Summary of earnings call for Tata Chemicals Ltd published on 01 Aug, 2025

Tata Chemicals Limited
Q1 FY26
Call date · July 25, 2025

1 · Management Commentary

Key Positives

• Consolidated revenue from operations at INR 3,719 crores, EBITDA of INR 649 crores, and PAT of INR 316 crores.
• Standalone revenue at INR 1,169 crores, EBITDA of INR 270 crores, and PAT from continuing operations of INR 307 crores.
• India business performance improved YoY due to higher volumes and operational efficiencies.
• Rallis reported 22% overall growth, 9% volume growth, 13% price growth, EBITDA margin of 16%, and 100% PAT growth.
• Variable costs, especially coal and fuel, have declined, supporting margins.

Key Negatives

• Global soda ash markets remain oversupplied with high inventory levels; China inventory at $1.8 billion.
• Export sales and prices in the U.S. were marginally lower; shipment spillover affected volumes.
• U.K. volumes lower due to cessation of Lostock operations; Kenya saw slightly lower volumes and margin decline.
• Soda ash and bicarb realizations in India saw a minor drop.

Forward Guidance

• Capex for FY26 to be around INR 1,000 crores, mainly operational/maintenance; growth capex cycle completed last year.
• Kenya: 50-kiloton calciner commissioned, trial runs ongoing; expected to deliver in Q2.
• U.K.: Own CO2 production to start in Q2; pharmaceutical grade salt plant commissioned, customer qualification ongoing; aim for breakeven at PAT level by Q4.
• U.S. soda ash expansion on pause pending market clarity; design and approvals in place.
• India: Next phase of Mithapur growth under evaluation; debottlenecking at lower cost being considered.
• Expect INR 600 crores structural EBITDA improvement in FY26 (INR 200 crores each from U.K. cessation, new projects, and cost improvements).
• No major price movement expected in soda ash; prices seen as bottomed out and range-bound for next 6–9 months.

2 · Q&A Highlights

Q 1 (Composite): What is driving sequential improvement in profitability despite lower volumes, and are current margins sustainable?
A (Management):
• U.S.: Higher domestic sales mix and lower fixed costs drove EBITDA; export shipment spillover will normalize next quarter.
• India: Volume-led improvement; variable costs down due to lower coal and input prices; margins expected to remain stable.

Q 2 (Composite): Update on U.K. business turnaround, margin outlook, and impact of new projects?
A (Management):
• Own CO2 production to start in Q2, reducing costs.
• Pharmaceutical salt plant commissioned; customer qualification ongoing, expected to contribute in H2.
• Targeting breakeven or zero losses at PAT level by Q4.

Q 3 (Composite): Status and outlook for capex, expansion projects, and timelines across geographies?
A (Management):
• FY26 capex ~INR 1,000 crores, mainly maintenance.
• Kenya calciner commissioned, trial runs ongoing.
• U.S. soda ash expansion paused; approvals in place, will resume when market improves.
• India soda ash expansion to be phased and low-cost; details in Q2/Q3.
• U.K. bicarb expansion: focus on stabilizing current unit before further growth.

Q 4 (Composite): How are global and regional soda ash prices behaving, and what are the demand-supply dynamics?
A (Management):
• Prices range-bound; minor sequential declines ($3–$5/ton).
• Global demand stable; oversupply persists due to unviable units operating.
• No major price movement expected unless further capacity rationalization occurs.

Q 5 (Composite): What is the impact of lower power and fuel costs, and is this sustainable?
A (Management):
• Lower coal, gas, and cessation of Lostock operations reduced costs; expected to be sustainable with further optimization possible.

Q 6 (Composite): Progress and placement of expanded capacities in India and Kenya?
A (Management):
• Bicarb ramp-up ongoing; ~5,000 tons/month incremental.
• No placement issues for soda ash in India; Kenya volumes to normalize as shipments and domestic sales recover.

Q 7 (Composite): Guidance on sustainable run rates for depreciation, interest, and tax, especially post-U.K. restructuring?
A (Management):
• Depreciation and finance costs to be in the INR 5–10 crores range per quarter; tax rate for Q1 not indicative due to one-offs.

Q 8 (Composite): Any updates on China/Mongolia capacity additions and their impact?
A (Management):
• Mongolia’s 5 million tons capacity operational; further Chinese additions being monitored; rationalization of synthetic capacity in China possible.

3 · Other Key Numbers

• China soda ash inventory: $1.8 billion (slight increase over prior quarter).
• India soda ash import prices: $230–$235/ton.
• India FOS sales volume: 869 metric tons (vs. 614 metric tons YoY).
• Kenya: 50-kiloton calciner commissioned, in trial runs.
• Rallis: 22% overall growth, 9% volume growth, 13% price growth, EBITDA margin 16%, PAT growth 100%.
• PAT includes INR 75 crores income tax refund in India business.
• Maintenance capex for FY26: ~INR 1,000 crores.
• U.S. export shipment spillover: ~40,000–50,000 tons to next quarter.
• India soda ash expansion: 320,000 tons planned in two phases (150,000 + 170,000 tons).
• U.K. bicarb existing unit: 80,000 tons.
• Mongolia soda ash capacity: 5 million tons operational.
• Bicarb ramp-up in India: ~5,000 tons/month incremental.
• No specific numbers disclosed for U.S. export share this quarter; management to provide in future updates.

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.