IN THE quarter when the soda ash major was much in the limelight for its $1 billion acquisition in the US, Tata Chemicals (TCL) had faced severe pressure on its operating performance. TCL’s normalised net profits halved during the quarter ended March 2008 to Rs 40 crore, while operating profit margins tumbled by a massive 820 basis points to 12.2%.
Consolidated sales grew 18% to Rs 1,460.3 crore. It was the profit of Rs 487.47 crore on sale of investments that boosted its net profit to Rs 527.68 crore. Incidentally, the company had a poor Q3 with topline stagnating and net profits down 42%. Rise in staff and fuel costs was the main reason behind erosion of operating margins.
Staff costs as a percentage to net sales jumped to 9.8% from 4.9% earlier. Due to the US acquisition, TCL had to provide for pension liabilities of Rs 34.54 crore, whereas in the corresponding previous quarter, it had written back an equivalent amount due to reduction in pension liabilities. Thus, staff costs rose nearly two-and-a-half times to Rs 160 crore. A rise in fuel costs led to the fuel bill rising 50% to Rs 290 crore. As a result, the fuel cost in proportion to net sales grew 370 basis points to 17.7%.
TCL’s chemicals business had a tough time while the fertilizer segment did well, something similar to the preceding quarter. Profit margins in TCL’s inorganic chemicals business crashed 1160 basis points to just 5.8% while the margins in fertilizers inched up slightly to 14%. Thus, despite a 20% growth in chemicals sales its profits fell by 60%. As against this, the fertilizers segment grew 15% and 20% in sales and profits, respectively.
The company is debottlenecking its Babrala urea plant to increase its rated capacity to 1.2 million tonne from 0.8. The process is expected to be complete by October 2008. However, the entire plant will remain closed for one month for the integration and commissioning work.
The company has progressed on its new businesses. It commissioned the Khet-Se project with the first collection-cum-distribution centre near Ludhiana in May 2008. The second distribution centre will come up at Kalyan, near Mumbai. TCL has also commissioned a 50,000 tonne per annum sodium bicarbonate plant in the Netherlands. Similarly, civil construction at site for the ethanol project at Nanded has commenced with completion expected by the end of this year.
Consolidated sales grew 18% to Rs 1,460.3 crore. It was the profit of Rs 487.47 crore on sale of investments that boosted its net profit to Rs 527.68 crore. Incidentally, the company had a poor Q3 with topline stagnating and net profits down 42%. Rise in staff and fuel costs was the main reason behind erosion of operating margins.
Staff costs as a percentage to net sales jumped to 9.8% from 4.9% earlier. Due to the US acquisition, TCL had to provide for pension liabilities of Rs 34.54 crore, whereas in the corresponding previous quarter, it had written back an equivalent amount due to reduction in pension liabilities. Thus, staff costs rose nearly two-and-a-half times to Rs 160 crore. A rise in fuel costs led to the fuel bill rising 50% to Rs 290 crore. As a result, the fuel cost in proportion to net sales grew 370 basis points to 17.7%.
TCL’s chemicals business had a tough time while the fertilizer segment did well, something similar to the preceding quarter. Profit margins in TCL’s inorganic chemicals business crashed 1160 basis points to just 5.8% while the margins in fertilizers inched up slightly to 14%. Thus, despite a 20% growth in chemicals sales its profits fell by 60%. As against this, the fertilizers segment grew 15% and 20% in sales and profits, respectively.
The company is debottlenecking its Babrala urea plant to increase its rated capacity to 1.2 million tonne from 0.8. The process is expected to be complete by October 2008. However, the entire plant will remain closed for one month for the integration and commissioning work.
The company has progressed on its new businesses. It commissioned the Khet-Se project with the first collection-cum-distribution centre near Ludhiana in May 2008. The second distribution centre will come up at Kalyan, near Mumbai. TCL has also commissioned a 50,000 tonne per annum sodium bicarbonate plant in the Netherlands. Similarly, civil construction at site for the ethanol project at Nanded has commenced with completion expected by the end of this year.
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