Tata Chemicals reported a 9 percent rise in its consolidated revenues for the quarter ended December 2010 at Rs. 2890.85 crore compared to corresponding previous year quarter while bottomline fell 23 percent to Rs. 164.56 crore mainly due to increase in input costs. Operating margins of the company fell 570 bps to 15 percent as cost of raw materials as a percentage to net sales rose 420 bps to 29.4 percent, 100 bps increase in employees cost to 8.2 percent, 90 bps in stores, spares and consumables to 4.8percent, 60 bps in freight and forwarding charges to 11.2%, 10 bps in power and fuel cost to 11.6 percent and 60 bps in other expenses to 11.1 percent.

Operating profits of the company was down 21% to Rs. 441.36 crore. Other income rose 396% to Rs. 31.57 crore while interest cost was fell 12% to Rs. 80.16 crore. Depreciation remained flat at Rs. 111.48. PBT before notional forex gain/loss fell 22% to Rs. 281.28 crore

PBIT margins of Tata Chemicals decreased 560 bps during the quarter to 12.3% mainly due to 430 bps fall in inorganic chemical PBIT margins to 15.5% and 700 bps fall in fertilizer margins to 8.8%. Compared to this Agri Input PBIT margins rose 80 bps to 17.2%.

Commenting on the company's performance for Q3 and 9M FY2011, R Mukundan, managing director, Tata Chemicals, said: We are witnessing an encouraging demand environment for all our businesses both domestically and overseas.

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. We are working towards price increases to negate this impact. The healthy improvement in production levels and demand growth enjoyed by General Chemical Industrial Products (GCIP) is particularly encouraging. The operations at Brunner Mond UK were impacted due to extreme weather conditions in the later part of the quarter. With the acquisition of British Salt we have secured the long term supply of brine, a key raw material for Brunner Mond and also a new business ? branded consumer and industrial salt in the UK.

In the fertiliser sector, while the NBS is a positive development, the lower benchmark prices set for DAP and MOP in a hardening price environment is a challenge for the next fiscal. We continue to await the new urea policy as well as allocation of gas for doubling our urea capacity at Babrala. Rallis continues to perform well in a challenging environment. The acquisition of Metahelix by Rallis fills in a vital gap in our overall agri strategy providing us leading-edge technology for developing high-productivity seeds. In the immediate future Metahelix's strong presence across the seeds value chain enables us to offer high-quality trusted hybrid seeds to the farmer.

Our consumer products business continues to do extremely well with branded salt maintaining a dominant 62 per cent market share and the range of Tata Swach water purifiers enjoying excellent demand. We are also delighted to extend our i-Shakti. brand to pulses as a natural evolution of our 'Farm to Fork' strategy which leverages our strong association with the farmer and our established retail presence to bring quality, hygienic and affordable pulses to the Indian consumer. The business would have to address structural challenges existing in infrastructure.

We are confident of the performance of our businesses but are cautious of the increase in costs ? energy in particular.

Nine Months ended results

For nine months ended December 2010 Consolidated Net sales of the company rose 16% to Rs. 8402.45 crore compared to corresponding previous year period. Operating margins of the company fell 320 bps to 16.4% leading 3% fall in operating profits to Rs. 1377.21 crore.

Other income was lower 43% to Rs. 89.51 crore as against Rs. 157.20 crore as compared to the corresponding period of the previous year. Depreciation was higher by 3% at Rs. 330.01 crore against Rs. 321.61 crore in the corresponding period of the previous year.

Interest cost was lower 11% to Rs. 267.90 crore. PBT before notional foregina exchange gain or loss was lower 9% to Rs. 868.80 crore. The final PAT was up 6% to Rs. 507.63 crore.

Business highlights

Strong demand environment across all products. Extreme climatic conditions in December impact European operations. Global soda ash prices firm, GCIP and Magadi capacity utilisations improve. Rising costs partially mitigated through price increases across decontrolled products. Introduction of NBS a positive for fertiliser industry, reduction of benchmark prices for next fiscal a concern though. New fertiliser policy for urea still awaited. Insurance claim towards Babrala admitted ? Rs39 crore accounted on a conservative basis. Production from customised fertiliser plant commences; product launched. Planned shutdown at IMACID successfully completed; production impacted for approximately 35 days. Tata Swach sales continues strong growth ? 9M FY2011 sales at 3.45 lakh units.

Growth initiatives

Brunner Mond acquires 100% stake in British Salt for an enterprise value of ?93 million to secure supplies of raw material at Brunner Mond UK as well as a new business of branded consumer and industrial salt in UK. Rallis India (Rallis) acquires a 53.5% stake in Metahelix Life Sciences (Metahelix), a research-based seed company filling in a vital gap in our overall agri strategy. Opportunity to leverage Metahelix's strong presence across the seeds value chain through its existing network. i-Shakti brand extended to pulses ? 'i-Shakti Dals'. introduced in Maharashtra and Tamil Nadu ? thrust on offering quality and hygienic pulses at an affordable price through linkages with the farmer.

Segmental performance

Soda ash

Domestic demand for Soda ash grew by 5%; robust sodium bicarbonate demand growth at over 9%. However, rising input (coal, coke and limestone) costs continue to exert pressure. Unusually extreme climatic conditions result in power and water supply failures causing Brunner Mond UK plant to operate at sub-optimal levels. Acquisition of British Salt enables long term securitisation of brine for Brunner Mond. Magadi operations improve on the back of stable production. GCIP demonstrates strong production growth. Healthy demand in the USA ? international market conditions favourable in terms of both, volumes and pricing.

Consumer Products

Salt

Tata Salt volumes growth strong at over 8%. Tata Chemicals remains the market leader with 62% market share in the national branded segment. During the quarter, profitability improved, achieving EBITDA margin of 22% compared to 15% per cent in the same period in the previous year. The improvement in EBITDA margin has been achieved through better portfolio mix and improved quality of operations including efficient control over working capital.

Pulses

i-Shakti brand extended to other food essentials ? launches range of pulses under the brand name 'i-Shakti Dals'. Farm to Fork strategy: Tata Chemicals will leverage its well-entrenched and extensive food retail distribution presence through salt as well as its widespread and entrenched association with the farmer through Rallis Kutumba initiatives and Tata Kisan Sansar outlets to distribute i-Shakti Dals range across the country. Thrust on introducing quality and hygienic pulses at an affordable price. Endeavouring to partner with various state governments.

Water Purifier

Tata Swach contributes positively to performance - 9M FY2011 sales at 3.45 lakh units. New introductions Swach Smart Magic and Swach Magic show promise.

Fertilisers

Domestic demand for urea, DAP and NPK increases by 4 per cent, 6 per cent and 29 per cent respectively. Marginal loss of urea production as a result of floods in October. Unavailability of phosphoric acid results in lower production volumes at Haldia. NBS a significant positive for the fertiliser industry. However, setting of low benchmark prices for DAP and MOP poses a challenge.

Rallis India

Strong growth in domestic business driven by value-added offering to farmers in the last four years. Rallis revenues higher by 32 per cent at Rs268 crore and PAT growth of 40 per cent at Rs34 crore in Q3 FY2011. Rallis has acquired 53.5-per-cent stake in Metahelix Life Sciences through an all-cash deal of Rs99.5 crore funded largely through internal accruals. Acquisition in line with TCL's strategy to offer the entire suite of agri-inputs for the benefit of farm community. Metahelix possesses a portfolio of seeds successfully commercialised over the last three years. Transaction provides a presence across the entire value chain comprising breeding, production and marketing of seeds. Pursuant to the terms of the definitive agreements signed, Rallis will enhance its shareholding to 100 per cent in Metahelix over a period of five years.