Earnings Outlook: Tata Chemicals' sales, net profit seen up but operating margin may contract

5 Aug 2022

Tata Chemicals Ltd is seen reporting good topline and bottomline performance in Apr-Jun, but its operating margin may have taken a hit due to high input costs.

The consolidated net profit of Tata Chemicals in the June quarter is expected to be between 3.4 bln rupees and 4.5 bln rupees, according to estimates by three brokerage houses. In the year ago quarter the consolidated net profit was 2.9 bln rupees, while it was 4.6 bln rupees in the previous quarter.

As per the estimates the consolidated net sales will likely be between 37 bln rupees and 39.5 bln rupees. The consolidated net sales was 29.8 bln rupees a year ago and 34.8 bln rupees in the previous quarter.

The company will declare its results for the June quarter on Tuesday.

A revival in a construction activity across the globe would have improved flat glass demand and consequently improved the demand for soda ash, according to brokerage ICICI direct.com Research in its preview report.

“We expect export business for North America unit to have performed well and thus, should have given respite to the overall performance,” the brokerage said.

Soda ash contributed a little over 50% of Tata Chemicals’ consolidated revenue in 2021-22 (Apr-Mar), data from the company’s annual report for the year showed.

According to brokerage Kotak Institutional Equities, US margins could potentially improve on the back of better international realisations, while the UK and Africa businesses should hold steady.

The operating profit margin will likely to remain at 20%, down 22 bps on the year, according to ICICI direct.com Research.

Tata Chemicals holds a 50% stake in its subsidiary Rallis India which declared its June quarter results last month.

Rallis India’s net sales increased by 17% on the year to 8.6 bln rupees in Apr-Jun while its net profit fell 18% to 675 mln rupees.

The revenue contribution of Rallis India to Tata Chemicals’ consolidated revenue is estimated to be around 7%. In the March quarter it was 7.3% based on back-of-the-book calculations.