Olam/Noble may take a hit after India's Trade Ministry halted fresh cotton export permits pending scrutiny of all shipment deals since Jan to check whether the fibre was being stockpiled outside the country, dashing prospects of greater cotton supplies from the world's 2nd largest cotton producer.
In addition, the textiles ministry also proposed an Rs10,000/ton export tax on cotton to discourage exporters and prevent local shortages. The announcement runs counter to the govt's decision to lift a ban on cotton exports within a week of its imposition last month.
India's series of policy flip flops on cotton exports has created uncertainty among potential customers. Last month's cotton-export ban weighed on supply-chain managers, such as Olam and Noble, after price volatility in the commodity impacted their earnings last year. Cotton is estimated to contribute 15-20% of Olam’s revenue, while the agriculture segment of Noble, which includes cotton, garins & oilseeds, sugar, cocoa and coffee, accounts for 20% of group sales
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