Tata Chemicals benefits from new gas pricing

Tata Chemicals (TCL) is ranked as one of the leading players in the agribusiness sector and is the world“s second-largest producer of soda ash with a total capacity of 5 million metric tonnes per ann…

Tata Chemicals (TCL) is ranked as one of the leading players in the agribusiness sector and is the world“s second-largest producer of soda ash with a total capacity of 5 million metric tonnes per annum, more than 60% of which is attributed to natural soda ash. In its strategy of global acquisitions to expand its product and customer base, Tata Chemicals has acquired US-based General Chemical Industries Products (GCIP) and has carried out the buyout of UK-based Brunner Mond Group. TCL also increased its stake in Rallis India to 50.6% by buying shares of worth INR 89.03 crore on preferential basis. The company is expected to benefit from the improving soda ash demand across the globe, with pricing stable in most of the markets. Europe, however, continues to put pressure on the company“s performance. Results for the quarter ended June 2010 were strong compared to the same period of 2009, on the back of a demand improvement witnessed in both the domestic and international soda ash markets. The company“s bottomline increased five times to INR 216 crore compared to the same period of 2009, due to Tata Chemicals“ increased stake in Rallis India, included in the June 2009 quarter. The company also incurred one-time expense of INR 87 crore against the restructuring costs of its Netherlands unit of Brunner Mond in the June 2009 quarter. Lower input prices led to a spurt of 610 bps in its operating profit to 20.2%, despite higher traded good costs. Moreover, a proportionate decrease in the other expenses as a percentage of the net sales contributed to the same. Considering the positive demand environment in the soda ash market, combined with newer capacities, the stock looks attractive in the coming quarters. However, slowdown in demand and weak pricing mechanism witnessed in Europe continue to be a concern for the company, stressing the performance of the Brunner Mond plant.