(Reuters) -India’s Tata Consumer Products reported second-quarter earnings above expectations on Monday, helped by easing tea prices, a key commodity for the company.
The company’s consolidated net profit rose 11% on-year to 4.04 billion rupees ($45.96 million) in the three months ended September 30, above analysts’ average estimate of 3.69 billion rupees, per data compiled by LSEG.
Revenue, which rose 18% to 49.66 billion rupees, also beat analyst estimates of 47.36 billion rupees.
Tea prices, which hit a peak in June due to adverse weather conditions and supply chain disruptions, waned year-on-year for the bulk of the reporting quarter, brokerage Motilal Oswal said.
The company’s tea portfolio accounts for a significant portion of its revenue, and the lower prices helped its branded India business to record a 47.5% rise in earnings before interest, taxes, amortization and depreciation (EBITDA).
However, higher marketing expenses and a steep cost inflation in coffee prices – which led to lower profit in its international business – pressured its overall EBITDA margins, which declined 130 basis points to 13.6%.
Tata Consumer has been attempting to grow its packaged foods segment – which includes items such as chilli oil and instant noodles – as a percentage of revenue to hedge its margins against commodity price fluctuations.
Its ‘growth’ business, which counts such food items, saw a revenue growth of 27% year-on-year, faster than Tata’s overall revenue growth of 18%.
The company’s shares rose 2.8% after the results.
($1 = 87.8950 Indian rupees)
(Reporting by Hritam Mukherjee and Ananta Agarwal in Bengaluru; Editing by Janane Venkatraman)
