Tata Chemicals Limited, a leading manufacturer of chemicals, fertilisers and food additives, has announced its audited financial results for the quarter and half year ended September 30, 2005. The company is one of the largest manufacturers of synthetic soda ash in the world, enjoys leadership in the Indian edible salt market and is the most efficient manufacturer of urea in the country.
Commenting on the company’s performance for Q2 and H1 FY2006, Prasad Menon, Managing Director, Tata Chemicals, said, "Our strong business performance is a result of enhanced sales volumes, improved price realisations and a concerted thrust on control of prices of various inputs as well as sales and distribution costs. The external environment is becoming increasingly conducive with encouraging demand growth especially in the chemicals business. Concerns however remain with regard to the settlement of phosphoric acid prices. I believe our focus on identifying viable organic and inorganic opportunities will further accelerate growth and strengthen our competitive position."
Performance summary
H1 FY2006 (April-September 2005) v/s H1 FY2005 (April-September 2004)
Income from operations (net of excise) at Rs 1,506 crore compared Rs 1,249 crore.
Profit from operations improves 22 per cent to Rs 308 crore from Rs. 252 crore.
* Healthy performance of chemicals business drives profitability. PBIT margins of the segment strengthen to 27 per cent compared with 21 per cent in the corresponding period last year.
Profit before tax (PBT) stood at Rs 278 crore, up 39 per cent in H1 FY2006 compared to Rs 200 crore in H1 FY2005.
Profit after tax (PAT) up 43 per cent at Rs 191 crore compared with Rs 133 crore in H1 FY2005.
Basic EPS (for the period): Rs 8.87.
Diluted EPS (for the period) : Rs 7.94.
Q2 FY2006 (July-September 2005) v/s Q2 FY2005 (July-September 2004)
Income from operations (net of excise) up 37 per cent at Rs. 997 crore compared to Rs 729 crore.
Profit from operations improves 32 per cent to Rs 186 crore from Rs 140 crore.
PBIT of the fertiliser business was Rs 82 crore, compared to Rs 62 crore.
PBT amounted to Rs 183 crore, up 44 per cent in Q2 FY2006 compared to Rs 127 crore in Q2 FY2005.
PAT increased 44 per cent to Rs 126 crore compared to Rs 87 crore in Q2 FY2005.
Basic EPS (for the quarter): Rs 5.85.
Diluted EPS (for the quarter): Rs 5.23.
Segmental performance
Chemicals
Soda ash
Performance perspective
Tata Chemicals maintained its dominance in the Indian soda ash segment with a domestic marketshare of 33.7 per cent for the last six months under review. On an overall market basis (including imports), the company’s marketshare was 31.9 per cent.
Domestic demand for soda ash showed good traction, growing at 4.3 per cent YOY. Tata Chemicals’ sales volumes increased 12.3 per cent over the corresponding six months in the preceding year.
Soda ash sales volumes for the quarter stood at 172,000 MT taking sales volumes for the year to date to 322,000 MT.
* Dense soda ash comprised 40 per cent of total sales.
* Export volumes for the half year stood at 44,000 MT (24,000 MT for the quarter).
Production for the half year under review amounted to 345,000 MT (185,000 MT for the quarter) translating to a capacity utilisation of 88 per cent.
Organic initiatives
In September 2005, Tata Chemicals expanded its dense soda ash manufacturing capacity to include a 600 tonne per day unit. This translates to a 70 per cent increase in the company’s dense soda ash capacity.
* Dense soda ash is used to manufacture float glass which is used in the construction, automobile, electronic (television and plasma screens) and mobile telephone (display panel) industries. The demand from the float glass segment is estimated to be growing at over 9 per cent, with China, India and the US being the largest manufacturers.
* Construction was completed in a record time at a cost of Rs 32 crore.
* The unit has been commissioned based on mono hydrate technology, which ensures that the company is able to meet with the stringent quality requirements of the leading float glass manufacturers both globally and in India.
Industry perspective
* Prices of soda ash, especially in North America and Europe remained firm resulting in reduced imports into the country. These are expected to sustain in the near to medium term on the back of strong demand.
* Higher international prices combined with enhanced efficiencies of India players has resulted in a significant 31 per cent decline in import volumes.
* Prices of coke and coal remained firm but steady 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’s dominance of the domestic market continued with the brand’s marketshare standing at 35.5 per cent (for the months of July and August 2005).
The company also launched a new brand Topp iodised salt in the Sultanate of Oman and Singapore.
* Topp is being marketed in the West Asian region, including the United Arab Emirates and Oman by Tata West Asia FZE, a Tata Group company based in Dubai.
* Tata West Asia has appointed Naranjee Hirjee & Co. LLC as its sole distributor for the Topp iodised salt in the Sultanate. Naranjee Hirjee, a 100-year-old organisation, is one of the leading FMCG distribution companies in Oman.
* Topp iodised salt is available in two formats — a smart and convenient dispenser pack of 750gm and an economical refill pack of 1kg. It retails at all leading hyper / supermarkets and other retail outlet
STPP
Prices which had weakened during the quarter are showing signs of firming up going forward.
Cement
Cement sales remained healthy during the review period.
Fertilisers
Nitrogenous (urea)
* A good monsoon contributed to healthy urea demand during the Kharif season. Sales volumes for H1 FY205-06 stood at 508,000 MT (307,000 MT for the quarter).
* Tata Chemicals remains the most energy efficient player in the industry with an energy consumption of 5.13 G Cal/ MT urea.
* Production in the quarter was completed with minimal naphtha usage necessitated due to the fire at Bombay High. A considerable proportion of the production was achieved through the combined use of APM, RLNG and PMT gas. Production volumes for the six months ended September 30, 2005 stood at 267,600 MT.
Phosphatics (NPK, SSP, di-ammonium phosphate)
* DAP, NPK and complex fertiliser sales volumes were healthy during the quarter on the back of normal to excess rainfall in most of the core command areas.
* Sales in H1 FY2005-06 stood at 323,000 MT (272,000 MT for the quarter) of which 53 per cent was made up of higher margin NPKs and complex crop specific fertilisers.
* Production during H1 FY2005-06 amounted to 373,000 MT (207,000 in Q2 FY06) of which 57 per cent comprised NPK and complex fertilisers. Supplies of phosphoric acid through the company’s partnership with Imacid ensured continuity of production.
* Delays in the settlement of phosphoric acid prices and expected tight supply of rock phosphate and phosphoric acid in the foreseeable future, however continue to be a challenge.
Financial management
* Interest costs in line with the company’s focused debt restructuring programme amounted to Rs 3.6 crore in Q2 FY2006 and Rs 5.5 crore in H1 FY2006, a decline of 40 per cent and 58 per cent respectively compared to corresponding periods last year.
* Total debt as on September 30, 2005 stood at Rs 1324 crore. The debt includes an amount of approximately Rs 660 crore availed via the company’s Foreign Currency Commercial borrowing.
* Debt comprises short-term buyers credit amounting to around Rs 585 crore, the tenor for which is around six months.
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