Tata Consumer expects COVID-19 impact on profitability; hit by commodity price, supply constraints

Tata Consumer Products expects its profitability to be impacted in the short term due to the coronavirus outbreak as input costs have risen on account of commodity price volatility and supply constraints during the pandemic and subsequent lockdown. However, the company said it was difficult to access the quantum at this stage.
According to a PTI report: Though the sales of the company is getting back to normal levels, the health crisis has imposed incremental operating costs on the business, said Tata Consumer Products Ltd (TCPL) in a regulatory filing.
”While there will be some impact on our profitability in the short term… it is difficult to assess the exact quantum at this stage,” said TCPL.
The Tata group company, which owns popular brands like Tata Salt, Tata Tea, Tetley, Eight O’ clock and Himalayan Water, however, said it is in a ”comfortable liquidity position” to meet its commitments.
The company has taken adequate measures to control costs, to conserve cash and to address any evolving situation resulting from the pandemic, it said adding that all internal tabs and controls over financial reporting are in a satisfactory manner.
On the estimation of future impact of COVID-19 on its operations, TCPL said considering the fact that the situation is exceptional and is changing dynamically, the company is not in a position to gauge with certainty how the evolving situation will influence its operations going forward.
Based on the current trends, the current scenario is not expected to have a material adverse impact on the company, it added.
”The out-of-home business segments, in general, have been impacted due to the lockdown conditions. However, this business segment is not materially significant within the overall business portfolio of the company,” said TCPL
As far as JV Tata Starbucks is concerned, TCPL said it is now able to open about its 40 per cent outlets for the delivery and takeaway business.
The company also expects some crop shortfall in its plantations side, as all tea and coffee plantations in India were also shut till early April.
”While they opened early April with limited manpower and operations, barring a few geographies today, they are now currently operating almost to full capacity. There has been some crop shortfall during this period due to the curtailment of operations,” it said
On the impact of the pandemic on its Indian operations, TCPL said that though it witnessed disruptions starting from the middle of March and the operations started resuming partially since early April, after receiving requisite government permissions.
”In the initial period, we saw a mixed response across channels good sales off-take in modern trade and e-commerce, which to some extent was reflective of panic buying, whereas sales in traditional channels and food service were adversely impacted primarily because of closure of stores and issues with sales manpower and logistics,” it said.
The situation has, however, progressively improved with easing of lockdown measures including higher market openings and facilitation measures for the supply chain.
Sharing the details of its international operations, TCPL said its factories have been running flat out.
”We saw higher demand, with significant increase in in-home consumption due to stocking with offices, bars and restaurants closed during the lockdowns. A shift to more normal consumptions levels is beginning in certain markets,” it said adding that tea and coffee sales to retail customers have increased due to higher in-home consumption.
However, its out-of-home businesses in the US and Australia have seen a sharp decline. After merging the consumer products business of Tata Chemicals with Tata Global Beverages, the company was renamed TCPL.