Tata Chemicals’s 22.5% profit-fall shows fertiliser makers’ pain

Higher raw material prices squeezed Tata Chemicals’ margins thin in the quarter ended December, sending its net profit down 22.51%.

Officials believe the numbers underline the challenges before Indian fertiliser and agrochemical makers at large.

The company’s total sales increased 10.17% year on year to Rs2,922.42 crore, primarily on account of improved performance in branded salt and water purifier business.

However, its margins still slumped. On a consolidated basis, margins fell from 21.2% in the year-ago period to 15.43% in the latest quarter.

The company attributed this to rising raw material costs and winter disruptions, which forced it to shut down its facility of Brunner Mond in England.

“We continue to see pressures of increasing input prices. The unfortunate weather events in Australia and Indonesia will put even greater pressure on energy prices,” said R Mukundan, managing director of Tata Chemicals.
Fertiliser is a key business area for Tata Chemicals as it accounted for 67% of the company’s total revenues of `49,541.8 crore in the April-December period of this fiscal.

Since October last year, natural gas prices on New York Mercantile Exchange have shot up 11% to $4.40 mmBtu, a key ingredient for making fertilisers.
Going by Rajju Shroff, chairman and managing director of United Phosphorus, the country’s largest pesticides maker, this could result in the prices of key raw materials including ammonia and phosphoric acid remaining high in the coming year.