Tata Chemicals Limited, a leading manufacturer of chemicals, fertilisers and food additives today announced its unaudited financial results for the quarter ended September 30, 2004.
Commenting on the company's performance for Q2 FY2005, Prasad Menon, Managing Director, Tata Chemicals, said, "In a demanding quarter wherein we were faced with increasing input and logistic costs, shortage of ammonia and a transport strike, Tata Chemicals has improved its operating margins and maintained its profitability. While the near term continues to present similar challenges, I remain confident in the strength of our operations and our robust business model."
Performance summary
H1 FY 2005 (April - September 2004) v/s H1 FY2004 (April - September 2003)
- Income from operations (net of excise) improved by 2 per cent to Rs 1,249 crore from Rs 1,224 crore.
- Profit before tax (PBT) stood at Rs 200 crore, a 3-per cent increase.
- Profit after tax (PAT) at Rs 133 crore compared with Rs 132 crore in H1 FY2004.
- EPS (for the period): Rs 6.17
Q2 FY2005 (July - September 2004) v/s Q2 FY2004 (July - September 2003)
- Income from operations (net of excise) lower by 9.9 per cent to Rs 729 crore from Rs 809 crore.
- Decline primarily a result of tightening of supply of phosphoric acid and ammonia resulting in reduced DAP production.
- Profit before tax stood at Rs 127 crore, up 4.8 per cent.
- PAT stood at Rs 87 crore compared with Rs 83 crore in Q2 FY2004.
- EPS (for the quarter): Rs 4.05.
Business overview
Enhanced efficiencies contributed to operating margins improving from 18.2 per cent in the corresponding quarter last year to 19.3 per centin Q2 FY2005. This was achieved in the face of a challenging environment wherein:
- Operations at the inorganic chemicals facility at Mithapur during the quarter were impacted by a transport strike which extended and was followed by a contractor strike.
- Prices of key inputs, coke and ammonia continued to rule firm.
- High freight and forwarding charges further increased logistics and transportation costs
Segmental performance
Inorganic chemicals
Soda ash
- Soda ash sales were under pressure during the quarter ended September 30, 2004, mainly due to the transport and contractor strike discussed earlier in this communication.
- The company however maintained its leadership position in the domestic market.
- Capacity utilisation levels at the Mithapur facility remained high at 87 per cent.
- Tata Chemicals also maintained its strong international marketing thrust during the review period. Total exports during the first six months of the current financial year amounted to 64,300 MT, 44 per cent of the country's total soda ash export volumes during the period under review
Food additives
- 'Tata Salt' maintained a healthy 40.5 per cent marketshare during July and August 2004 (September figures currently unavailable) continuing to be the leader in the edible salt market.
- Dealer penetration also improved by 12 per cent (over the corresponding period last year) to over 117,000 households translating to 37 per cent nationwide penetration.
- The Tata Salt brand was also recognised as a 'Superbrand' in the FMCG brand category
- The 100gm Tata Salt pouch priced at Re 1 that was introduced in the North in the first quarter of the current financial year has demonstrated encouraging results with a high number of repeat purchases
- Primary sales of both Samunder Cooking Soda and Samunder Crystal Salt continued to be healthy. Samunder Cooking Soda is now available in almost all major markets in the country.
STPP
- Sales volumes of sodium tri poly phosphate (STPP) were healthy, amounting to 26,700 MT in H1 FY2005, an 18 per cent increase over the corresponding period last year
Fertilisers
Nitrogenous
- Sales over the first half of the current fiscal were higher by 10 per cent compared to the corresponding period last year at 469,900 MT.
- The company's energy consumption continues to be the lowest in the industry making it the most efficient player in the sector.
- A Six Sigma programme has also been launched at the Babrala facility
Phosphatics
- DAP fertiliser sales volumes amounted to 209,000 MT in the first half of the current financial year.
- Operations during the quarter were impacted by shortage of phosphoric acid and ammonia.
Financial management
- Interest costs in Q1 FY2005 amounted to Rs 5.94 crore, a 60 per cent decline compared to the corresponding period last year. This reduction is mainly a result of the company's aggressive debt restructuring programme.
- Total debt as on September 30, 2004, stood at Rs 669 crore. This debt comprises short-term buyers credit amounting to around Rs 476 crore. The tenor for this debt is around six months.
- Tata Chemicals' debt equity ratio presently stands at 0.31.
- The weighted cost of borrowings (short and long term) was 4.6 per cent for the quarter under review.
- ICRA has reaffirmed the LAA+ rating assigned to the Rs 125-crore NCD programme of Tata Chemicals indicating high safety and reflecting a strong competitive position in the chemicals and fertiliser business segments.
Outlook
Inorganic Chemicals
- The sales shortfall is expected to be made up in the second half of FY2005.
- Continuing strong coke prices and high freight rates can however be expected to temper margins.
Fertilisers
- Overall demand for urea and DAP is expected to be strong during the forthcoming Rabi season.
- The industry has negotiated a revised price of phosphoric acid with the government. However ammonia prices remain strong.