Tata Chemicals Limited, a leading manufacturer of chemicals, fertilisers and food additives today announced its unaudited financial results for the quarter ended June 30, 2004.

Commenting on the company’s performance for Q1 FY 2005, Prasad Menon, managing director, Tata Chemicals, said, “During the quarter under review, sales across our urea, DAP, complex fertilisers and edible salt businesses have demonstrated healthy improvement. Further, despite steep increases in the prices of coke, ammonia and phosphoric acid as well as firm ocean freight rates, Tata Chemicals has maintained its profitability in the just concluded quarter. This has been achieved through a rigorous control over operating and processing costs. I believe this is testimony of Tata Chemicals’ ability to deliver results in an adverse environment.

I believe that Tata Chemicals possesses the size, stature and experience to combat environmental challenges and become an even stronger and more efficient player going forward”

Performance summary

Q1 FY 2005 (April – June 2004) v/s Q1 FY 2004 (April – June 2003)

• Income from operations (net of excise) improved by 26 per cent to Rs 520 crore from Rs 415 crore

• Profit from operations lower by 5 per cent at Rs 111 crore compared to Rs 117crore
  

  • Continuing high cost of coke which is a major constituent of power and fuel costs
    
  • Freight and forwarding charges too while declining marginally, continue to rule firm on a corresponding quarter basis

• PBIT of the inorganic chemicals business at Rs 57 crore

• PBIT of the fertiliser business amounted to Rs 32 crore

• Profit before tax up by Rs 51 lakh, as a result of efficient control of operating and processing costs and decreased interest outgo 

• PAT stood at Rs. 46 crore compared with Rs 49 crore in Q1 FY2004
  

  • Provision for tax considers the effect of the inclusion of 2 per cent cess as proposed in the finance bill 2004

•  EPS (for the quarter): Rs 2.12

 Segmental performance

Inorganic chemicals

Soda ash

• Capacity utilization at the company’s Mithapur manufacturing facility improved to 87.5 per cent during the year under review.

• Soda ash domestic sales volumes in Q1 FY2005 amounted to 131,000 MT while exports stood at 25,000 MT.

• Tata Chemicals sustained its leadership position in the segment with a market share of 31.2 per cent.

Food additives

• ‘Tata Salt’ continues to be the leader in the edible salt market with a market share of 41.8 per cent for the quarter under review.

• The brand was also ranked amongst the top FMCG brands in the country with the highest penetration according to the 11th Round of the Indian Readership Survey 2004.

•  In an effort to enhance penetration in the rural segment, Tata Salt has been introduced in a 100gm pouch priced at Re 1.

•  Samundar crystal salt was launched in Mumbai, Nagpur and Pune in the June 2004

STPP
Sales volumes of sodium tri poly phosphate (STPP) continued to be healthy amounting to 4,986 MT

Fertilisers
Nitrogenous

• Normal rainfall during the initial two months of the period under review combined with low distribution channel inventories resulted in improved sales. Sales volumes appreciated 63 per cent in Q1 FY2005 compared with Q1 FY2004

• The company’s energy consumption continues to be the lowest in the industry making it the most efficient player in the sector.

• Tata Chemicals has entered into a supply agreement with Indian Oil Corporation to ensure continuous gas supply.

• The Babrala manufacturing facility received the Greentech Safety old Award for 2002—03 in chemical sector

Phosphatics

• Q1 FY2005 sales volumes of DAP fertiliser stood at 79,000 MT, an improvement of 18 per cent compared with the corresponding quarter in the previous year 

• Performance in this segment has been considerably impacted by the steep increase in the price of raw materials like ammonia and phosphoric acid

Financial management 

• Interest costs amounted to Rs 7 crore - less than half the amount incurred in the corresponding quarter in the previous year 

• Total debt stood at Rs 619 crore as on June 30, 2004 compared with Rs 750 crore as on June 30, 2003

  •  Debt as on June 30, 2004 also includes short term Buyers credit of the erstwhile Hind Lever Chemicals, amounting to around Rs. 155 crore. The tenor for this debt is around six months 

• Tata Chemicals’ debt equity ratio presently stands at 0.30 (including short term debt) and 0.26 (excluding short term debt)

• Weighted average cost of long term borrowings at 6 per cent (not considering short term borrowings which are procured at far lesser interest rates) in Q1 FY2005 compared with 8 per cent in the corresponding quarter last year

Outlook
Inorganic chemicals

• Ocean freight rates have declined though they have again begun to appreciate in recent weeks. However raw material prices are expected to continue to be firm in the near term keeping soda ash margins under pressure. The Company continues to identify various options to mitigate this threat.

• Tata Chemicals continues to endeavor towards becoming a leading international player as well as sustaining its dominant domestic presence in the soda ash business.

• Tata Chemicals also continues to explore new opportunities in the food additives business as part of its efforts to add value to the food category and create a more evolved and quality conscious market.

Fertiliser

• With the domestic industry well positioned to cater to this increased demand and with international prices of urea ruling high, threat of imports is negligible.

• Tata Chemicals supply agreement with Indian Oil Corporation will contribute to continued gas supply and effectively higher levels of efficiency.

• Ammonia and phosphoric acid prices, while continuing to be high, are off their peak levels. The Company along with other players in the sector is in continuous dialogue with the Government in an effort to ensure that the new DAP policy is free of any irrationalities in treatment of costs such that any price escalations are fairly factored in when calculating price concessions.

• Tata Chemicals is also exploring opportunities to securitise the price and ensure consistent supply of its raw materials, besides identifying alternate and cheaper inputs.