TATA COFFEE results 2009

Tata Coffee is primarily into coffee exports and also has small presence in the Indian coffee market.
Tata Sons has disclosed that it has pledged its entire 100% holding in its group firm Tata Coffee to raise resources. Tata Sons have a 57.48% stake and now it is has been pledged entirely. Yet, the stock price remained firm yesterday at rs.152 levels.

The company had done very well in Q3FY09 where net profit on QoQ rose 61% and YoY by 304% at Rs.12.25 crore. And this is despite a QoQ 34% fall in net sales at Rs.67.14 crore, which YoY has slipped 8%. But this could be attributed to two factors – a high component of other income which during the quarter was at Rs.14.69 crore, which is actually more than the net profit. Secondly, it managed to bring down the operating costs by 34% on a QoQ and 9% on a YoY. As per the practice of the company, a portion of the plantation related costs have been carried forward and will be charged during the period when the crop is harvested.

In the coming months, exports are likely to take a knock due to slowing Russian demand. Plus, the company has cut prices of its instant coffee products in the face of the global slowdown and falling prices of raw material. The price cut is to the tune of 10-15%. If volumes go up, the price cuts would help but if volumes remain low, despite the prices coming down, Q4 could be the toughest quarter of FY09. Plus the pledging of the shares by Tata Sons will weigh on the minds of the market men, indicating an underlying liquidity crunch. thanks