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Tata Consumer Q1 Results: Profit Up 17%, But Margin Contracts

Tata Consumer's net profit attributable to shareholders rose 17% sequentially to Rs 255.5 crore in the April-June period.

<div class="paragraphs"><p>Range of Tata Consumer products. (Photo: Usha Kunji/ Source: BQ Prime)</p></div>
Range of Tata Consumer products. (Photo: Usha Kunji/ Source: BQ Prime)

Tata Consumer Products Ltd. saw a rise in its quarterly consolidated profit even as expenses jumped. But the earnings missed estimates.

Net profit attributable to the shareholders of Tata Tea and Tata Salt maker rose 17% sequentially to Rs 255.5 crore in the April-June period, according to an exchange filing. That compares with the Rs 272.4-crore consensus estimate of analysts tracked by Bloomberg.

Q1 Highlights (QoQ)

  • Revenue rose 5% to Rs 3,326.8 crore, compared with the estimated Rs 3,302.4 crore.

  • Operating profit rose 3% to Rs 456.6 crore, against Rs 463-crore forecast.

  • Margin contracted to 13.7% from 14%, dragged by higher expenses. Analysts had pegged the metric at 14%.

  • Expenses rose 5% to Rs 2,959 crore.

  • Cost of materials consumed rose 13.26% to Rs 1,360.5 crore.

  • Revenue from India business increased 9.8% to Rs 2,145.2 crore.

  • International business saw revenue decline 6% to Rs 836.6 crore.

  • Advertising spends down 6.18% to Rs 211.6 crore. It was, however, 33.7% higher than Rs 158.2 crore spent in corresponding quarter of FY22. As far as the India business is concerned, ad spends were up 48% YoY.

Year-on-year, the company reported an 11% rise in revenue. Profit before exceptional items and tax stood at Rs 403 crore, up 19%. The consolidated net profit was higher by 38%, the filings said. Margin for the India business expanded 20 basis points despite significant input cost inflation in salt and significantly higher ad spends, mainly supported by tea prices cooling off.

Within categories, the beverages business in India saw a 1% growth in volumes, according to the company.

"In India, coffee volume grew 43% year-on-year with revenue growth of 73% led by new SKU launches and roll out in new geographies," the company said. With prices of tea seeing corrections, however, the packaged beverages business recorded a 4% revenue decline on an elevated base that saw 24% revenue growth in the same period last year.

The market share in tea rose 40 basis points, it said citing Nielsen data.

The food business volumes fell 3%, while the revenue growth stood at 19% on an elevated base of last year. During the year, Tata Salt gained market share of 400 basis points with its premium salt portfolio growing faster, in line with the company’s premiumisation strategy. Revenue from salt business grew 20% and the premium salt portfolio posted 36% growth during the quarter, according to the company. Yet margins in salt business remained under pressure due to persistent inflation in input costs.

"We recorded market share gains in both our core categories of tea and salt in India. Our new engines of growth--NourishCo, Tata Sampann, Tata Soulfull and Tata Q--are making good progress and expanding their market presence," said Sunil D’Souza, managing director & CEO of the company.

Tata Sampann portfolio grew 6% during the quarter, while Tata Soulfull, the company said, also delivered strong growth.

Among Tata Consumer's subsidiary, NourishCo Beverages, saw a 110% revenue growth across products and geographies. Tata Coffee volumes, however, rose 3% during the June-ended quarter. "Revenue for the quarter grew 25% led by strong growth across both the extractions and coffee plantations," the company said.

In the international markets, both U.S. coffee and tea businesses saw volumes contract.

During the quarter, the company's modern trade channel grew 35% year-on-year, while e-commerce now accounts for 8.2% of India business sales, up from 2.5% in FY20, according to the company's investors presentation. Tata Consumer has expanded its wholesale reach by two times from the January-March quarter. It now aims to grow its direct outlet reach to 1.5 million outlets by end of FY23 from the current 1.3 million.

Tata Starbucks, the joint venture with Starbucks Corp., recorded a revenue growth of 238% for the quarter, albeit on a low base, led by normalised store operations with lower restrictions. It opened seven stores in Q1 and entered four new cities--Jalandhar, Anand, Nagpur and Calicut--taking the total store count to 275 across 30 cities.

"Given the inflationary environment and investments required for some of the new businesses, we will continue to optimize margins at the company level while remaining focused on growth," the company said.

Shares of the company closed 0.25% higher on Wednesday before the results were announced against a flat benchmark Nifty 50.