Tata Chemicals Q3 profit dips 60%; its consecutive 3rd quarter decline

Shares of Tata Chemicals fell as low as 4.6% in early morning trade before picking up and rising 2.2% to ₹995.30 apiece after the Tata group company reported 60% fall in its third quarter profit. The stock opened gap down and fell to intra-day low of ₹934.35 crore, just 1.3% from 52-week low touched on April 19, 2023. However, the stock picked up soon and settled at ₹994, up 1.43%, at the time of filing the story. The Tata Chemicals share has seen consistent fall in the share price in the past year. The scrip has dropped 2.25% in the past week; 9.64% in the past month; 4.44% in the past six months; 11.14% in the year-t0-date period; and 1.31% in the past year.

Tata Chemicals experienced a consecutive third-quarter decline in profits, primarily attributed to reduced soda ash prices and subdued demand. The consolidated net profit for the three months ending on December 31 dropped by 60% to ₹158 crore compared to ₹398 crore in the corresponding period of previous year. The company's consolidated revenue from operations amounted to ₹3,730 crore, showing a decrease from ₹4,148 crore in the corresponding quarter of the previous year.

The company says its major business segment, soda ash, faced challenges last year as declining caustic soda prices made it a more attractive option than soda ash in the silicate market. To stay competitive, Tata Chemicals says it had to lower prices, particularly in the U.S., its largest market, where two-thirds of its total sales volume is concentrated.

Tata Chemicals' standalone revenue from operations stood at ₹1,093 crore as compared to ₹1,218 crore in the corresponding quarter of the previous year. Standalone PAT from continuing operations was ₹115 crore, showing a decline from ₹190 crore for the corresponding quarter of the previous year.

The company says it implemented price reductions on its key products, light and dense soda ash, twice in the previous year, leading to a decline in revenue in the latest quarter. Additionally, soda ash sales volume decreased by approximately 10% during the quarter, resulting in a proportional decrease in total revenue to ₹3,730 crore. Sales of salt, constituting about one-third of Tata Chemicals' total sales volume, remained relatively stable.

R. Mukundan, Managing Director & CEO, Tata Chemicals Limited, said, “The demand environment for soda ash in our domestic markets as well as international markets was challenging during the quarter. This was especially so in the container glass and flat glass sectors in Europe & Americas, which led to a pressure on volumes and prices. Our endeavour is to continue to maintain our market share through customer engagement and have steady contribution margins with focus on costs and higher value-added products. Our focus will also be to deliver capital investment projects on time, conserve cash and continue to deleverage. In the short term, the current demand -supply situation is likely to persist but should improve and stabilise over the long term driven by growth sectors based on sustainability trends.”

Tata Chemicals, a part of the Tata Group, supplies raw materials to various industries, including glass, detergent, industrial, and chemical sectors. Notably, the company's larger rival, UPL, also reported a quarterly loss recently, citing weak demand and destocking issues.