The Bombay Burmah Trading Corporation Limited — Q4 FY20 earnings call

Call held 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

  • 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

  • COVID-19 Pandemic Disruptions

Key financials

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

What they filed

Q1 FY27: revenue up 8.0%, net profit up 17.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,761 4,685 4,519 4,712 4,943 +4%5,066 +8%4,818 +7%5,089 +8%
EBITDA724 873 802 724 936 +29%943 +8%827 +3%814 +12%
Net profit516 627 585 498 566 +10%655 +4%781 +34%583 +17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Tea Division
    ₹59 Cr Revenue41.7 lakh kilos Sales Volume-29% 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

Guidance & targets

Volume

  • Tea Plantation Improvement Volume · next 6 to 9 months · Medium confidence Considerable improvement
    I think, in tea plantations there will be a considerable improvement, hopefully during the current year despite COVID, particularly in the next six months to nine months.

    — Nusli Wadia, Chairman

Profitability

  • Coffee Performance Profitability · FY21 · Medium confidence Better
    But this year, we expect the coffee performance will be better.

    — Nusli Wadia, Chairman

Revenue

  • Auto Division New Products Revenue · FY21 · Low confidence Further growth
    Even though these new products will bring in further growth in the turnover in the year 2021, their full revenue potential would not be realized in the year due to the pandemic.

    — Nusli Wadia, Chairman

Risks & concerns

  • COVID-19 Pandemic Disruptions

    high

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

    Management acknowledged

  • Adverse Weather Conditions

    medium

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

    Management acknowledged

  • Automotive Sector Slowdown

    medium

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

    Both acknowledged

  • Biennial Coffee Cycle

    low

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

    Management acknowledged

Areas of evasion (1)

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

Q&A highlights

2 direct
Asset Utilization in Tanzania Partial
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

Roadmap for the next two years Direct
I believe that the productivity in the plantations as also the thrust in exports will show some better results as in the past.

Management clarified that recovery will be driven by plantation productivity and export focus despite COVID-19 disruptions.

Asked by Lekha Shah

Impact of COVID-19 on Auto Division Direct
Due to the COVID-19 pandemic, the manufacturing facility were shut between April 20, and it resumed only partial operations on 4th of May 2020.

Confirms the direct operational hit to the Electromags division during the lockdown period.

Asked by Vinod Agarwal

2 min read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

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