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Tata Chemicals net doubles on lower base, better realization
Aug. 7, 2014
Tata Chemicals has reported that its consolidated net profit more than doubled to 176 crore (75 crore the previous year) largely due to last year’s lower base and better realisations across business segments this year. Sales were up 16% at 3,889 crore (3,331 crore).
The revenue from the fertiliser business improved 43% to 1,187 crore (833 crore compared to last year) as the Haldia unit in West Bengal, which was shut for three months last year due to raw material shortage, operated at its optimal level in the June quarter of this year.
The company is expected to take a charge of $8-9 million (about 54 crore) next quarter to pay 200 employees who have opted for the voluntary retirement scheme as part of restructuring in Magadi, Kenya. Post restructuring, the unit is expected to turn EBITDA (earnings before interest, taxes, depreciation and amortisation) positive from the September quarter.
Tata Chemicals has a gross debt of 8,371 crore and net debt of 6,800 crore. A major portion of the debt is in the US where the rates are low with attractive terms spread over seven years. In India, the debt level is expected to halve to 1,500 crore in five years, while in the UK and Kenya it will dip by 50-60 per cent in the same period.
The company has to recover 1,687 crore from the Indian Government for selling urea at subsidised rate to farmers.
R Mukundan, Managing Director, said the delay in formalising a fertiliser policy by the Government for unsubsidised urea would impact the profitability.
Going ahead, the company intends to focus on selling more non-subsidised fertilisers. Sale of non-subsidised fertilisers, which accounts for 50% currently, would over take the subsidised fertiliser in next five years, he said. The company does not intend to expand fertiliser production in India due to high gas prices. In the US, gas is available at $4 per million British thermal units while it is priced at $1-2 in Mozambique.
"It would not be viable to expand fertiliser production in India even if gas is made available as the price we are talking of now is about $8 per million British thermal units," said Mukundan. Share of the company was up 3% at 374.
Source: The Hindu Business Line
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