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Tata Chemicals Q4FY21 Concall Highlights

Tata Chemicals Q4FY21 Concall Highlights

Published on 31 May 2021 Views 174 Comments 1

Performance highlights

  • The TCNA exports volumes are back to normal run rate which is a big positive and the run rate will continue throughout next year.
  • All sectors are showing positive demand trend. Volumes will be strong going forward in FY22.
  • The company has focused on cash flows and operational cash flows. Indian business has delivered negative working capital for the first time. Even though profit levels were low, there was higher operational cash flow.
  • Demands from detergents and glass segment sectors are back though container glass demand is soft currently.
  • In TCNA exports, the company had a price reduction of $5. Company expects prices to move up with spot. Spot prices had a strong bounce back, expanding as much by $25 in some cases.
  • One-off hit of Rs. 45 crores was caused in US as the polar vortex hit the oil wells in Texas from which gas feed happens in the company’s unit. The prices spiked from $2.30 to $150-$160 per MMBtu during 4 day weekend of presidential holiday.
  • In UK, the business was steady but softness in salt sales, arising due to strict shutdown orders in UK in Q4FY21. As UK opens when its cases come down, the softness in demand should start decreasing.
  • The company had 2 one-off expenses in UK, the first was a refinancing cost for Q4FY21 and the other was a tax asset write-off in Q4FY21 and also an impact of unseasonal floods. Realizations were lower in Magadi and margins contracted too.
  • Tata Chemicals and Rallis operations in India are profitable and Magadi delivered profit as well. The one-offs in UK and USA impacted the final numbers of the business.

 

Standalone business highlights

  • Q4FY21 soda ash volumes stood at 184 lakh tonnes which is 16% more than Q4FY20.
  • Revenue for Q4FY21 stood at Rs. 841 crores as compared to Rs. 734 crores in Q4FY20, a growth of 15%.
  • Basic chemistry revenue is up 13% and Specialty chemical revenue is up 59% though they had a smaller base.
  • Other expenses are up to Rs. 141 crores as compared to Rs. 118 crores in Q4FY20. This has increased due to consumption of stores, spare parts, repairs and maintenance.
  • EBITDA improved by 17% to Rs. 164 crores and PBT has increased by 11% YoY. There is also a one off gain to due income tax refund of Rs. 18 crore.
  • Cash generation has gone up to Rs. 672 crores in FY21 as compared to Rs. 427 crore in FY20. This happened due to tight working capital and CAPEX control. Cash position currently is Rs. 2,098 crores on Mar 21.
  • Capital expenditure for Q4FY21 stood at Rs. 205 crores as compared to Rs. 143 crores in Q4FY20. CAPEX in FY21 was Rs. 548 crores as compared to Rs. 640 crores last year.
  • Net worth of the company has gone up to Rs. 11,977 crores by almost Rs. 1,500 crores due shares in group company have increased.

US Business Highlights

  • Soda ash volumes increased by 3% to 5.68 tonnes in Q4FY21 from 5.5 lakh tonnes  in Q4FY20 leading to revenue increase too.
  • PBT was affected and led to a loss of Rs. 60 crores in Q4FY21 as compared to profit of Rs. 92 crores in Q4FY20. The reasons being: incomplete price recovery, artic blast which caused extreme cold weather and natural gas price increase by almost 100 times and a higher spend on repairs and maintenance.
  • The unhedged part of the gas suffered an impact of Rs. 45 crores on the open position which the company believes is an one-off event.
  • Production levels came down which ultimately lagged the sales, leading to a Rs. 40 crores impact as the fixed costs remained unabsorbed. When production goes up in next quarter, the company sees recovery happening.

UK Business Highlights

  • Volumes in soda ash and bicarbonate were lower than Q4FY20 due to impact of flooding and lower demand.
  • Revenue for Q4FY20 was up 5% than Q4FY20. The company had Rs. 28 crore loss in Q4FY21 in UK when compared to Rs. 13 crores profit in Q4FY20.
  • Loss was majorly due to one-off expenses like tax write-off and refinancing costs & floods.

Kenya Business Highlights

  • In Magadi, the revenue had a small decrease when compared to Q4FY20, but tight cost control resulted in PBT improving from Rs. 4 crores lost in Q4FY20 to Rs. 10 crores profit.

 

Rallis Business Highlights

  • In Rallis, the revenue has increased by 36% in Q4FY21 YoY due to crop care jump and good international business.
  • PBT increased to Rs. 8 crores in FY21 compared to Rs. 1 crore in FY20

 

Consolidated Highlights

  • Revenue grew by 11% YoY in Q4FY21. EBITDA stood at Rs. 283 crores, decreasing by 30% YoY. PBT fell to Rs. 80 crores in Q4FY21 from Rs. 217 crores in Q4FY20.
  • The consolidated CAPEX for FY21 was Rs. 411 crores compared to Rs. 300 crores in FY20.
  • FY21 free cash flow stood at Rs. 450 crores, increasing by 65% YoY. This rise in free cash flow can be attributed to efficient working capital.
  • Consolidated gross debt stood at Rs. 6,933 crores, which reduced by Rs. 770 crores from FY20. Net debt stood at Rs. 3,828 crores, reducing by Rs. 214 crores.

 

Soda ash market

  • Demand is fully back in the soda ash market. Only the container glass demand is lagging.
  • Tightness in the market because the spot market prices have moved up. This situation is likely to continue forward.
  • Several expansion announcements which were made have been paused.
  • Producers which made the announcements are waiting to see long-term trends in demand and lagged effect of pricing.
  • Spot prices in export markets have made a sharp comeback.

 

US Business

  • Gas price increase of led to an impact of Rs. 45 crores.
  • Rs. 40 crores impact due to fixed cost under absorption because of lower production in sales.
  • Fixed cost has moved up has the company has moved expense from Q3FY21 to Q4FY21.
  • The drop in price in export markets and the above mentioned factors led to a loss for the US business.
  • Almost all US volumes are contractual and very little spot in US domestic.

Outlook

  • With new capacities mainly in Rallis and Mithapur and full utilization of units in South America, the absolute growth estimation for top-line is close to 50%-70% on consolidated basis for period upto 2025/26.
  • This growth will be from Rallis in Mithapur unit, majorly in salt. Also growth in sod ash, chloro caustic chain. Nutraceutical business in Nellore will also contribute in the same.
  • The volumes are supposed to go back to historical levels this year.
  • The company is also seeing price improvements in most of the markets but it is constrained by contractual commitments. Recovery in price will happen after renegotiation.

CAPEX

  • Capex spend is spread over next three years. CAPEX is going to be done in Rallis and the balance left is going to be done in Dahej for manufacturing of technical and formulation units.
  • In terms of chemicals, CAPEX is concentrated in Mithapur and majorly is being done for expanding salt capacity from  1 million tonne to 1.5 million tonne.
  • Soda ash capacity will be going up by 2,00,00 tonne.

 

Specialty product portfolio

  • The current plan includes expansion of caustic and team is also focused on chlorine and bromine derivative. Focus is on Mithapur to make it more of a specialty site.
  • For nutrition portfolio, the approach of the company is build on fermentation platform. In performance materials, the company thinks silica business is extremely versatile with wide application.
  • Hence the company is going to expand on three elements in inorganic chemicals (Halogen Chain, Silica Chain and performance material) and also on the nutrition side fermentation platform.
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