Expects rising input costs to put pressure on its margins

Tata Chemicals Ltd. (TCL) expects rising input costs to put pressure on its margins going forward and said there were early signs of a demand contraction for soda ash.

The company reported a 35.7 per cent growth in its net profit for the third quarter ended December 31, 2011, at Rs.224 crore (Rs.165 crore) on a 32 per cent higher net sales of Rs.3,810 crore (Rs.2,888 crore) and a 26 per cent higher operating profit of Rs.556 crore (Rs.441 crore).

R. Mukundan, Managing Director, said, “There appears to be some softness in markets mainly China. Since it accounts for half the global production and consumption of fertilizers, it needs to be watched.” The company said that higher prices of chemicals helped mitigate input cost hikes and the leading common salt from its stable recorded a 9 per cent rise in volumes. Fertilizer prices and volumes were higher.

During the quarter, the company completed the one lakh tonne expansion of its natural soda ash facility in North America as well as the debottlenecking of the SSP capacity at Haldia by 50,000 tonnes. Both these operations are expected to achieve stability in the current quarter.

For the nine months ended December 31, 2011, the net profit was higher at Rs.699 crore (Rs.508 crore) on a 23 per cent higher net sales of Rs.10,335 crore.

Operating profit margins were 17 per cent.

Speciality products

The company's speciality products business, which includes all its non-bulk products not receiving any government subsidy, has been growing well and could contribute around Rs.550-600 crore to the company's turnover.

The speciality products business includes custom-made fertilizers, pesticides, seeds and services (managing of farms). It has been growing at more than 40 per cent. In fact, it will double its business over the previous year's Rs.320 crore. Mr. Mukundan said the business could grow 30-40 per cent next year.

Tata Chemicals may shift its bioethanol plant set up at Nanded, Maharashtra, out of the country. The Rs.50-crore plant, whose operations have been shut for the last few months owing to problems in sourcing the feedstock, sweet sorghum, had been set up as a pilot project.

Mr. Mukundan said, “The plant has worked and was supposed to make 30,000 litres per day of ethanol. There are no signs of revival. We have to decide whether to sell, lease or even shift the plant. We have taken a write-off on the civil/foundation structure and may move it to where feedstock is not a constraint.”

Keywords: Tata Chemicals

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