A drought in Kenya is set to benefit McLeod Russel India, the world’s biggest tea grower.
Hot, dry weather in the African nation, the No. 1 exporter of black tea, is threatening to cut output, and a dip in global supply may help boost auction prices for McLeod Russel this year by as much as eight per cent, Chief Financial Officer Kamal Baheti said in an interview.
“Since there’s been a shortage of crop in the overseas markets, exports from India will increase and that will have a positive impact on the prices,” Baheti said from his office in the eastern Indian city of Kolkata, formerly known as Calcutta.
Prospects of better prices may provide the Indian grower a shot in the arm as it’s sought to reverse a decline in profit amid a forecast for stagnant leaf production for the next five years. McLeod Russel, which traces its origins to a partnership formed by two Englishmen in 1869, owns 40,213 hectares of tea plantations in India, Vietnam, Rwanda, and Uganda.
Average auction prices may rise to 180-185 rupees per kilogram by end of March 2016 from 172 rupees last year, Baheti said. Net income in the current financial year may rise fivefold to 1.5 billion rupees ($24 million), the first increase since the 12 months through March 2012, while sales may climb 14 per cent to 18.5 billion rupees, he said.
Tea prices suffered last year as Kenya and Uganda had record crops while demand fell in the Middle East because of political unrests, said Jignesh Makwana, an analyst at Quantum Securities Pvt., by phone from Mumbai.
“The drought in Kenya will boost prices this year by about 10 per cent to 15 per cent,” Makwana said. “A higher crop in Assam and Sri Lanka because of good rains may restrict prices from rising further.”
Bloomberg News, edited by ESM
