ON A consolidated basis, Tata Chemicals reported a 42% fall in net profit at Rs 91.1 crore during the quarter ended December 2007 on the back of a 5% fall in net sales to Rs 1,700.1 crore. However, this dismal performance was mainly the result of some one-time expenses and losses totalling around Rs 35 crore, which are not likely to repeat in future.
The consolidated Q3 results were affected by four important factors. First, the company refinanced over $40-million high-cost debt with low-cost loans, paying a pre-payment penalty of over Rs 14.5 crore. Second, the operations in Kenya were affected in December due to political unrest. Also, the interest and depreciation costs moved up as the new soda ash facility in Kenya commenced production. Finally, higher coal prices in Europe could not be passed on to customers due to long-term contracts.
However, the scenario has changed since then. The new soda ash plant in Kenya has achieved nearly 80% capacity utilisation level and the unrest has ebbed. In Europe, new contracts for 2008 were signed at over 10% higher prices. Over 90% of European sales of the erstwhile Brunner Mond Group, which TCL acquired in 2005, are 1-year contract now. At the same time, the company’s expansion projects as well as new ventures in India are on track.
TCL’s operating margins improved slightly during the quarter, thanks to a better performance by the fertiliser business. The segment profits improved despite a fall in revenues, as the company curtailed trading in di-ammonium phosphate (DAP), which was incurring losses due to unprecedented spurt in international DAP prices. The inorganic chemicals segment had a tough run though.
The company on January 31, 2008, announced acquisition of GCIP — a US-based natural soda ash maker with annual capacity of 2.5 million tonne. Valued at $1 billion, financing this acquisition remains an important issue for the firm, which currently carries around $175 million in cash and liquid investments and around $375 million in listed equities. The company’s outstanding debt as on December 31, 2007, stood at $372 million, including $96 million of outstanding FCCBs. As a result, the company enjoys considerable flexibility to finance the acquisition through a mix of debt and equity.
This acquisition will take TCL’s total soda ash capacity to 5.5 million tonne with a 14% global market share. Over 50% of this capacity is based on natural soda ash, the production cost of which is just 40% that of synthetic soda ash. The soda ash demand remains strong globally while the supply continues to remain stiff. As a result, the international prices continue to hover around $300 per tonne mark. The demand in the US is likely to weaken in the coming months due to a housing slump. However, the demand in emerging economies, including China and India, is growing fast, which will sustain the current high prices. The lower cost of production at the newly acquired US facility gives TCL the flexibility to sell the material in farther away countries.
The consolidated Q3 results were affected by four important factors. First, the company refinanced over $40-million high-cost debt with low-cost loans, paying a pre-payment penalty of over Rs 14.5 crore. Second, the operations in Kenya were affected in December due to political unrest. Also, the interest and depreciation costs moved up as the new soda ash facility in Kenya commenced production. Finally, higher coal prices in Europe could not be passed on to customers due to long-term contracts.
However, the scenario has changed since then. The new soda ash plant in Kenya has achieved nearly 80% capacity utilisation level and the unrest has ebbed. In Europe, new contracts for 2008 were signed at over 10% higher prices. Over 90% of European sales of the erstwhile Brunner Mond Group, which TCL acquired in 2005, are 1-year contract now. At the same time, the company’s expansion projects as well as new ventures in India are on track.
TCL’s operating margins improved slightly during the quarter, thanks to a better performance by the fertiliser business. The segment profits improved despite a fall in revenues, as the company curtailed trading in di-ammonium phosphate (DAP), which was incurring losses due to unprecedented spurt in international DAP prices. The inorganic chemicals segment had a tough run though.
The company on January 31, 2008, announced acquisition of GCIP — a US-based natural soda ash maker with annual capacity of 2.5 million tonne. Valued at $1 billion, financing this acquisition remains an important issue for the firm, which currently carries around $175 million in cash and liquid investments and around $375 million in listed equities. The company’s outstanding debt as on December 31, 2007, stood at $372 million, including $96 million of outstanding FCCBs. As a result, the company enjoys considerable flexibility to finance the acquisition through a mix of debt and equity.
This acquisition will take TCL’s total soda ash capacity to 5.5 million tonne with a 14% global market share. Over 50% of this capacity is based on natural soda ash, the production cost of which is just 40% that of synthetic soda ash. The soda ash demand remains strong globally while the supply continues to remain stiff. As a result, the international prices continue to hover around $300 per tonne mark. The demand in the US is likely to weaken in the coming months due to a housing slump. However, the demand in emerging economies, including China and India, is growing fast, which will sustain the current high prices. The lower cost of production at the newly acquired US facility gives TCL the flexibility to sell the material in farther away countries.
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