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Tata Chemicals: Lower Finance Costs Boost Profits - Views on News from Equitymaster
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Tata Chemicals: Lower Finance Costs Boost Profits
Jun 2, 2017

Tata Chemicals has announced the fourth quarter results of financial year 2016-2017 (4QFY17). The company has reported a 15.8% YoY fall in the topline and a 54% YoY surge in the bottomline during the quarter.

Performance summary
  • Total income from operations during the fourth quarter fell by 15.8% YoY. Most of the loss here was driven by the poor performance of the fertilizer and other business segments of the company, where revenues fell by 49.3% YoY and 48.4% respectively.
  • Operating profit (EBITDA) in 4QFY17 fell by 6.4% YoY. However, there was an improvement in operating margins which stood at 16.2% in 4QFY17 as against 14.6% in 4QFY16. The improvement in margins came on the back of lower plant spend and lower fixed costs across all the business units including subsidiaries.
  • Net profits grew by 54.2% YoY on the back of decreasing finance costs by 37.7% YoY and a rise in other income which grew 45.7% YoY during the quarter. Most of the rise in net profits during the quarter was aided by the surge in exceptional items which included the proceeds from the discontinued business. Exceptional items during the quarter were up by 517.6% on a YoY basis.
  • On the segmental front, the inorganic chemicals business recorded a small 4.3% dip in revenues, while agri trading business witnessed a 6.8% fall in volumes on account of the focus on improving working capital position.
  • The higher sales realization in consumer business were partly offset by lower sales volume in pulses. The Phosphatic business of the company realized improved margins despite lower sales volumes due to lower input and lower fixed costs.
  • For the twelve months ended March 31, 2017, the company's revenue from operations decreased by 12.7% YoY. Operating profits for FY17 grew by 6.3% YoY, while net profits grew 28.9% YoY. Operating margins stood at 16.7% in FY17 as against 13.7% reported in FY16. Net profit margins improved to 7.5% in FY17 as compared to 5.1% in FY16.
  • For the full year ended FY17, the board of the company has recommended a dividend of Rs 11 per equity share (dividend yield 2%).

    Consolidated financial snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Net sales 35,652 30,023 -15.8% 152,202 132,889 -12.7%
    Expenditure 30,443 25,148 -17.4% 131,285 110,653 -15.7%
    Operating Profit (EBITDA) 5,209 4,875 -6.4% 20,917 22,236 6.3%
    EBDITA Margin (%) 14.6% 16.2%   13.7% 16.7%  
    Depreciation 1357 1378 1.5% 5,261 5,347 1.6%
    Finance Cost 1305 814 -37.7% 5255 4112 -21.8%
    Other Income 529 771 45.7% 1,253 1,661 32.6%
    Profit before tax 3,076 3,455 12.3% 11,654 14,439 23.9%
    Exceptional Items 101 626 517.6% 742 1348 81.7%
    Tax 438 790 80.1% 2,484 3,573 43.9%
    Profit after tax/(loss) 2,739 3,291 20.2% 9,913 12,214 23.2%
    Minority Interest 587 324 -44.9% 2,356 2,410 2.3%
    Share of Associates -137 139   149 128  
    Net profit after minority interest 2,015 3,106 54.2% 7,706 9,931 28.9%
    Net profit margin (%) 5.7% 10.3%   5.1% 7.5%  
    No. of shares (m) 254.8 254.8   254.8 254.8  
    Diluted earnings per share (Rs)*         39.0  
    P/E ratio (x) *         16.3  

    *Based on trailing 12 month earnings


    Segmental Performance
    Segment 4QFY16 4QFY17 Change FY16 FY17 Change
    Inorganic Chemicals            
    Revenues 23,031 22,034 -4.3% 88,201 86,342 -2.1%
    PBIT 4,324 3,722 -13.9% 15,303 15,645 2.2%
    PBIT margin 18.8% 16.9%   17.4% 18.1%  
    Fertilisers            
    Revenues 7,903 4,005 -49.3% 41,130 22,883 -44.4%
    PBIT -201 244 -221.7% 153 1,186 675.1%
    PBIT margin -2.5% 6.1%   0.4% 5.2%  
    Other agri inputs            
    Revenues 3,947 3,678 -6.8% 19,853 20,628 3.9%
    PBIT 404 241 -40.4% 2,205 2,646 20.0%
    PBIT margin 10.2% 6.5%   11.1% 12.8%  
    Others            
    Revenues 925 477 -48.4% 4,582 3,748 -18.2%
    PBIT -336 -181 -46.1% -476 -863 81.3%
    PBIT margin -36.3% -37.9%   -10.4% -23.0%  
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