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Tata Chemicals: Urea division dampens performance
Nov 18, 2016

Tata Chemicals has announced its September quarter results. The company has reported consolidated topline fall of 17% YoY while the bottomline has fallen 5% YoY.

Performance summary
  • Consolidated topline for the quarter falls 17% YoY, standalone topline falls 34% YoY.
  • Operating margins on a consolidated basis expand by 1.9%, leading to a lower, 6% fall in operating profits
  • Consolidated bottomline falls by a similar 5% YoY as there are no other big negative surprises.
  • For the half year period, bottomline grows 13% on the back of a 12% fall in topline
  • Standalone bottomline falls 46% on the back of a 34% fall in topline

    (Rs m) Consolidated Consolidated
    2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Net sales 41,022 33,905 -17.3% 74,738 66,058 -11.6%
    Expenditure 35,106 28,369 -19.2% 64,016 54,804 -14.4%
    Operating profit (EBDITA) 5,916 5,536 -6.4% 10,721 11,254 5.0%
    EBDITA margin (%) 14.4% 16.3% 14.3% 17.0%
    Other income 491 260 -47.0% 593 706 19.2%
    Interest (net) 1,570 936 -40.4% 2,759 1,936 -29.8%
    Depreciation 1,308 1,324 1.2% 2,570 2,645 2.9%
    Profit before tax 3,528 3,536 0.2% 5,984 7,379 23.3%
    Extraordinary items 273 323 415 407
    Tax 987 837 -15.2% 1,583 1,855 17.2%
    Profit after tax/(loss) 2,813 3,022 7.4% 4,817 5,931 23.1%
    Share of loss of associate 115 -91 -179.5% 224 -204
    Minority Interest 697 804 15.4% 1,334 1,539
    Net profit after minority interest 2,231 2,126 -4.7% 3,707 4,188 13.0%
    Other comprehensive income 1,007 -1,160 104 2,442
    Total comprehensive income 3,239 966 -70.2% 3,811 6,631 74.0%
    Net profit margin (%) 7.9% 2.9% 5.1% 10.0%
    No. of shares (m) 254.8 254.8 254.8 254.8
    Diluted earnings per share (Rs)* 32.5
    Price to earnings ratio (x)* 14.4

    (* on trailing twelve months earnings)

  • What has driven performance in 2QFY17?

  • The 17% fall in topline was driven by the poor performance of the fertilisers business as revenues fell by 56% YoY. Amongst other things, the performance was hit by lower sales volumes due to suspension of production in phosphatic fertilizer unit due to high raw material cost. However, rural demand on the back of normal monsoon has ensured strong performance of the non-subsidy based products.
  • The inorganic chemicals business recorded a small 5% dip in revenues. While the global demand of soda ash in key markets is stable, prices have remained range bound with soft bias. Indian chemicals business continued to register good performance
  • Company's agri trading business had to witness a fall in volumes on account of the focus on improving working capital position and non-subsidized sales.

    Segment 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Inorganic Chemicals
    Revenues 22,296 21,237 -4.8% 44,021 43,273 -1.7%
    PBIT 3,816 3,831 0.4% 7,214 7,836 8.6%
    PBIT margin 17.1% 18.0% 16.4% 18.1%
    Fertilisers
    Revenues 13,117 5,710 -56.5% 19,665 9,754 -50.4%
    PBIT 261 -96 -136.6% 265 153 -42.4%
    PBIT margin 2.0% -1.7% 1.3% 1.6%
    Other agri inputs
    Revenues 5,950 6,950 16.8% 11,799 12,778 8.3%
    PBIT 779 1,071 37.4% 1,446 2,095 44.9%
    PBIT margin 13.1% 15.4% 12.3% 16.4%
    Others
    Revenues 1,438 1,198 -16.7% 2,482 2,359 -4.9%
    PBIT -143 -452 217.1% -247 -554 123.9%
    PBIT margin -9.9% -37.7% -10.0% -23.5%
  • As far as the segmental margins are concerned, they went up for the inorganic chemicals and other business segments of the company.
  • PBT of the company was nearly flat as besides strong operating performance, lower interest charges helped offset the fall in topline
  • At the bottomline level, net profits fall 5% YoY
  • At the standalone level, the fall was 46% on the back of 34% fall in topline
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