TATACHEM - Tata Chemicals Ltd Share Price

Management's outlook for Tata Chemicals remains cautiously optimistic, emphasizing a focus on safety and sustainability while maximizing product volumes and operational efficiencies. They predict a growth trajectory supported by strong demand in India and Kenya, alongside ongoing improvements in the UK.

Key forward-looking points include:

1. Soda Ash Demand and Production: Overall global demand for soda ash grew by 18% in China and 4.5% in India but decreased by 2.3% elsewhere. India is expected to maintain growth of 5-6% in the coming year, while the company anticipates production capacity increases in India and a new modular plant in Kenya, which is set to add another 50,000 tons of pure ash product by year-end.

2. Financial Performance: For Q4FY25, Tata Chemicals reported consolidated revenue of Rs.3,509 crores, EBITDA of Rs.327 crores, and a PAT before exceptional items of Rs.(12) crores. For FY25, consolidated revenue was Rs.14,887 crores, EBITDA was Rs.1,953 crores, and PAT before exceptional items stood at Rs.479 crores. Standalone figures for FY25 were Rs.4,441 crores in revenue, Rs.818 crores in EBITDA, and Rs.524 crores in PAT.

3. UK Operations: The UK specific operations have undergone a transformation, with the cessation of soda ash production at Lostock and a pivot towards higher-grade value-added products. Management anticipates stabilization in the second quarter following the completion of restructuring efforts.

4. US Market Challenges: While domestic sales in the US are stable, export pricing pressures remain, particularly in Southeast Asia, affecting margins. Management does not foresee significant improvements in US margins in the coming quarters, with expectations that EBITDA margins may stabilize as operational efficiencies improve.

5. Capital Expenditure Plans: After a peak CAPEX of Rs.2,000 crores in FY25, future spending is expected to reduce to approximately Rs.1,000 crores for FY26. Sustenance CAPEX is projected at Rs.550-600 crores, with incremental investments focused on profitable capacity expansions and improvements.

This strategic focus on balancing growth in high-potential markets while managing operational costs is central to Tata Chemicals' mid-to-long-term outlook.

Question 1: "I wanted to know your views whether the government imposed minimum import price does play a role in this kind of improved performance for us during the quarter?"

Answer: "No, I think this would have been done even without any support and I think that MIP was, in fact, not a factor at all."

Question 2: "How would you imagine the situation in India post this MIP expiry?"

Answer: "I doubt it benefited the industry. I doubt it is going to impact the industry."

Question 3: "Can you please explain what led to such kind of difficulties in getting the profitability in the US business?"

Answer: "Domestic US business is doing fine. It's mainly exports facing margin compression due to Southeast Asian market pricing hovering around $200, which won't yield full cost recovery."

Question 4: "What could be a fair assumption to kind of build out the margins for the US business?"

Answer: "We do not expect any major improvement in the margins in the next few quarters in the US as export pricing remains subdued."

Question 5: "Can you provide us with the import number in tonnage for the quarter and for the year as a whole?"

Answer: "There has been a reduction; about a million tons of material came into India. However, I cannot comment further about ADD as it is under quasi-judicial process."

Question 6: "What kind of improvement do you expect in the US margins in the next few quarters?"

Answer: "Domestic pricing is still subdued with 60% coming from exports. We don't forecast major improvements in margins due to ongoing challenges."

Question 7: "In terms of UK business, will losses subside after the operational changes?"

Answer: "By quarter 2, you should start to see a more stable profile. We anticipate a positive transformation similar to what happened in Magadi."

Question 8: "How will you maintain the sales volume growth in the future?"

Answer: "We will maximize throughput. While UK soda ash will be compensated by growth in India and Kenya, we expect ample opportunity for expansion in both markets."

Question 9: "What is your outlook for CAPEX for FY26 and beyond?"

Answer: "The FY26 CAPEX will be lower; we're expecting around Rs. 1000 crores, primarily for sustaining growth and minor capacity expansion."

Question 10: "Can you share your perspective on global capacity expansion in the soda ash market?"

Answer: "Expansion in the US for the export market is unviable at current margins. We've seen supply growth, but larger expansions may be challenged given current pricing scenarios."