Tata Chemicals posts strong quarter performance in an improving economy
- Consolidated net profit after tax at Rs223 crore; surges by 424 per cent compared to Q1
- Stand-alone PAT at Rs166 crore; up by 76 per cent compared to Q1
Business Highlights
- Strong demand uptake being witnessed across all products, contributions too improve Chemicals
- India soda ash segment maintains 8 per cent growth
- US capacities sold out for CY10
- Sodium bicarbonate and consumer products too perform strongly Fertiliser
- Babrala urea production up by 12 per cent on Y O Y basis
- Plan to double Babrala urea capacity in advanced stages; early closure of gas purchase agreement critical to achieving financial closure. Availability of gas for sector in line with highest priority accordance given, can result in considerable reduction in imports
- Environment for phosphatic fertiliser business improving
- Financial Highlights
- Performance a reflection of improving macro environment
- Q2 FY10 Revenues at Rs 2,242 crore
- Q2 FY10 Profit from operations at Rs 297 crore
- Q2 FY10 Net Profit for the group at Rs 223 crore
- Efficiency program ADAPT enables cash generation of over Rs 500 cr across units
- Debt repayment of Rs 222 crore during quarter; Net Debt Equity ratio improves to 0.91:1 as on September 30, 2009 from 0.98:1 as on June 30, 2009
- Company's cash including cash equivalents balance as on September 30, 2009 at Rs.1,140 crores.
Mumbai: Tata Chemicals, a leading manufacturer of chemicals, fertilisers and food additives today announced its consolidated and stand-alone financial results for the quarter ended September 30, 2009. The company is the second largest manufacturer of soda ash and the third largest producer of sodium bicarbonate in the world, apart from being the leader in the Indian market. Tata Chemicals also enjoys leadership in the Indian edible salt market and is the most efficient manufacturer of urea fertiliser in the country.
Commenting on the company's performance for Q2 and H1 FY 2010, R Mukundan, managing director said:
"Our operating performance is reflective of the improving macro environment for our products and a turnaround from the stress experienced in the second half of last year. We are witnessing healthy demand traction for soda ash in India and our markets overseas. Our US capacities are completely sold out. Continuing low input prices have enabled improved all-round contribution levels too. Our urea business is operating at full capacity post expansion and the benefits of import parity pricing for our expanded volumes can be expected to flow in from the fourth quarter. We are also in the final stages of putting in place a capacity doubling programme which is dependent on achieving closure on our gas purchase agreement with the government. Our cost efficiency programme ADAPT that we put in place in the beginning of the calendar has delivered considerable savings and cash generation. While our approach continues to be one of "Wait and Watch", we are encouraged by the gradual uptrend shown by most indicators and look forward to improved performance going forward."
Quarter – on – Quarter performance comparision
Q2 FY2010 (July – September 2009) v/s Q1 FY2010 (April – June 2009)
- Income from operations (net of excise) at Rs 2,242 crore compared to Rs 2,385 crore
- Profit after interest but before exceptional items & tax up 19 per cent at Rs 325 crore; as against Rs 274 crore last quarter
- Net Profit for the Group at Rs 223 crore compared with Rs 43 crore in Q1 FY 2010, up by 424 per cent
- Basic EPS (not annualised): Rs 9.48
- Diluted EPS (not annualised): Rs 8.95
Q2 FY2010 (July – September 2009) v/s Q2 FY2009 (July – September 2008)
- Income from operations (net of excise) including other operating income at Rs 2,242 crore compared to Rs 4,794 crore in Q2 FY 2009, a decrease of 53 per cent
- Profit from operations decreased by 59 per cent to Rs 297 crore compared with Rs 722 crore in corresponding period last year
- Profit before exceptional items & tax down by 49 per cent at Rs 325 crore; as against Rs 639 crore last year
- Net Profit for the Group at Rs 223 crore compared with Rs 278 crore in Q2 FY 2009, down 20 per cent
- Basic EPS (not annualised): Rs 9.48
- Diluted EPS (not annualised): Rs 8.95
Balance sheet perspective
- Total Consolidated net debt as on September 30, 2009 amounted to Rs. 4,322 crore as compared to Rs. 4,428 crore as on June 30, 2009. Debt repayment in the quarter under review was Rs 222 crore.
- Suppliers and buyers credit continue to be the main source of working capital finance. Outstanding on these accounts amounted to Rs 561 crore as on September 2009.
- The Company's cash balance as on September 30, 2009 amounted to Rs 1,140 crore. As on September 30, 2009, the Company's Net Debt to Equity ratio is 0.91:1 as compared to 0.98:1 as on June 30, 2009.
ADAPT
- The Company's focused cash management and efficiency programme ADAPT has enabled considerable savings to the tune of over Rs 500 cr for the year upto September 30, 2009.
SEGMENTAL PERFORMANCE
CHEMICALS
- Soda Ash demand in Indian markets maintained its 8 per cent growth for the year. Demand continues to be healthy from both the detergents as well as the glass segment. Recommencing of operations by some flat and container glass furnaces offers continued optimism for the segment
- Magadi PAM is fully operational
- U.S. demand too has rebounded strongly on the back of reopening of glass factories while in Europe the environment too is improving
- Prices though remain lower by around 10 – 15% YOY. However with input prices trending at even lower levels, contribution margins have improved
- Sodium bicarbonate demand both in India and overseas is encouraging
- Tata Chemicals continues to lead the Salt market with a market share of 57.8 per cent amongst national brands.
- Tata Salt Lite is the market leader in Low Sodium Salt category.
FERTILISERS BUSINESS
- Urea production continues to be at full capacity of 3,500 tons per day
- The benefits of debottlenecking of the Babrala facility through the availing of Import Parity Pricing are expected to be visible from the fourth quarter onwards
- The Company has put in place a blueprint to double the capacity of its existing facility to 2.5 million tonnes. Financial closure however awaits the finalising of agreements with the Government of India for gas supply. With the fertiliser sector having been accorded priority status the Company is optimistic of this being in place at the earliest
- Stabilization in DAP prices combined with lower phosphoric acid prices enables an equilibrium and improved performance by phosphatics business
- IMACID operations also stable at over 90% capacity utilisation
- Crop Nutrition business performs strongly despite deficient rainfall
- The decontrol of SSP farmgate price with a fixed subsidy is an extremely positive move for the industry and is seen to be an indication of the Government's focus on reforms in the fertiliser sector
NEW BUSINESSES
- Plant commissioning trials commenced at bio-ethanol facility at Nanded post harvesting of khariff crop
- The plant has achieved capability to produce 175,000 liters of ethanol at 99.8 per cent purity levels
- Operations being optimised for higher yield and throughput
Other key perspectives
- Sale of stake in Titan Industries
- In September 2009, the company unlocked value with the sale of 810,800 equity shares of Rs10 each of Titan Industries for a net consideration of about Rs100 crore to Tata Sons as a block deal on the stock exchange at a price of Rs1,233.40 per equity share.
Enhancement of stake in Rallis India
Post purchase of shares from other promoter and group companies Tata Chemicals enhanced its stake in Rallis India to 45.97 per cent. Further, in September 2009, the board of directors of Rallis India passed a proposal to allot shares not exceeding 980,000 to Tata Chemicals, the main promoter, on a preferential basis at a price determined as per SEBI norms. Upon approval of this proposal by shareholders of Rallis India and acceptance by Tata Chemicals, Tata Chemicals' stake in the company will increase to 50.06%.
Closure of Netherlands manufacturing facility
Production of soda ash and sodium bicarbonate at the Brunner Mond BV facility in Delfzil ceased on August 31, 2009 and the factory is expected to be decommissioned by December 31, 2009. Post closure of this facility, contributions can be expected to improve.
Note: *All sales volumes exclude inter unit and trading quantities
**All production volumes are gross