McLeod Russel Says Ugandan Tea Unit to Boost Profit as India Output Falls

McLeod Russel India Ltd., the world’s biggest tea grower, expects profit to climb 13 percent this year as higher prices and rising sales from its Ugandan estates make up for a decline in Indian production.

Group net income may increase to 2.6 billion rupees ($57.3 million) in the year to March 31 from 2.3 billion rupees a year earlier, Managing Director Aditya Khaitan said in an interview. Sales may climb 18 percent to 13 billion rupees, he said.

A pest attack on plantations in north India, which accounts for 70 percent of total output, have boosted tea prices, helping McLeod and rivals offset a drop in sales volume. McLeod fetched an average 150 rupees a kilograms at auctions in the year from April 1, about 10 percent more from a year ago, Khaitan said.

“We have been compensated with a better price,” he said. The company’s output may be lower by 3.5 million to 4 million kilograms, while the northern region will likely lose about 25 million kilograms of production, Khaitan said in Kolkata.

Mcleod’s shares advanced as much as 3 percent to 223.50 rupees in Mumbai, the most since Dec. 21, and settled at 218 rupees. The stock has risen 26 percent in each of the past five years, faster than the 18 percent annual jump in the BSE 200 Index, according to data on the Bloomberg.

Domestic prices may gain 5 percent to 10 percent next year as Indian production has declined below 980 kilograms for the first time in five years, Kamal Baheti, McLeod’s chief financial officer, said in an interview.

The company’s domestic production may decline to 74 million kilograms this year from 77.5 million last year, and output at James Finlay Uganda Ltd., which McLeod acquired last year, may be 17 million kilograms, Khaitan said. Total production may reach 96 million kilograms, he said.

Production in Uganda, Africa’s third-largest producer, may reach 55 million kilograms this year from a provisional estimate of 53 million kilograms for 2010, according to the country’s Tea Association. The country ships most of its tea through weekly auctions at the port city of Mombasa in neighboring Kenya.

To contact the reporter on this story: Pradipta Mukherjee in Kolkata at pmukherjee7@bloomberg.net

To contact the editor responsible for this story: Arijit Ghosh at aghosh@bloomberg.net

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