"Tata Chemicals Limited Q4FY25 and FY2025 Earnings Conference Call"
May 07, 2025 Management: R Mukundan - Managing Director and CEO, Tata Chemicals Limited Nandakumar Tirumalai - Chief Financial Officer, Tata Chemicals Limited Moderator: Good evening, ladies and gentlemen, and welcome to the Q4FY25 and FY2025 Earnings Conference Call of Tata Chemicals Limited.Please note that this conference is being recorded. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing '*' then '0' on your touchtone phone.
We have with us today R Mukundan - Managing Director and CEO and Nandakumar Tirumalai - Chief Financial Officer of Tata Chemicals Limited.
Before we begin, I would like to mention that some of the statements made in today's discussion may be forward looking in nature and may involve risk and uncertainties. With this, I now invite Mukundan to begin the proceedings of the call. Thank you and over to you, Sir.
R. Mukundan: Thanks, Neerav. Good evening and welcome to everyone for this Q4FY25 Earnings Call. And I will start the discussion with a brief industry overview, then move on to highlights across business and geographies.Starting with the demand scenario across geographies:
In the year FY 25, for the worldwide overall demand of soda ash there was a growth, mainly led by China by 18% and India by 4.5%. While the rest of the world saw a decrease in demand of about 2.3%. The market conditions remain challenging, even as India continues to grow. While demand fell, mainly in the flat and container glass in all these markets, we do anticipate that pockets other than China, US and Western Europe to show momentum and growth and India will continue to grow, though demand-supply balance softness, tariff uncertainties will also weigh in on the market.
However, I would say looking beyond this, medium-term and long-term remains positive, driven largely by sustainability trends, where soda ash is one of the key ingredients for the sustainable transition of the world. In terms of supply side, soda ash remains well supplied, especially because supply has risen in China more recently. Soda ash capacity increased by 8.9% and this was the main reason for decline in prices by over 25% from the previous year. The tariff uncertainty could lead to shifts in production centers of soda ash application industry, and this could lead to change in demand centers. However, some of the demand centers will continue to move forward with positive momentum.
In terms of TCL performance:
The Company reported for Q4 on a consolidated basis, a revenue of Rs. 3,509 crores, EBITDA of Rs. 327 crores and a PAT before exceptional item of Rs. (12) crores. For Q4FY25 the
company reported on a standalone basis, revenue of Rs. 1,219 crore, an EBITDA of Rs. 230 crore and a PAT from continuing operations of Rs. 97 crore.
For the full year, the consolidated revenue was Rs. 14,887 crores, an EBITDA of Rs. 1,953 crore and a PAT before exceptional item of Rs. 479 crore. Similarly, for FY25, the standalone revenue was Rs. 4,441 crore, EBITDA of Rs. 818 crore and PAT from continuing operations of Rs. 524 crore.
In India, the performance is higher compared to previous year, mainly driven by higher volumes, partly offset by lower realization of soda ash and bicarb. The quarterly sales volume of FOS has increased significantly to 817 MT compared to Q4 of FY24. During the year FY25, the Company commissioned 230 kT of soda ash and 1,40,000 kT of bicarb capacity in Mithapur, both are fully on stream.
In US overall both the volumes and prices were lower in Q4FY25 than Q4 of FY24.
UK had lower volume mainly due to the ceasing of the soda ash operations in Lostock and there has been an exceptional charge of Rs. 55 crore which has been taken to comply with certain regulatory and contractual obligations in UK. Our focus in UK will be to move fully to high-grade value-added products, and in this regard, we have commissioned 70,000 Tons of pharma salt capacity in Middlewich, UK.
Kenya saw higher sales volume and higher realization, mainly because they continue to focus on the domestic African market which give them better yield in terms of contribution margins.
Rallis results were lower amid continued weakness in the export market, as this also is a weak quarter for Rallis and they were in line with our internal understanding.
In conclusion, going forward, I think our focus will continue to be on safety and sustainability. While focusing on these two, we will continue to focus on maximizing volumes across products alongwith cost and working capital efficiency and we will also calibrate Capex to the market conditions. We remain positive in terms of the medium-term outlook, and we also remain focused on our outcomes in the immediate term to ensure that our free cash flow and operational efficiencies continue to be of the highest order.
With this, I close my comments and hand over back to the moderator to open for Q&A. Thank you.
Moderator: Thank you very much. We will now begin with the question-and-answer session. First question is from the line of Saurabh Jain from HSBC. Please go ahead. Saurabh Jain: Thank you so much for the opportunity. My first question is on the Indian business. We have seen improvement in the volumes and also on the margin side on a Q-on-Q basis. 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? R. Mukundan: 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. Saurabh Jain: Okay, so it is going to expire in June and how would you imagine the situation in India post this MIP expiry? You said you are not impacted, right? But what about the industry? Are you seeing any impact post this expiry of MIP next month? R. Mukundan: I doubt it benefited industry. I doubt it is going to impact the industry. Saurabh Jain: Okay, thanks. Secondly, on the US business and if you can also comment on the margins for the other businesses as well. In US business, we have seen the margin kind of seeing persistent compression. While if I look at the realizations, it is still holding up at about $259 to $260. And we used to make good margins at these realizations about 2 to 3 quarters back. Can you please explain what kind of led to such kind of difficulties in getting the profitability in the US business, please? R. Mukundan: Domestic piece of the US business is doing fine, in terms of both revenue and margin profile. It is mainly in the exports where there's been a margin compression. And I think fundamentally one needs to watch out for the export pricing in the Southeast Asian markets, LATAM not a big issue. It has been the Southeast Asian market where the prices are hovering somewhere close to,$200 odd per ton and while they have positive contribution margins, they don't yield full cost recovery.
Saurabh Jain: So what you are relating to the fact is that the demand situation is much better in the LATAM and the South Asian markets, but the pricing challenges remain? R. Mukundan: I don't think there's a demand issue in the markets we operate. I think we are fully sold out and will continue to be fully sold out in all our products. The way we do see the next year going forward is that we see India, Kenya and the UK continue to move in the positive direction. UK mainly because they have restructured their operation and the cost structures, and everything will be reflected by first quarter and you will start seeing the difference and by the second quarter it would have fully settled down. So that is the profile I would say of UK because whatever residual issues would be there, they would all be out of the way during the early part of this month itself. So we are not going to see any further cost impact and UK would continue to go towards a value-added cost profile and India and Kenya would continue to move in the same direction. US domestic also should be positive. The main point being the US exports, which we remain totally focused on how to improve the volume and market mix, and that effort the teamis going to work on. It is not that we can't place the volume, but it is about where can we place the volume with opportunities to improve the margin profile.
Saurabh Jain: So, what could be a fair assumption to kind of build out the margins for the US business? $40 per ton of margin, when can we reach that back? Nandakumar Tirumalai: What is the question, can you repeat that? Saurabh Jain: What kind of improvement do you expect in the US margins in the next few quarters? How much of that can improve? Nandakumar Tirumalai: If you look at the next few quarters, the pricing is still subdued in the market here and since US exports about 60% and 40% is domestic sales, on the export part, the pressure still remains. So we do not expect any major improvement in the margins in the next few quarters in US. Moderator: Thank you. Saurabh, sorry to interrupt you. I will request you to come back for a follow-up question. I request all the participants to kindly restrict 2 questions per participant and join the queue again for a follow-up question. Next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Ankur Periwal: Thanks for the opportunity. So, first question on the UK part of the business. You did mention one time cost or expenses of around Rs. 55 odd crores for the quarter. But even if I adjust for that, profitability on the business, given the shutdown of Lostock there, looks slightly on the lower end. So, your thoughts on how you are looking at FY26 given that pharma salt also comes into picture in terms of ramp up and the loss-making operations are also taken care of? R. Mukundan: I think as I said by quarter 2, you would start getting the complete stable profile and our anticipation is in terms of its overall, it should move towards the way Magadi transformed itself. So, I think UK is on a transformation path. We are pretty much hopeful that will be the direction it would take. Ankur Periwal: Sure, and Nandu Sir, just as a follow up, show any numbers or thoughts we can peg ourselves to, maybe an FY21-22 profitability, sort of a number that we can look at on a steady-state basis? Nandakumar Tirumalai: If you look at the British Salt numbers, they improved in the last 3-4 years. And therefore, when you get the annual report at the end of May, you get all the numbers for Company-wise performance, and then you can look at those and work out. So British Salt is an upside and EBITDA in the last 4 years, in a way, doubled that would remain as it and we also get the incremental volume from the pharma grade salt. And bicarb, the 80kT plant remains in UK which will go and deliver profits. Lostock is shut down, so Lostock losses will not be coming going forward. So broadly looking at UK will get into a much better financial position going