TATACHEM - Tata Chemicals Ltd Share Price

Management's outlook for Tata Chemicals indicates a challenging near-term environment, particularly for the soda ash market, while maintaining a positive long-term growth narrative driven by sectors like solar PV and electric vehicles.

Key forward-looking points include:

1. Global Demand: Short-term global demand for key products is expected to remain flat, with stable demand in Europe, Africa, and parts of India and Asia, except China, which is experiencing a slight decline.

2. Soda Ash Pricing: The soda ash market is oversupplied, leading to pressure on prices. Prices fell approximately 56%-58% from Q2FY23 to Q2FY26, largely due to high inventories in China (1.65 million tonnes) and aggressive competition. Expect subdued pricing to persist throughout the year.

3. Financial Performance: On a standalone basis, revenue from operations was up 19%, EBITDA increased by 67% to Rs.240 crores, and profit after tax rose by 80% to Rs.178 crores. Consolidated revenue fell 3% to Rs.3,877 crores, impacted by the cessation of operations at Lostock in the UK and a one-time provisioning of Rs.65 crores.

4. EBITDA Guidance: The US subsidiary reported a depressed EBITDA of Rs.77 crores, down from Rs.188 crores in the previous quarter due to work-in-progress adjustments, suggesting a normalized run rate closer to Rs.117 crores.

5. Capex Plans: An allocation of Rs.1,500 crores for a general purpose NCD issuance is planned, aimed at increasing production capacity in India, which is targeted to grow by 15% to 50% depending on market conditions.

6. UK Operations: The reconfiguration in the UK is complete, focusing on value-added non-cyclical products. A turnaround to positive EBITDA is anticipated in the third and fourth quarters of FY26.

7. Litigation Resolution: A legal dispute in Kenya was resolved favorably, mitigating further obligations from a potential ruling.

8. Anti-Dumping Measures: Management expressed optimism regarding the impact of a proposed anti-dumping duty, which could support pricing stability in the domestic market.

Overall, while immediate challenges persist, especially in terms of pricing pressures and inventory levels, management remains optimistic about the company's strategic initiatives and long-term growth potential.

1. Question: "Regarding the litigation issue in Kenya, is everything settled, and will there be further complications?"
Answer: While the recent ruling was in our favor, it's important to note that litigation can lead to further appeals, potentially even to the Supreme Court. Currently, we are monitoring the situation closely. So, while we are hopeful, the matter isn't entirely resolved yet.

2. Question: "What impact do you foresee from the anti-dumping duty on pricing and EBITDA?"
Answer: The upper end of the pricing band may align with current expectations, but it varies by country. We anticipate that the anti-dumping measures will stabilize market pricing, making existing producers' operations more viable, but its exact impact will depend on its implementation.

3. Question: "What is the timeline for the new soda capacity addition in China?"
Answer: The Chinese government aims for a 50:50 balance between natural and synthetic capacities. We expect some new capacities to come online by 2029-2030. This process might have delays due to existing capacities that need to be closed.

4. Question: "Why did the US business see a significant dip in EBITDA in Q2?"
Answer: This quarter's lower EBITDA is attributed to a drawdown of work-in-progress due to internal changes, impacting fixed cost absorption. If adjusted, the EBITDA should range around Rs. 117 crores, which is closer to the actual performance we look to maintain moving forward.

5. Question: "Can you explain the recent changes in India's unit margins?"
Answer: Although volumes increased, the overall pricing pressures led to lower margins this quarter. We expect prices to stabilize in the Indian market, allowing us to maintain our current performance levels moving forward.

6. Question: "What are your expectations for achieving the Rs. 600 crore savings target?"
Answer: We remain confident in achieving around 75% of the Rs. 600 crore savings target due to currency depreciation impacting fixed costs and adjustments needed from market pressures, particularly in exports.

7. Question: "What are the future capex plans regarding the NCDs and their purpose?"
Answer: The proposed Rs. 1,500 crore NCDs aim to support general growth initiatives, including enhancing Indian capacity by up to 50%. Detailed plans will be shared in upcoming quarters.

8. Question: "What insights can you provide from the recent global soda ash conference?"
Answer: The conference underscored a shift towards optimizing global capacities, with expectations that normalization will occur in the next 18 months. There's cautious optimism regarding medium-term growth prospects, even amid current pricing challenges.