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FY2005 net sales Rs 3,008 crore; PAT up 55 per cent, EPS: Rs 15.85
May 31, 2005

Tata Chemicals Limited, a leading manufacturer of chemicals, fertilisers and food additives, today announced its audited financial results for the year ended March 31, 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 FY 2005, Prasad Menon, Managing Director, Tata Chemicals, said, "Our financial and operating performance is a reflection of a healthy increase in sales volumes and stronger realisations from all our businesses. This has happened despite high input costs, disruptions in supply of inputs for DAP fertiliser and strong competitive activity. In financial year 2005, Tata Chemicals achieved a healthy increase in sales volumes and improved realisations in all its businesses. An aggressive financial management approach which has seen interest costs halve for the second year in a row has complemented our operating and marketing efforts.

"In January, Tata Chemicals also took its first step towards establishing a footprint in geographies outside India, by becoming an equal partner in Indo Maroc Phosphore S.A., a leading manufacturer of phosphoric acid. This will ensure continuous availability of this key input and ensure optimal operations. We continue to aggressively explore both inorganic and organic growth options across all our businesses and in order to be suitably prepared for these, Tata Chemicals availed a USD 150 million FCCB in the just concluded quarter.

"Strategic sourcing, efficiency in operations and strong customer relations will enable us to sustain profitability and take advantage of the healthy demand growth in all our businesses."

Performance summary
FY 2005 (April 2004-March 2005) v/s FY 2004 (April 2003-March 2004)

Income from operations (net of excise) improved by 18 per cent to Rs 3, 008 crore from Rs 2,544 crore

  • Increase in net sales driven by improved realisations and volume increases across all products
  • Higher urea sales also partially attributable to increased claims on account of urea escalations
  • Sales of traded products, largely agri offerings and complex fertilisers via the Tata Kisan Sansar network increased by 33 per cent

Profit from operations at Rs 516 crore compared to Rs 460 crore, up 12 per cent

  • Improvement due to volume increases and healthier realisations
  • Reduced fixed costs and better logistics management neutralised the steep increase in input costs during first nine months of the fiscal under review
Profit before interest and tax (PBIT) of the chemicals business amounted to Rs 222 crore
PBIT of the fertiliser business at Rs 208 crore

Profit before tax (PBT) higher at Rs 453 crore, up 39 per cent from Rs 326 crore. This represents the highest PBT ever reported by the company

  • Increase in PBT also attributable to
    • Improved financial management results in lower interest charge
    • Profit from sale of long term investments, lower depreciation charge as a consequence of impairment of assets and the reduction in charge on Employee Separation Compensation
Profit after tax (PAT) at Rs 341 crore compared with Rs 221 crore, an improvement of 55 per cent
Basic earnings per share (EPS): Rs 15.85
The Board of Directors of the company have declared a dividend of Rs 6.50 per equity share translating to a dividend payout of 46.5 per cent

Q4 FY 2005 (January - March 2005) v/s Q4 FY 2004 (January - March 2004)

Income from operations (net of excise) up 27 per cent to Rs 720 crore from Rs 565 crore

Profit from operations improves 80 per cent to Rs 134 crore from Rs 74 crore

  • Besides volume enhancement and improved realisations across all products, soda ash price increases negated the impact of earlier raw material price increases
PBIT of the chemicals business amounted to Rs 69 crore
PBIT of the fertiliser business was Rs 49 crore

PBT amounted to Rs 112 crore, up 174 per cent in Q4 FY 2005 compared to Rs 41 crore in Q4 FY04

  • Improvement in PBT also attributable to increase in tax refunds and reduction in interest costs

PAT increased 275 per cent to Rs 111 crore compared with Rs 30 crore in Q4 FY 2004

  • Restatement of deferred tax liability as a consequence of reduced tax rates resulted in a lower tax charge
Basic EPS (for the quarter): Rs 5.18

Segmental performance

Chemicals

Soda ash

Among domestic manufacturers, Tata Chemicals' marketshare stood at 34.5 per cent, continuing to be the largest player in the Indian soda ash segment. On an overall market basis, the company's marketshare was 30.8 per cent
Price increases (~Rs 500 pmt) effected in November 2004, enabled increased contributions from the soda ash business
Production of soda ash during the year under review amounted to 782,000 tonnes translating to a capacity utilisation of 89.3 per cent. In the quarter ended March 31, 2005, the capacity utilisation stood at 91 per cent
Domestic sales for the year under review stood at 532,000 MT and for the quarter amounted to 144,000 MT
In line with its objective of enhancing its global presence, the company exported 151,000 MT during the year, which is 41 per cent of India's export volumes during the period under review
Imports into the country continued to be firm, amounting to 11 per cent of total material sold

Food additives

Tata Salt's dominance of the domestic market continued with the brand attaining a marketshare of 41 per cent in FY05.
The brand, which is the Number 1 food brand in India (ref 'The Economic Times' Brand Equity rankings 2004) is present in 12.4 lac outlets translating to a 35 per cent penetration across the country.
Primary sales of both Samunder Cooking Soda and Samunder Crystal Salt continued to be healthy at both the primary and secondary levels.
As part of the company's 'Desh Ko Arpan' programme, whose objective is to enable its numerous consumers to collectively contribute to the progress of the society and nation, 10 paise out of the company's profits for every pack of Tata Salt sold between January 26, 2005, and February 25, 2005, was contributed towards the upliftment of underprivileged children.

STPP

Sales volumes of sodium tri poly phosphate (STPP) were healthy at 55,000 MT, an improvement of 21 per cent over the last year.
Tata Chemicals' marketshare remains strong at 68 per cent.

Cement

A conducive business environment enabled healthy performance in the cement business. Sales in this segment improved 5 per cent over the previous year.

Fertilisers

Nitrogenous (Urea)

Demand from the fertiliser segment continued to be strong. In response the government sought additional volumes. Consequently, urea sales during the year amounted to 950,000 MT, an increase of 11 per cent over the previous year. Sales for the quarter ended March 31, 2005, also improved 14 per cent yoy.
Tata Chemicals remains the most energy efficient player in the industry.
In the quarter ended March 31, 2005, Tata Chemicals entered into long term agreements with Indian Oil Corporation for the supply of reliquefied natural gas.
The company awaits government of India approval with regard to the debottlenecking of its manufacturing facility at Babrala.

Phosphatics (NPK, SSP, Di ammonium phosphate)

DAP, NPK and complex fertiliser sales volumes during the year under review amounted to 704,000 MT.
During the year the company endeavoured to enhance the manufactured volumes of NPK fertilisers which enjoy higher realisations and lower ammonia and phosphoric acid requirement as compared to DAP.
In March, 2005, the company entered into a raw material sourcing agreement with Indo Maroc Phosphore S.A. (IMACID), Morocco, a leading manufacturer of phosphoric acid. By way of this agreement, Tata Chemicals will receive its entire phosphoric acid requirement.
Delays in the settlement of prices of ammonia and phosphoric acid however continue to create a challenging environment for phosphatic fertiliser manufacturers.
In the quarter ended March 31, 2005, Tata Chemicals also introduced two new crop enriching variants namely 15:15:15 and 14:35:14 both of which have been positively received by the farmer.

Financial management

Interest costs in line with the company's focused debt restructuring programme amounted to Rs 24.6 crore in FY2005, a 52 per cent decline compared to the previous year.
Total debt as on March 31, 2005, stood at Rs 1,324 crore which is an increase of Rs 559 crore as compared to debt as on March 31, 2004. The debt includes an amount of Rs 655 crore availed via the company's foreign currency commercial borrowing. Net reduction in debt is hence Rs 96 crore.
Debt comprises short-term buyers credit amounting to around Rs 516 crore, the tenor for which is around six months.
Tata Chemicals' debt equity ratio (debt considered inclusive of FCCB and short term buyers credit) as on March 31, 2005, stood at 0.66. net of FCCB the debt equity ratio stood at 0.33.
The weighted cost of borrowings (short and long term) was 4.3 per cent for the year under review as compared to 7.8 per cent in the previous fiscal.
On January 25, 2005, as part of its efforts to be adequately prepared to leverage inorganic and organic growth opportunities, the company priced an offering of USD 150 million senior convertible bonds through the accelerated book built route. The 5-year, 1 per cent coupon bonds have an issue price of 100 per cent and can be redeemed at a premium to par to yield 4.75 per cent per annum. The bonds which are listed on the Singapore Stock Exchange, convert in to ordinary / equity shares of the company at a 50 per cent premium off closing price on January 25, 2005, of INR 154.25 on the Bombay Stock Exchange.

Outlook

Inorganic Chemicals

The demand outlook for the soda ash business, especially from the glass segment remains strong both domestically and globally. On the back of this demand growth, as well as increasing raw material and freight costs, spot prices of soda ash were increased by around 7 per cent on April 1, 2005. This increase is in addition to the two earlier price increases effected in CY2004 and are expected to contribute to improved margins. From an input perspective, prices of coke and coking coal are firm but steady.
Retail prices of Tata Salt were increased with effect from May 1, 2005, by 16 per cent to Rs 9.25 per kilogram. This initiative is a reflection of healthy market demand and a gradual shift by consumers towards branded foods.

Fertiliser

Urea sale volumes improved by around 8 per cent during the previous year. Demand continues to be firm. While a healthy monsoon will encourage growth, with the company's core command areas having high water tables and good irrigation facilities, the monsoon is viewed to be a less influential parameter.
The company is exploring opportunities to manufacture urea in locations where cheaper gas is available.
With regard to the phosphatic fertiliser business, prices of ammonia and phosphoric acid continue to be firm. The sourcing agreement with IMACID as discussed earlier in this communication will ensure continuity of operations. The company is also gradually increasing production of NPK fertilisers which are cross specific and enjoy higher realisations as compared to DAP.

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