Tea companies likely to see 8% revenue de-growth this fiscal

The tea industry in India is expected to register an 8 per cent de-growth in revenue this financial year, led by a decline in exports.

Operating profitability is also expected to fall for the second year in a row, shedding 100 basis points (1 per cent is equal to 100 basis points) to 5 per cent, due to lower tea prices.

Profitability had fallen 150 basis points last financial year, primarily because of an increase in wages. Wages, which constitute 20 per cent of total cost of production, was hiked 15 per cent last fiscal.

Domestic demand, which accounts for 82 per cent of sales volume, should remain steady at 1,100 million kg this fiscal. However, exports, which make up 18 per cent by volume and 30 per cent by value, may slide 12 per cent on-year to 200 million kg. Last fiscal, the export volume had increased 14 per cent due to lower production in Sri Lanka, a major tea exporting country.

India as a whole contributes 23 per cent to the global tea output and employs around 1.2 million workers in the tea plantation sector.

For several years now, India’s tea industry has been struggling with issues such as rising production costs, relatively stagnant consumption, subdued prices and crop losses due to climate change. It also faces the challenge of finding a footing and

holding its ground in a competitive global market.

Source: Associated News India (Extracts), Courtesy: Tea Exporters’ Association Sri Lanka