Tata Chemicals – 30% demand contraction of Soda ash in China

Highlights-

• The consolidated top-line of the company during the third quarter ended December 2008 increased by 106% to Rs 3,510.01 crore as compared to the same period last year.
• During the quarter the company incurred notional forex loss of Rs 24.92 crore on account of restatement of borrowings. This is due to unrealized exchange loss or mark-to-market restatement (under AS-11) of foreign currency borrowings including ECB raised to fund the purchase of GCIP.
• The profit before tax after forex gain/loss increased by 29% to Rs 178.36 crore during the quarter ended December 2008. The company posted a consolidated net profit of Rs 91.17 crore, which was flat as compared to the same period last year.
• The consolidated performance during the nine-month period ended December 2008 registered an increase of 127% to Rs 10,363.08 crore as compared to the same period last year.
• The company incurred a notional forex loss of Rs 381.95 crore on account of notional exchange loss or mark-to-market restatement (under AS-11) of foreign currency borrowings including ECB raised to fund the purchase of GCIP. Thus the consolidated profit before tax after forex gain/loss increased 32% to Rs 808.88 crore as compared to the same period last year. The net profit of the company increased by 9% to Rs 475.90 crore during the nine-month period ended December 2008.
• The chemicals division revenue increased by an impressive 71% to Rs 1,447.23 crore whereas the profit from this division improved by 214% to Rs 322.83 crore. The sales volumes (including exports) for soda ash at Mithapur for the quarter ended December 2008 stood at 170,000 tonnes.
• However huge demand compression in soda ash is being witnessed around the globe, especially in China, where the demand has compressed 30%. The US market has slowed down by around 10%, whereas the demand compression in India was 6% during the previous quarter.
• GCIP produced 1.76 million tonnes of soda ash in 9MFY09. Sales for the period amounted to 1.77 million tonnes.
• The global soda ash prices and volume off-take declined during the quarter especially in the African & Asian markets. Some shrinkage in volumes was also witnessed in the US export markets & in Western Europe. In India prices have been reduced by 6 % during the quarter.
• The current spot soda ash is traded in a range of US$ 190 to US$ 250 per metric tonnes. The bulk tonnage is traded at US$ 235 per metric tonnes.
• However lower key inputs prices like the declining prices of coal and coke has mitigated the major impact due to price fall of Soda Ash.
• The company’s market leadership in the domestic edible salt market broke its own record again and reached an all time high of 58% in the national branded segment.
• The fertilizer division also performed exceedingly well during the quarter with the consolidated revenue increasing by 144% to Rs 2.098.73 crore on the back of healthy demand. The consolidated profit from the division however fell by 67% to Rs 32.45 crore during the quarter ended December 2008.
• The company sold 1,78,000 metric tonnes of urea during the quarter under review, whereas it sold 2,23,000 metric tonnes of NPK during the quarter under review.
• Tata Salt’s continues at number one position with market share of about 44%. The I-shakti continues as the third largest salt brand in India in its first year. Its national branded market share is 14%.
• The Babrala plant was fully de-bottlenecked and now is producing 3,500 tonnes per day levels. The facility was shut for a period of around 40 days to ensure stability of operations.
• A steeper decline in DAP prices as compared to those of phosphoric acid impacted performance of the phosphatic fertilizer business.
• The unavailability of rock phosphates and its higher prices impacted the operations at IMACID. The phosphoric acid price realization was US$ 1920 per metric tonnes and the production during the quarter was around 35,000 to 40,000 metric tonnes. The IMACID complex was shut for half of the previous quarter for turnaround.
• IMACID had Rs 50 crore negative impact due to write down of high cost inventory and now the high cost inventory is through.
• Total cash on the balance sheet as on December 2008 was Rs 1,199 crore (inclusive of value of fertilizer bonds as on December 31, 2008).
• The Company’s consolidated net debt as on December 2008 stood at Rs 4,639 crore. This comprises borrowings of USD 475 million taken on the Tata Chemicals balance sheet and a loan of USD 300 million taken on the GCIP balance sheet, both of which have been taken at extremely fine rates. Payment towards the former will commence in June 2012 while towards the latter will begin in February 2009.
• The average rate of debt for the company is just 6.1% and all the loans are hedged except the US$ 475 million which is taken on Tata Chemicals balance sheet.
• Net Debt to Equity as on December 31, 2008 stood at 1:1. The company intends to take the gross debt to Equity ratio at 1:1.
• The company had a capital expenditure plan of Rs 550 crore to be spent during FY 2009, FY 2010 and FY 2011. Now this capex has been revised and the downward revised capex is Rs 400 crore, out of which Rs 200 crore is already spent for Babrala plant de-bottlenecking.