Tata Consumer Products Q1 Results: Profit Up 24%, Margin Expands

Tata Consumer Products Ltd.'s first quarter net profit rose in line with analysts' estimates, led mainly by the domestic foods business.

Net profit of the maker of Tata Tea and Tata Salt increased 24% to Rs 316.6 crore in the quarter ended June, according to an exchange filing on Wednesday. That compares with the Rs 324.9 crore consensus estimate of analysts tracked by Bloomberg.

Tata Consumer Q1 FY24 Highlights (Consolidated, YoY)

• Revenue rose 12% to Rs 3,741.2 crore, as compared with the estimated Rs 3,761.3 crore.

• Operating profit up 19% to Rs 545 crore as against an estimate of Rs 536.2 crore.

• Margin expanded to 14.6% from 13.7% despite higher expenses. Analysts had pegged the metric at 14.3%.

• Total expenses increased 12% to Rs 3,304.36 crore.

• Advertising-to-sales for the domestic business stood at 7.1%.

"During the quarter we saw positive results from the interventions put in place for the branded tea business, which grew volumes for the second consecutive quarter," said Sunil D'Souza, managing director and chief executive officer at Tata Consumer Products.

Key Highlights

• India business grew 15.5% to Rs 2,477.9 crore.

• International business revenue rose 7% to Rs 894.8 crore as demand remained soft. In constant currency terms, revenue rose 3%.

• Revenue in non-branded businesses, which include plantation and extraction businesses for tea, coffee and other produce, rose 7.2% to Rs 377.1 crore. Revenue increased 5% in constant currency terms.

• For the quarter, the domestic food business saw a revenue growth of 24% and volume growth of 6%.

• Beverage business grew 10% and volume growth stood at 3%.

• Modern trade and e-commerce grew 22% and 28%, respectively, on a year-on-year basis with domestic total reach now at 3.9 million outlets.

Tea volume grew 3% during the quarter. Citing Nielsen data, the company said its market share in the tea business declined 50 basis points volumewise and 110 basis points in terms of value in June over the previous year.

Coffee continued its strong performance with a revenue growth of 21%.

Salt revenue grew 18% during the quarter, on a high base of last year.

D'Souza said that the company was able to maintain volume growth momentum in the salt business, despite the pricing actions taken earlier to manage inflation. However, Nielsen data suggests that there was a market share loss of 30 basis points led by the low-priced salt brands.

Nourishco, Sampann and Soulfull—referred to as growth businesses—grew 58% and collectively account for 20% of the domestic business now.

NourishCo, the ready-to-drink brand, saw a 60% revenue growth over the previous year despite an elevated base and adverse weather conditions. The Sampann portfolio posted a growth of 51% YoY, albeit on a soft base.

"The profitability profile of our growth businesses improved significantly, primarily led by NourishCo," according to the company.

The top line of Tata Starbucks, the joint venture with Starbucks Corp., grew 21% over the previous year. The premium coffee chain opened 16 new stores during the quarter, taking the total count to 348 across 46 cities.

"We continue to see improving demand trends for our core categories and remain cautiously optimistic going forward, subject to rural recovery and a normal monsoon," the company said in its investor's presentation.

As for the international market, where brands such as Tetley Tea in the United Kingdom and Eight O'Clock coffee in the United States are sold, the company said inflation started to plateau, even as the demand trends remained soft. Pricing actions and structural interventions, however, have led to a sequential improvement in margin for three quarters now.

Shares of Tata Consumer Products closed 0.67% higher on Wednesday before the results were declared, as compared with a 0.53% gain on the benchmark BSE Sensex.