Tata Chemicals came out with weak results for the June ’09 quarter with the consolidated net profit attributable to the group falling 60% to Rs 42.5 crore. The dismal performance on a consolidated basis came in spite of a strong 61% rise in standalone profits to Rs 94.4 crore, which indicates at continuing woes at its overseas businesses.
The company, which had written off hefty sums of Rs 119.2 crore towards impairment of assets and Rs 115 crore towards overseas pension liabilities in the March 2009 quarter, wrote off another Rs 87.4 crore towards restructuring costs in the June 2009 quarter. The company also provided for Rs 152.2 crore towards additional pension fund liabilities, which it chose to write off against accrued reserves. In other words, had it followed its earlier practice of charging these expenses to the quarterly profits, it would have posted a net loss for the June 2009 quarter. Although, these items do not entail an immediate cash outflow, they certainly lower the book value of the company’s shares.
Nevertheless, the company’s share price surged on the next day of the results by 6.5% on BSE to end the week at Rs 254.8. The total market capitalization of the company now stands at Rs 5992 crore or 10.3 times the profits for trailing 12 months.
Apart from the write offs, even the bruised profitability of TCL’s overseas businesses weighed down on its quarterly numbers. The UK-based Brunner Mond group reported a loss of Rs 40 crore, Moroccan joint venture IMACID posted a loss of Rs 12 crore, while US-based General Chemical’s profits dipped by a third to Rs 30 crore in June 2009 quarter against comparable period of last year.
Earnings in various foreign currencies proved a shortcoming for the company, which had to write off Rs 47.2 crore during the June 09 quarter in line with AS-11 provisions In view of the global economic slowdown, the company has adopted cash conservation measures by re ducing costs and working capital, by postponing capex and by restructuring overseas businesses.
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