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Tata Chemicals Maintains Its Profit Level After Sale of Its Urea Business

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Tata Chemicals which operates in consumer, chemicals and fertilizers segment has seen a decline in its revenue. For the current quarter the revenue came down by 17%, where in, profits remained flat at Rs 293 Crs. As such the operating margin improved from 10.93% in Q2 last year to 12.04% on current reported quarter. The decline in revenue was due to sale of its Urea business and closure of its phosphatic fertilizer plant.
Inorganic chemicals contributed 60.75% of total revenue and fertilizers coupled with agri chemicals accounted for 36.21% of the revenue. Inorganic chemicals operating margin was at 18.04% whereas for agri chemicals it was 15.4 and fertilizer was a loss making segment.
During the quarter, the company has sold its urea business to Yara fertilizers as a slump sale at Rs 2,670 Crs. Tata Chemicals has also diluted its stake in Crystal Peak Minerals from 19.47% to 14.80%. Post stake sale Tata Chemicals consolidated net debt came down by 14.33% since 31st March 2016. Currently net outstanding debt stands at 6,584 Crs.
Tata chemicals has reported good performance from its Soda Ash, Salt and its newly launched products in Tata Sampann brand. However capping of pulses price by government has reduced the operating margin for the firm.
After sale of Urea business, the firm is strongly concentrating on revenue growth of non subsidized fertilizers. Tata chemicals has Rs 1377 Crs as outstanding subsidy receivables from government.
Chemical and foreign operation’s have registered good performance, but the domestic fertilizer has been bogged with problems. Tata Chemicals suspended production of its phosphatic fertilizer unit due to higher input cost and the Magadi plant has been operating under lower efficiency.