Tata Chemicals, the third-largest producer of soda ash globally, on Monday reported a net loss of Rs 841 crore in the fourth quarter, marking a stark contrast from the Rs 692 crore profit posted in the same period last year.
This downturn, according to a filing, is primarily attributed to a one-time loss stemming from its UK operations.This quarter marks the first time in nine years that the company has reported a quarterly loss.
The fiscal year ending March 31, 2024, has been marked by a non-cash write-down of assets totaling Rs 963 crore. This exceptional loss, attributed to the UK soda ash and bicarb operations, has significantly impacted the company’s financial performance.
In addition to the substantial net loss, Tata Chemicals saw a 21.1 percent drop in revenue for Q4, amounting to Rs 3,475 crore compared to Rs 4,407 crore in the corresponding period last year. The company’s EBITDA also experienced a sharp decline, falling to Rs 443 crore from Rs 965 crore year-on-year, with the EBITDA margin shrinking to 12.8 percent from 21.9 percent.
The company has cited the decline in soda ash demand in Europe and a bleak pricing outlook as key factors behind its lacklustre performance. This downturn in demand is largely attributed to the growing popularity of caustic soda in the silicate market, driven by falling prices. In response, Tata Chemicals has reduced the prices of its soda ash products multiple times since April 2023.
The Rs 963 crore write-down is broken down as follows: Rs 821 crore for the non-cash write-down of cash-generating units and property, plant, and equipment, Rs 122 crore for capital work-in-progress, Rs 4 crore for right-of-use assets, and Rs 16 crore for other assets associated with the UK group. Tata Chemicals has announced a dividend of Rs 15 per share, demonstrating its commitment to shareholders amid turbulent times.
“Overall demand for soda ash in India stayed stable during the quarter on account of rising demand from the detergent and chemical sectors. During the year, salt production and sales were at their highest levels. The European soda ash market remained under pressure due to muted demand and margin pressure, leading to a one-time non-cash charge of Rs 963 crore in the UK. The company’s overall sales volume grew sequentially from the previous quarter, despite adverse price movements on account of market factors. We continue to focus on customer engagement and sustainable performance while maintaining a prudent balance sheet,” R. Mukundan, CEO, Tata Chemicals Limited, said in a statement.
“We expect the sustainability trend to drive demand for newer applications like solar glass and lithium, which will fuel growth. Our focus is on the timely execution of expansion projects and efficient cost management. We continue to work with our customers and other stakeholders on our sustainability and digitization efforts,” Mukundan added. Emkay Research has reported a 21% decrease in soda ash prices in Q4 compared to the previous year, further exacerbating Tata Chemicals’ financial woes.
The company faces the daunting task of navigating through an increasingly competitive market while addressing the evolving demands of its customer base. Strategies to mitigate the impact of declining soda ash demand and stabilise financial performance will likely be at the forefront of the company’s agenda in the coming quarters. As Tata Chemicals endeavors to regain its footing in the global market, industry analysts will closely monitor its initiatives and financial results to gauge its progress and resilience in the face of adversity.
