AGRIBUSINESS:Tea prices expected to raise
McLeod Russel, India’s largest tea exporter that already owns Gisovu tea plantation in western Rwanda, wants to acquire two more plantations in the country.
In an interview with CNBC-TV18, the chief financial officer of McLeod Russel, Kamal Baheti said that they plan to fund the acquisition of two other tea plantations in Rwanda through internal accruals.
“Whatever acquisitions we have done in the last three years were done within our internal accruals and even this one (in Rwanda) will be done well within it,” explained Baheti. The specific farms of their interest were not yet clear.
According to Baheti, the company had placed the bid for the plantations in February and expects the results to be announced within a month or so.
McLeod Russel is also the world’s largest tea producer.
If the deal is finalised, the company expects it to fetch 7 million out of 20 million kg in Rwanda, representing 25-30% of the market share.
Gisovu produces 2 million kilogrammes.
However, the National Agricultural Export Board (NAEB), the tea department remains tight-lipped about the bids, referring us to Rwanda Development Board (RDB).
“The bids are not yet released and it is RDB that is handling the process,” said Ndambe Nzaramba, the Deputy Director General in charge of exports and promotion at NAEB.
In case McLeod Russel succeeds in acquiring two more plantations, the company expects this year’s consolidated margin to be around 27-28%, according to an article on CNBC-TV18 website.
Gisovu has already got an operating margin of 50% and the company expects the two extra plantations to bring in around 35-40% of operating margin.
According to Baheti, McLeod Russel expects price increase to be higher than the input cost increase next year, and overall margins to increase from 27-28% to maybe 31-32%, taking into account normal weather, normal productions in North East as well as in the international markets.
The tea dealers produce approximately 100 million kilos of high quality tea a year from tea estates in Assam, West Bengal, Vietnam, Uganda and Rwanda.
The tea sector in Rwanda consists of two Tea estates owned production units, namely Mulindi, Shagasha, and about nine private owned production units, Gisovu, Cyohoha (SORWATHE), Pfunda (Pfunda Tea Company), Kitabi,Nyabihu, Rubaya ( Rwanda Mountain Tea),Mata, and Gisakura.