stocks like Tata Coffee. Looking at the available growth in the industry, this stock can be a good pick for Conservative and Moderate Investors.

Do not consider this discussion as direct investment advice and hence consult a financial advisor before making any investment decisions.

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