But Kamal Baheti, CFO, Mcleod Russel says Vietnam contributes just about 5 percent to its revenues and 6 percent to total production. The company doesn't export anything to China either. He feels the whole China-Vietnam issue is unlikely to have any impact.
As has been reported earlier also, we lost around 30 percent of the field crop but the rain had come in the last 5-7 days.
Kamal Baheti
CFO
McLeod Russel
The recent skirmishes in the South China Sea between China and Vietnam may be a cause of concern for companies like Mcleod Russel India that have exposure to Vietnam. The tea major in March announced the acquisition of a tea processing factory in Vietnam for over Rs 5 crore.
But Kamal Baheti, CFO, Mcleod Russel says Vietnam contributes just about 5 percent to its revenues and 6 percent to total production. The company doesn't export anything to China either. He feels the whole China-Vietnam issue is unlikely to have any impact.
Also Read: Tea prices may see 5-10% hike in 2014: McLeod Russel
He is generally expecting a 10-15 percent increase which means around Rs 15-20 increase per kilogram of tea during the year as a whole.
Below is the verbatim transcript of Kamal Baheti's interview with CNBC-TV18's Sumaira Abidi and Reema Tendulkar
Reema: You all have exposure to Vietnam. In fact one of your recent acquisitions was in Vietnam. We have heard about a lot of skirmishes on disputed sea waters with China. Has that impacted Vietnamese operations or will it impact going ahead?
A: Our total exposure in Vietnam is around 7 million kilograms which is only 6 percent of the total production. On revenue side it is only 5 percent. We as a company don't export anything to China or otherwise. So, I don't see any impact because of the disputes on the business at all.
First it is not a big part of our business. Number two, we don't see any problem. Our export happens to all the other countries other than China. So, I believe there is going to be no impact.
Sumaira: What about tea prices, what is the likely trend going forward? Are they expected to remain firm?
A: As we started the season, April had been a little dry. As has been reported earlier also, we lost around 30 percent of the field crop but the rain had come in the last 5-7 days. The opening prices had been 10-15 percent higher as compared to last year. It looks like till June-July we will continue to have this kind of a trend on prices, rest will depend upon how the total overall crop actually comes up during peak production months which is July to October. Hopefully the process will remain strong and also hope that there will be some recovery of the crop in April.
Reema: Could you give us some numbers on how much there could be a price increase and what the production volumes could look like?
A: Production is very difficult to really predict particularly because we don't know how the monsoon is going to really pan out. If we go by the previous trends even in the year of El-Nino, we had not seen much drop in crop. Prices have remained very strong. We are generally expecting a 10-15 percent increase which means around Rs 15-20 increase per kilogram of tea during the year for the full year as a whole.
We don't expect much crop drop or increase or may be it is too early to really predict on the crop. However the prices continue to remain very strong particularly because of the strong consumption growth and low inventories.
Mcleod stock price
On May 09, 2014, Mcleod Russel (India) closed at Rs 276.80, up Rs 2.80, or 1.02 percent. The 52-week high of the share was Rs 330.00 and the 52-week low was Rs 240.35.
The company's trailing 12-month (TTM) EPS was at Rs 23.14 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 11.96. The latest book value of the company is Rs 164.06 per share. At current value, the price-to-book value of the company is 1.69.
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