Bisnauth Tea Bottomline Tangos With Ascending Prices

Margins of tea companies have been under squeeze for quite some time now. The rising trend in tea prices since the second half of the last fiscal has helped most companies improve their bottomline. Bisnauth Tea Company, member of the B M Khaitan-promoted Williamson Magor group, is one of them.

In the first half of 1997-98 the company recorded a nearly 19 per cent sales growth. In spite of a more than six per cent rise in interest and a seven per cent increase in depreciation, the company registered a nearly 43 per cent jump in profits. Profitability ratios thus improved significantly during the period. In the last year Bisnauth Tea started to improve overall performance.

 

The company registered a 31 per cent profit growth in 1996-97. This was despite a fall in production. Bisnauth produced 179.88 lakh kg of tea in 1996-97 against 180.51 lakh kg the previous fiscal. The company also witnessed a 54 per cent drop in PAT growth.

Tea production suffered due to the extreme conditions prevailing in Assam in the latter part of 1996-97. Prices rose 20-25 per cent, which helped the company improve its bottomline. The beginning of the season saw tea prices touch new highs. Auction prices rose to Rs 54 per kg in March from Rs 49 in the beginning of 1997. It further climbed to Rs 75 in September.

Tea is one of the major foreign exchange earners for the country. Exports from India, however, slipped to around 154 million kg in 1996 against 164 million kg the previous year. In 1996-97 the target for export was 180 million kg. But the country was able to export only 160 million kg.

Against this backdrop, Bisnauth Tea was able to increase export earnings by 19 per cent in 1996-97.

The company was also able to raise profitability ratios in 1996-97. Operating margins climbed from 26.84 per cent to 30.10 per cent, while net profit margins went up from 4.85 per cent to 5.74 per cent. Similarly, return on net worth increased to 3.29 per cent from 2.51 per cent while return on capital employed rose to 10.22 per cent from 7.99 per cent.

During the year, Bisnauth Tea spent Rs 3.62 crore for upgradation and modernisation of factories. The company has deployed a contingent of the Assam Tea Plantation Security Force to protect its estates from growing militancy. It also incurred an expenditure of Rs 35 lakh on donation in 1996-97 compared with Rs 52 lakh the previous year.

During the year, Bisnauth Tea was able to decrease its sundry debtors which dropped nearly 67 per cent to Rs 62.46 lakh in 1996-97 against Rs 1.92 crore the previous year.

According to latest estimates of the Consultative Committee on Plantation Association, tea production in the country in 1997 was a record 805 million kg against 780 million kg the previous year. While Kenya recorded a 40 per cent fall in production, Sri Lanka saw only a marginal increase. Further, in 1997 average tea price increased to Rs 60 per kg compared with Rs 49 per kg the previous year. There has been a rapid growth in exports.

Tea exports in 1997 stood at 190 million kg, 36 million kg or 23.5 per cent more than the previous years 154 million kg. The steady erosion in the value of the rupee is also likely to help the tea sector increase export margins.

Bishauth Tea expects these factors to help record a better performance in the second half of the current fiscal.