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    Bombay Burmah

    BBTCMixed
    Fast Moving Consumer Goods·24 Jul 2020
    Management Summary

    Bombay Burmah faced significant headwinds in FY20 across its primary divisions due to adverse weather affecting plantations, a slowdown in the automotive sector, and the onset of the COVID-19 pandemic. Operating revenue declined by approximately 11.5%, primarily driven by lower tea and coffee yields and reduced demand for auto components. Despite these challenges, the company increased its dividend payout and expressed optimism for a recovery in the plantation segments in the coming 6-9 months.

    Highlights

    8

    • Total revenue achieved was ₹282.81 crores, including a dividend of ₹50.95 crores from overseas subsidiaries.

    • Operating revenue stood at ₹231 crores, a decline from ₹261 crores in the previous year.

    • Tea production (leaf) declined by 29%, leading to sales of 41.7 lakh kilos vs 62.46 lakh kilos YoY.

    • Coffee production dropped to 424 metric tonnes from 722 metric tonnes due to 49% higher precipitation.

    • Auto Electric Component business revenue fell to ₹99.57 crores, down 10.6% YoY due to auto sector slowdown.

    • Dividend declared at ₹1.20 per share, up from ₹1.00 in the previous year.

    • Tea division revenue reported at ₹59 crores against ₹80 crores in the previous year.

    • Dental products showed a marginal increase in turnover, though Q1 FY21 was impacted by COVID-19.

    Concerns

    1

    • COVID-19 Pandemic Disruptions

    What Changed3

    vs Q1 FY23

    Tone shiftWeak → MixedGuidance items2 → 3 (+1)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    04 metrics
    1. 01Total Revenue₹282.81 Cr
    2. 02Operating Revenue₹231 Cr-11.5%YoY
    3. 03Dividend from Overseas Subsidiary₹50.95 Cr
    4. 04Dividend Per Share₹1.2+20%YoY

    Segment breakdown

    Tea Division
    ₹59 Cr Revenue41.7 lakh kilos Sales Volume-29.0% Production Decline
    Coffee Division
    424 metric tonnes Production35% Crop Loss
    Auto Electric Component (Electromags)
    ₹99.57 Cr Revenue₹85 Cr Domestic Sales₹14 Cr Export Sales
    Dental Products
    ₹37 Cr Q1 FY21 Revenue
    List

    Guidance & targets

    3
    CategoryTargetPriority
    Volume
    Tea Plantation Improvement
    Considerable improvement
    		Medium
    Profitability
    Coffee Performance
    Better
    		Medium
    Revenue
    Auto Division New Products
    Further growth
    		Low

    Risks & concerns

    5
    RiskSeverity

    COVID-19 Pandemic Disruptions

    Plantations and manufacturing facilities faced shutdowns; full revenue potential of new products unlikely to be realized in FY21. — Management acknowledged

    high

    Adverse Weather Conditions

    49% higher precipitation in Karnataka led to 30-40% coffee crop loss. — Management acknowledged

    medium

    Automotive Sector Slowdown

    Marked slowdown in the automobile sector impacted domestic and export sales for the Electromags division. — Both acknowledged

    medium

    Biennial Coffee Cycle

    FY20 was an 'off year' for coffee's biennial cycle, contributing to lower production. — Management acknowledged

    low

    Areas of Evasion(1)

    • Specific operational details regarding the Tanzania land assets were deferred to a private email response.

    Q&A highlights

    3

    “Tanzania, we have not had much control over it in the past, but Tanzania, I believe, has been improving. I don't know, I think what we will do is, Ness, will you send an answer on Tanzania please?”

    Shareholders flagged that 1,000+ hectares of land in Tanzania are only generating ₹3.13 crores in revenue, suggesting significant under-sweating of assets.

    asked by Vinod Agarwal

    2 min read5 chapters

    Detailed Narrative

    01

    Plantation Division Faces Dual Headwinds

    The Tea and Coffee divisions were severely impacted by both biological cycles and extreme weather. Tea production leaf was lower by 29%, resulting in sales of 41.7 lakh kilos compared to 62.46 lakh kilos in the previous year. Coffee production in Karnataka suffered a 30% to 40% crop loss due to 49% higher precipitation and the biennial 'off year' cycle, yielding only 424 metric tonnes against 722 metric tonnes previously.

    02

    Auto Component Segment Hit by Sectoral Slowdown

    The Electromags division saw domestic sales drop to ₹85 crores and export sales to ₹14 crores. This 10.6% decline in total revenue to ₹99.57 crores was attributed to the marked slowdown in the automobile sector. While the division has released new products, management warned that their full revenue potential would not be realized in 2021 due to ongoing pandemic-related disruptions.

    03

    COVID-19 Operational Impact and Recovery

    The pandemic forced shutdowns across operations in late March 2020. Tea plantations in Tamil Nadu resumed in phases from April, with normal attendance only by May. The auto manufacturing facilities were shut from April 20 to May 4, 2020. Dental products also saw a significant Q1 FY21 impact, with turnover dropping to ₹37 crores from ₹62 crores in the same period last year.

    04

    Strategic Focus on Exports and Cost Rationalization

    Despite the pandemic, the Tea division showed some improvement in the same period due to cost rationalization. Management is implementing strategic measures including increasing the production of orthodox teas and upgrading factories for quality improvement. Export sales for tea registered a small improvement of 2%, now accounting for 26% of total sales.

    05

    Shareholder Concerns Over Tanzania Assets

    A key point of contention during the AGM was the performance of the Tanzania operations. Shareholders pointed out that over 1,000 hectares of land produced only ₹3.13 crores in revenue. Chairman Nusli Wadia admitted that the company has not had much control over these operations in the past but claimed they are improving, promising a detailed written response from MD Ness Wadia.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.