• Increased volumes, higher realisations drive sales, enhance operating margins
• Acquisition of majority stake in Brunner Mond Group makes Tata Chemicals the third largest soda ash player in the world
  

Tata Chemicals, a leading manufacturer of chemicals, fertilisers and food additives, today announced its audited financial results for the quarter and nine months ended December 31, 2005. The company is the third largest soda ash player in the world, enjoys leadership in the Indian edible salt market, is the most efficient manufacturer of urea in the country and also manufactures phosphatic fertilisers.

Commenting on the company’s performance for Q3 and 9M FY2006, Prasad Menon, Managing Director, Tata Chemicals, said, "I am delighted to report strong operating performance in the just concluded quarter. These results have been driven by enhanced sales volumes, improved price realisations and an efficient management of inputs and operations in both our business segments

"Our profitability growth is even stronger when you consider the significant extraordinary income we received in the corresponding quarter last year from sale of investments and income tax refunds.

"The acquisition in December 2005, of a majority stake in the Brunner Mond Group, places us among the largest soda ash manufacturing players in the world. It also creates for us a presence in the low-cost natural soda ash segment and gives us access to several new geographies. Moreover, the transaction also demonstrates our ability to swiftly leverage viable growth opportunities.

"The demand environment for our products continues to be strong. I remain confident of Tata Chemicals delivering continued progressive business and operating performance."

Performance summary
Q3 FY2006 (October – December 2005) v/s Q3 FY2005 (October – December 2004)

• Income from operations (net of excise) up 21 per cent at Rs1,258 crore, compared to Rs 1,039 crore.
  • Higher realisations of inorganic chemicals, increased thrust on high-value NPK fertilisers and increased fertiliser trading volumes enhanced revenues.
• Profit from operations improved 31 per cent to Rs 171 crore from Rs 131 crore.
  • PBIDT margins strengthen 100 basis points to 13.6 per cent.
  • Price increases of soda ash and edible salt, stable input prices, manufacturing efficiencies strengthen operating performance.
• PBT amounted to Rs 143 crore, up 1 per cent in Q3 FY2006 compared to Rs 141 crore in Q3 FY2005.
• PAT increased 1 per cent to Rs 98 crore compared with Rs 97 crore in Q3 FY2005.
  • Improvement in PBT and PAT despite higher extraordinary income of around Rs 51 crore in the corresponding quarter last year on account of profit from sale of investments and interest on tax refunds.
• Basic EPS (for the quarter): Rs 4.55.
• Diluted EPS (for the quarter): Rs 4.07.

9M FY2006 (April – December 2005) v/s 9M FY2005 (April – December 2004)

• Income from operations (net of excise) up 21 per cent at Rs2,764 crore compared Rs 2,289 crore.
• Profit from operations improves 25 per cent to Rs 478 crore from Rs 382 crore.
• Profit before tax (PBT) stood at Rs 421 crore, up 24 per cent in 9M FY2006 compared to Rs 341 crore in 9M FY2005.
• Profit after tax (PAT) up 26 per cent at Rs 289 crore compared with Rs 229 crore.
• Basic EPS (for the period): Rs 13.42.
• Diluted EPS (for the period) : Rs 12.01.

Segmental performance
Chemicals

Soda ash
Performance perspective

• Tata Chemicals continues to be the market leader with a 35.3 per cent marketshare among domestic manufacturers as compared to 34.2 per cent in the corresponding quarter last year. Marketshare inclusive of imports stands at 32.3 per cent.
• Sales volumes remained healthy
  • Dense soda ash comprised 34 per cent of total sales for the quarter under review.
  • Export volumes for the half year stood at 39,000 MT taking total exports for the year to 83,000 MT.
• The continuing mordernisation programme at the Mithapur manufacturing facility enabled production at over 95 per cent capacity utilisation levels and improved efficiencies.

Inorganic initiatives

• In November 2005, Tata Chemicals acquired a 63.5-per cent stake in the UK-based chemical company Brunner Mond Group. The transaction was completed with the acquisition of the stakes of Wayland Investments and Barclays Bank (the selling shareholders) for a consideration of about Rs 508 crore. This amount comprised part of the proceeds of the Foreign Currency Convertible Bond (FCCB) offering the company launched in February 2005.
• The transaction makes Tata Chemicals the third largest soda ash player in the world and gives the company a presence in the low-cost natural soda ash segment.
• Brunner Mond is one of the world’s leading manufacturers and suppliers of soda ash and associated alkaline products. The company has manufacturing facilities in Northwich, Cheshire, where it is headquartered, in Delfzijl in The Netherlands and at Lake Magadi in Kenya.
  • The production capacity of the Kenyan facility is in the process of being expanded to around 700,000 tonnes. The total soda ash manufacturing capacity is expected to go upto 2 million MT from current level of 1.6 million tonnes once the Magadi expansion is completed. Currently, about 1,000,000 tonnes are produced in Cheshire, 300,000 tonnes in Delfzijl and 350,000 tonnes in Kenya. The European facilities manufacture both light and dense soda ash while the plant in Magadi, Kenya manufactures only dense soda ash.
• The company is Europe’s second-largest manufacturer of soda ash. It is also one of the world’s leading producers of refined sodium bicarbonate and the leading producer of calcium chloride liquor.
• The transaction gives Tata Chemicals access to several new geographies which include several countries in Europe and Africa besides Pakistan, Malaysia, Philippines, Vietnam. It also enables the company to strengthen its leading position in the domestic market and diminishes the threat of potential reductions in import duty.

Industry perspective

• Domestic sales demand has grown by around 1.2 per cent. However significantly lower imports (down by 27 per cent YOY) has resulted in an increase in domestic sales by over 5 per cent.
• Tight availability of material in Europe is reflected in continuing firm prices. These are expected to sustain in the near to medium term on the back of strong demand.
• Prices of coke and coal remained firm during the six months under review.
• On October 1, 2005, prices of soda ash were increased by an average of Rs 400 pmt.

Food additives

• Tata Salt maintained its dominance and leadership position in the national branded salt segment.
• Exports of Topp iodised salt continue to be encouraging.

Fertilisers
Nitrogenous (Urea)

• A healthy agricultural season drove demand.
• Tata Chemicals remains the most energy-efficient player in the industry with an energy consumption of 5.058 GCal/ MT urea.
• Production during the quarter was completed using natural gas and RLNG with no naphtha consumption.
• The company has received intimation from the government with regard to the debottlenecking of its Babrala facility and is seeking clarifications on the same.
• An increase in rabi acreage is expected to result in increased fertiliser consumption.

Phosphatics (NPK, Di ammonium phosphate)

• Operations continued to be healthy during the quarter under review with an increased thrust on the higher value NPK fertilisers.
• During the quarter several crop specific fertilisers were introduced.
• Increased trading volumes through the Tata Kisan Sansar Network strengthened and further broadbased relationships with the farmer.
• The company’s tie up with IMACID, Morocco, ensured continuity of operations despite continuing tight supply of rock phosphate and phosphoric acid globally.
• Delays in the settlement of phosphoric acid prices, however continue to be a challenge.

Financial management

• Interest costs amounted to Rs 2.9 crore in Q3 FY2006 and Rs 8.4 crore in 9M FY2006 a decline of 53 per cent and 57 per cent respectively compared to corresponding periods last year.
• Total debt as on December 31, 2005 stood at Rs 1,480 crore.