Earnings Review: Tata Chem net profit surges on operating profit jump

 9 Aug 2022

Higher realisations and moderate volume growth were enough for Tata Chemicals Ltd to offset sharp rise in energy costs and raw material expenses and record a significant increase in operating profit in the quarter ended June.

It led to a 2.1 times rise in consolidated net profit to 5.9 bln rupees as compared to the year ago period. The reported net profit was higher than analyst estimates of 3.4 bln-4.5 bln rupees.

The consolidated net sales were up 34% on year to 40 bln rupees which too were above analyst estimates of 37 bln-39.5 bln rupees.

Tata Chemicals' sales were higher on the back of rise in realisations in sales of soda ash and sodium bicarbonate in domestic and export markets of US, Kenya and UK.

This was despite soda ash volume declining 1% to 885,000 tn. The increase of 5% in sales volume of sodium bicarbonate to 58,000 tn aided the company's sales.

There was a volume growth in salt sales as well. It went up 2% to 418,000 tn.

ACROSS GEOGRAPHIES
Tata Chemicals' domestic revenue jumped 48% to 8.3 bln rupees.

Tata Chemicals said that domestic demand for soda ash and sodium bicarbonate was strong during the June quarter and the company's Mithapur unit operated at full capacity. The company sells soda ash, sodium bicarbonate and salt in the domestic market.

The domestic soda ash volume was up by only 1% on year to 167,000 tn but sodium bicarbonate sales increased sharply by 8% to 27,800 tn and salt sales were up by 6% to 311,900 tn.

In the US market where the company sells only soda ash the revenue growth was 34% on year to 8.4 bln rupees even though the sales volume was lower by 1.7% at 577,600 tn.

Tata Chemicals' Kenyan operation saw soda ash sales jump 84% to 1.3 bln rupees. But the volume was near flat at 83,100 tn.

Revenue growth was the lowest in UK with sales rising 31% on year to 4.1 bln rupees.

There was a fall in UK sales volume of soda ash and salt. While soda ash volume fell 4.3% to 67,500 tn that of salt fell 8.3% to 96,000 tn. Sodium bicarbonate sales were however up by 3.7% to 27,100 tn.

HIGHER PROFITABILITY
The consolidated operating profit, defined as earnings before interest, tax, depreciation and amortisation, of the company jumped 69% to 10.2 bln rupees in Apr-Jun. The EBITDA margin expanded to 25.4% from 20.2% a year ago.

The EBITDA growth was primarily driven by higher realisations. It was the highest in domestic, UK and Kenyan operations.

The company said that soda ash realisations increased across units with US and Kenya export pricing remaining firm.

The realisations in the UK market were higher as input costs rose sharply and the company was able to pass on the costs to its customers.

But the EBITDA from the company's agrichemicals subsidiary, Rallis India, fell 7%. Tata Chemicals holds a 50% stake in its subsidiary Rallis India which declared its June quarter results last month.

COMPANY OUTLOOK
Tata Chemicals' managing director and CEO R Mukundan said that global demand environment in the company's products and their applications remains strong.

"While this positive momentum is expected to continue in the near to medium term, the input side environment especially energy remain at elevated levels coupled with logistic challenges that continue to be seen in the market," he said.