Release Date: February 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Chemicals Ltd (BOM:500770, Financial) prepaid $25 million in debt, demonstrating strong financial management.
- Domestic businesses registered growth despite challenging external environments.
- The company is focusing on higher value-added products and rigorous cost management to maintain stable margins.
- CapEx projects are on track, with new capacities expected to come online in the next fiscal year.
- The company is strategically expanding its core business capabilities, particularly in sustainability sectors like solar and lithium.
Negative Points
- Revenue for the quarter decreased by over 10% compared to the previous year, driven by lower soda ash volumes and pricing pressure.
- EBITDA for the quarter was significantly lower by 41% compared to the previous year's Q3.
- PAT for the quarter was down 55% compared to last year's Q3.
- The U.S. volumes were lower due to plant shutdowns and railcar shortages, leading to lower contribution and fixed cost absorption.
- The European market is facing significant challenges, particularly in the flat glass and lithium sectors, impacting overall performance.
Q & A Highlights
Q: Can you throw some light into what kind of contracts you must have entered starting of this year in both U.S. and Europe?
A: In the U.S., we are stable on both volume and pricing domestically. However, export contracts have seen a sharp erosion, with an expected blended drop of approximately $100 per ton. In Europe, many customers have moved to fixed pricing contracts due to high energy prices, leading to an erosion of about GBP 100 per ton.
Q: What is the situation in Europe regarding contracts for this year?
A: Europe has seen a shift to fixed pricing contracts due to high energy prices, resulting in an erosion of about GBP 100 per ton compared to the previous year.
Q: On the U.S. business, can you quantify the profit loss during this quarter due to the 80,000 tons of volumes lost?
A: The loss is approximately $10 million, considering a contribution of about $130 to $150 per ton.
Q: How much of China's demand for soda ash comes from the construction and solar segments, and what might it be for India in the coming years?
A: We will provide detailed insights later, but the focus is on the current quarter's dynamics.
Q: In India, implied pricing and margins appear to have improved sequentially. What has been different this quarter?
A: The improvement is due to our contract structure, which has protected us. Compared to import parity, there is a benefit of approximately 100 crores.
Q: Given the environment of falling energy and other costs, can you offset some of the ASP declines over the course of the year?
A: The $100 erosion in U.S. exports includes the benefit of lower energy costs. The pricing environment will determine future margins.
Q: Can you provide an update on the new ammonia capacity addition and its timeline?
A: The new capacities have come on stream, but challenges remain in reaching market capacity and quality. The China market remains balanced or slightly short, while Western Europe has lost about 1 million tons of demand, impacting prices.
Q: How has the capacity utilization been across different geographies, and are there any issues with excess inventories?
A: The industry as a whole is operating at close to 90% utilization. There are no significant issues with excess inventories.
Q: What is the sustainable EBITDA per ton for the U.S. business going forward?
A: The U.S. business should deliver an EBITDA of around $35 to $40 per ton, with potential for higher figures depending on market conditions.
Q: Can you clarify the U.S. export price erosion of $100 per ton?
A: The $100 erosion is compared to the previous year's figures. Last year, export prices were at a premium, but this year they are at a relative discount.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
