Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you.
Thank you. Good day, everyone, and thank you for joining us at Tata Chemicals Q3 and 9-month FY 2024 Earnings Conference Call. We have with us today Mr. R. Mukundan, Managing Director and CEO, Mr. Zarir Langrana, Executive Director, and Mr. Nandakumar Tirumalai, the Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties. I now invite Mr. Mukundan to begin proceedings with the call. Mukundan?
Thanks, Gavin. Good evening, and welcome everyone to our quarter three, nine-month FY 2024 earnings call. I'm joined by my colleague, Zarir and Nandu for today's call. I'll start with the discussion of key operation highlights across business geographies, following which Nandu will walk you through the financial performance of this quarter. Firstly, an update on the overall soda ash industry. The market conditions remain challenging across all key regions and segments, especially flat glass, which is being impacted in Europe. LATAM also is experiencing a bit of slowdown, especially in the lithium sector, which is more recent. Consequently, there's been a surge in Turkish exports to Asian markets, which have diverted from Europe to Asian markets, especially in India, China, and Southeast Asia.
China, while it grew overall, flat glass was impacted in the construction real estate, and the demand grew for solar glass. Solar glass also had a strong demand in Southeast Asia; other sectors were flat. India demand was a marginal growth of 1%. The softness was mainly felt in export-facing sectors, in textiles, dyestuffs, and ceramics. South African demand, there was a bit of a decline in mining sector. Overall, the customer sentiment is bearish, with approximately 12-18 month recovery period in our view, as we explained in the last call. The company's performance is lower as compared to previous year due to pricing pressure in all regions and lower volume.
Especially in U.S., volumes are lower due to plant shutdown and rail car, which led to lower contribution, lower absorption of fixed costs, and increase in fixed cost during the quarter. The shortfall was about 18,000 tons. Input costs continue to be stable. We prepaid a debt of $25 million in U.S.A. Our endeavor is to continue to maintain our share through customer engagement and have steady contribution margin, with focus on cost and higher value-added products. Our focus will also be to deliver on investments on time, conserve cash, and continue to de-leverage. We've seen good performance in salt amidst challenging external environment. Domestic business has registered growth. International business there, again, is facing challenges, but we do believe it should revive in few coming quarters. Management there has undertaken steps in recent years to improve profitability of business.
We expect that to translate in coming years. We anticipate in the short term, current demand supply situation is likely to persist, but should stabilize and improve over long term, driven by sectors which we continue to engage with, which is sustainability, sectors, which is solar and, lithium, other related sectors. As we strategically expand the core business capability through cost-effective de-bottlenecking, we are equally committed to vigorous cost management, debt reduction, and downstream of cash flows. Our aim is to sustain market share with customer engagement and maintain stable margins with keen eye on controlling costs. Going forward, we do expect next few months to be challenging due to subdued pricing of soda ash. This is more so for the export markets, while domestic seems to be stable. That concludes my opening remarks.
I now hand over the floor to Nandu, who will walk you through the financial performance.
Thanks, Mukundan, and good evening, everyone. Let me walk you through the performance, after which we'll go to the Q&A session. Starting with the headline numbers for the quarter, our revenue was for the quarter INR 3,730 crores against INR 4,148 crores last year, Q3, down by 10%. Decrease in revenue was driven mainly on the lower soda ash volumes and pricing pressure in all regions. EBITDA for the quarter was INR 502 crores, as against INR 902 crores in the last year's Q3, down by 41%. Tax for the quarter was INR 194 crores, down by 51% compared to last year's Q3. Coming to India, revenues for the quarter were INR 1,003 crores. soda ash volumes were 7% down compared last year's
soda ash were actually up compared to last year's Q3. The pricing, the pressure has been there, because of which we had lower realizations on account of import on stock and drop in pricing. Salt and bicarb saw steady volume during the quarter. Moving to U.S., export pricing saw a sharp decrease versus previous year. However, both domestic price and market share were stable, but absolute volumes are falling. EBITDA margin was at 12% for the current quarter. In U.K. business, revenue was impacted as compared to last year's Q3 because of lower volume of soda ash, which led to the revenue being lower by 20% in the current quarter. EBITDA was at 10% for the current quarter. As far as Kenya is concerned, both volumes and realizations were softening, which in turn impacted margins and profits for the quarter.
As far as HDS and Nutraceuticals is concerned, both the business had a stable performance in this quarter. In Rallis, revenues were at INR 598 crore, a 5% drop compared to last year's Q3. EBITDA was 61 crore in the quarter, higher 14% compared to last year's Q3, and profit of 24 crore. Our cash at a consolidated level is at INR 1,535 crore in December ending. CapEx was INR 402 crore. Net debt was at INR 4,377 crore. With that, I close my comments and hand it over back to Gavin to open up for the Q&A.
Thank you very much. Should I go ahead?
Yes, please.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question, and to restrict to two questions at a time. You may join back the queue again for further questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Saurabh Jain from HSBC. Please go ahead.
Yeah, thank you so much for the opportunity. I have two questions. Number one, can you throw some light into what kind of contracts you must have entered starting of this year in both U.S. and Europe?
So, I think the bigger issue is in the U.S. Let me just highlight broadly. I think on the domestic front, I think contractually we are more or less stable, both in volume and pricing. On exports, what we do see, because these are reset sometimes quarterly, sometimes semi-annually, there's been a sharp erosion in the next year. We expect a blend of, because some of the material also is going to China now, so, and we expect a blended erosion of approximately $100 of export contribution and realization.
Domestic realizations, are they still closer to what realization we have delivered in the previous quarter?
Yeah. They will continue to be almost same. Not a, not a big shift in them. The contribution will remain almost same. Whereas, exports is where the erosion of contribution is approximately, I would say, nearly $100. It's slightly less than $100, but I would say approximately $100 would be an approximation.
Okay, understood. So still, it is still, you know, kind of a fixed pricing contract for the domestic business for this, for the 2024 in U.S.
For 3. So for 3, basically for the full year, which means for the last quarter of this year and 3 quarters of the next year.
Correct. And, what is the situation in Europe? How are the contracts structured over there for this year?
Europe is a bit of a different story. Let me just say this, I think, there, broadly, we are now, while some customers are on, the, energy price adjustment and a longer term duration, many customers have moved to what we call as a fixed pricing contract, where the risk is with us, and hence, we have been very cautious about it. Our, bigger issue there is in terms of, in terms of pounds, if you say, what is the erosion in, erosion in pricing, it's close to about 100 pounds.
GBP 100 versus 2023?
Yeah, compared to previous year, same period.
Average of previous year, right?
Yeah.
Okay. So, what kind of margins do you think are, you know, more likely to come through in U.S. and Europe for FY 2025? Any sort of guidance on that will be helpful.
Yeah. So, I would say that in terms of, broadly, the domestic should be stable in U.S. As I mentioned, the export margin, I've given the contribution number already.
Yes.
It's down approximately about $100.
Yeah.
It may improve the contracts as the pricing environment around the world improves, but these are the current situation. And in U.K. it's about, I would say, GBP 100 compression right across.
Thank you. We have our next question from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Good evening. Thanks for taking my question. One on the U.S. business, would it be possible to quantify maybe the profit lost during this quarter because of the 80,000 tons approximately of volumes that we lost? And also just to check, U.S. domestic volumes seem to have fallen a lot more than the export volumes this quarter. Any specific reason for that?
Yeah, in terms of the while you are seeing the domestic compared to the previous year more or less, if you look at a trading quarter, it has almost been flat, so we haven't seen any major shift there. There is an overall reduction in the market volumes, which is reflected in our volume. In terms of pricing, it is stable. Your first question was on the 80,000 ton. Approximately, if you broadly take about 130 or 150 odd dollar of contribution, we are seeing an erosion of close to about $10 million on that account.
Got it. That's helpful. Thank you. And also one question on how much of China's demand for Soda Ash comes out of the lithium and solar segments, if it may be possible to, you know, shed some light on that? And also, whether you would have some projections for what it might be for India in coming years. Thanks.
Can we come back to that little later? We'll just get the data, and we'll flash it to you during this call itself, huh?
Okay, sure. Thank you.
Thank you. We have our next question from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi, sir. Thank you so much for the presentation. Sir, apologies if this was asked, but just in India, it appears that the implied pricing and margins appear to have improved sequentially. Could you just talk about what has been different this quarter? Because all the literature seems to point that it's been a tough backdrop for this part of the world. Thank you.
I think in terms of overall business, I think it is absolutely fine. I think we, because of our contract structuring, we have benefited other than the rest of the pack, what you might be putting in, so that's where it is. If you strictly go by the market position, I think we should be, and our own analysis shows compared to. Because the domestic industry is also into contracting structures which are different. So through that, we've been able to sort of protect a annualized number of about, I would say, if you were to take the as we price it at import parity versus where our contractual pricing is, there's a benefit of approximately INR 100 crore.
That's an internal working, but I don't want you to go by that. But broadly, I think it's all the result of the contracting structures.
Sure, sir. So if I were to just get a classification, I mean, going forward, I mean, should we kind of look at it from a sequential perspective, or maybe just look at it from an annual perspective, that at the end of the full year, you'll probably be more stable, irrespective of what happens on a sequential basis, depending on imports, exports. Would that be a fair statement?
Yeah. Sequentially, I think we should be there. I think that is the first step.
Sure, sir. And the second question was, obviously, I think you've spoken about the new contracts on, you know, the pricing, and we've obviously seen some erosion or a meaningful erosion over there. Just wondering, given that, you know, we are in an environment of, you know, falling energy and, you know, all the other costs, would you be able to, you know, offset some of this, you know, ASP declines by way of lower costs over the course of the year?
Yeah, on export, I think what I did mention, the erosion for U.S. exports is our understanding of where energy will land and the pricing in the market, that $100 erosion which I spoke about, so it includes that. It's slightly lower than 100, but I'm saying for ease of discussion, we should just round it off to 100 and keep it there.
Sure, sir. Thank you so much, and all the very best.
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Good evening, and thank you very much. So if you were to get some update on the Inner Mongolia capacity addition, is there any update on that in terms of how much they've added and what is the, you know, progress likely on that 5 million ton expansion there?
So I think the situation seems to be more or less static in the sense that the capacity which was supposed to come in has come on stream. And there have been some challenges for them in terms of reaching the capacity to market and quality, as you mentioned. And overall, we think China market remains either balanced or slightly short. This is why a lot of the. I also mentioned this includes the blended sales in the end markets, where exports are headed to China again. But we think it will get balanced over a period of time. I think the real challenge for us has been coming from, again, as I mentioned in the last call, in Western Europe, where we lost about 1 million tons of demand.
That 1 million ton needs to find a home somewhere else, especially coming out of Turkey, and this is what is depressing prices. So we need to work our way through that.
Okay. So, second thing is, if you look at your average, inventory cost of coal, you would have got some benefit from the decline in coal from September. But what is the impact of the current increase in freight because of the, you know, Red Sea related, crisis? And do you see your input cost, particularly for coal, going up, say, over the next, 3, 6 months? And, would that, squeeze your margins further in India?
No, I think as I mentioned that, to the previous question, the margins sequentially have been stable. We have all the numbers. They are not impacting it overall.
Okay. What about the other markets like U.S. and Europe? Would the freight cause any additional strain compared to what you have mentioned in terms of the erosion in margins?
The erosion in margin includes part freight, part energy, a benefit in energy, and also includes the reduction in price. Which, put everything together, is what creates the contribution number we just spoke about, so it's all embedded inside.
Thank you. We have our next question from the line of Riya Mehta from Aequitas Investments. Please go ahead.
Thank you for giving me the opportunity. My first question is in the India business, how much percentage would be in the contractual basis, short or long?
Quarterly, quarterly contracts in India would be approximately 50% of our volume.
50% of the volume. These are annual contracts or, what would be the-
Quarterly.
-your estimate?
Quarterly.
Quarterly contracts. In India, how are we seeing the demand side scenario? So like you mentioned, we saw 1% increase in the demand. Going forward in the month of January, how are things getting?
Yeah, so I think the demand challenge is key in Western Europe. Now, because of the lithium prices in the Latin American markets, but otherwise, Asian market is not a demand problem. It is either growing or it is flat, but it's more a pricing problem here because of the excess supply coming in out of the lost demand in Western Europe.
Right. What would typically be the consumption in Europe, and what has it reduced to, if we can get some numbers? Loss of demand in Europe.
6 million, right? Yeah, it's about 6 million. I think it's 6.5 or so. It's down to, I think about 5.5 or so.
6 million tons per annum loss of demand.
Yeah, 6.5, approximately. I mean, and then it's down to about 5.5, so it's 1 million ton less.
Got it. Got it. What will be the imports which are happening in India on that account, like incremental? I think earlier it was around 60,000-70,000 tons were imported from outside. What will be the current level of imports?
The incremental, what would have been a normal run rate versus where we ended the year, calendar year, I'm speaking, is about 600,000 ton emission.
600,000 tons per annum incremental in India?
Imports, yes. About 200-250, I think they're close to about 830-850, approximately. The current run rate.
Sorry, I couldn't hear all the last line. Could you repeat?
It used to be between 200, 250 thousand. I think we ended the year with calendar year with around 800 or 850, somewhere there.
Okay. Okay. Got it. Got it. That's it from my side. I will join the queue for further questions.
Thank you. We have our next question on the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah. Namaskar, sir. Just a data point. Firstly, sir, you mentioned about $10 million hit on the bottom line on account of the lower sales and from the U.S. facility.
Yeah, approximately. I think that's what it comes to. I think our contribution, broadly, is about, let's say $125-$130 per ton. 80,000 tons is about $10 million.
Right, sir. And the part about the European part, what is exactly what has exactly led to this contraction in demand in terms of Western Europe, which you are articulating to earlier reply? And how are things going to shape up in terms of the. This demand is permanently lost, or what is the nature of this contraction in demand, if you could explain?
I think most of the consumption industries are in stress there. And I think just in our view, if the current energy environment, if the current European environment continues, it is, you could say in the medium term, it is lost. So effectively, I think the European, I don't want to use the word, but European supply has to rationalize itself.
Okay, so there, just like the Solvay part, we will be seeing further rationalization of capacity going ahead to even the market, to balance the market.
I see many of those capacities not being able to survive with the current pricing and demand environment, so I think it is gonna be challenging for them. So there will be certainly a rationalization, but I can't speak for the industry. I can only give you the numbers I have.
Right. The next question is pertaining to the solar demand that is expected domestically in the country, for our country, India. So what are we currently anticipating, and what are the pillars in terms of the solar lines that are envisaged to be set up in, say, two, three years down the line, and the incremental demand in terms of million metric tons that is expected out of this solar initiative taken by the government of India?
So I think if you don't predict too long, you just say what the incremental demand is going to come on stream on the announced line and the lines which are currently under built and will be operational in about 18 months or 24 months, it's about 250,000 tons, 250,000 tons.
250,000 tons?
Yes. And in China, the lithium plus solar demand is about 2.7. Somebody had asked it before. It's about 2.7 tons a year.
Here it is 250,000 ton you are mentioning.
In India, solar demand on the basis of announced projects which are in implementation, which will get commissioned in the next 24 months, is about, in our estimation, about 200-250,000 tons, about quarter million tons.
Oh, okay. Right. So this unabated import, which is routing from Turkey, will create more price distortion when the prices will be trending, will remain lower for a longer period of time. This would be a better understanding going ahead?
Yeah. I won't comment about pricing, but all I can say is that I think if you really say on an overall basis, if the European rationalization of capacity rather stays, I think it would be shorter. It'll depend fundamentally arising out of that, because that's where the material will get absorbed. So we have to just wait for that, those processes to continue during the years.
Thank you. Before we take the next question, I would like to remind participants to press star and one to ask a question. The next question is from the line of Santosh Keshri from Kesari Finance. Please go ahead.
Thank you for giving me an opportunity, but, my questions are already answered, so you can pass it on to someone else.
Sure. Thank you. We have our next question from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Yeah, hi, sir. You talked about the slowdown in lithium demand, and we have seen a slowdown of EV sales in developed countries. So, the way we are talking about lithium is going to have a more contribution in glass, in the battery side, in the sort of uses of soda ash. So, do you think the near term or maybe midterm challenges of slowdown in EV is not because of slow because of current scenario or there is a structural changes?
So you see the projects which are already commissioned, they will continue to get, you know, run at whatever capacity they need to run, because they're actually on stream. So we don't see a reduction in demand because these are continuous process plants. And, well, the current pricing of lithium, I think new capacities coming on stream, they will find it challenging because the return environments will be subdued for some time. So they may get postponed, but we think this is a long-term trend. We really don't believe that there is, it is a permanent situation. Okay.
Any alternate commodity which is going to replace lithium or some changes happening in the market?
For mobility application today, for passenger vehicles or light commercial vehicles and light vehicles, so lithium will be the best solution. We go for, commercial segments, heavy, heavy truck segments, hydrogen is the solution. And for stationary, there are many solutions, including sodium and, some, China has started to see some sodium industry come on stream. But these are developing solutions.
Okay. And last, what is the sustainable EBITDA per ton for U.S. business? We can see going forward. Per ton and sells to $100. So what is the sustainable EBITDA per ton in this current scenario for you?
Yes. EBITDA figure, I think we have we usually should be delivering anywhere around 35 or 40-odd dollars, and if times are good, it will be higher. If times are bad, it can depend down from there. I mean, we've always maintained the U.S. business should deliver a EBITDA of about $100 million with the current capacity. So either it'll be a little lower or a little higher, depending on if the market environment is very positive, it's delivered very high, and but the range around which we tend to examine the U.S. operation is around that much.
Thank you. We have our next question from the line of Ankur Periwal from Axis Capital. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity. Just a clarification for the U.S. business, especially domestic, you did mention that there are quarterly contracts there, while the balance export business is largely on spot, as I understand. Typically, we take a repricing of these contracts in December or, you know, in the month of January. A clarification here, whether the repricing has already happened or probably we'll see another repricing happening this quarter, which is January onwards.
So U.S. domestic is annual. It runs for the calendar year, which is starting January to December, and the pricing has already happened. And what I mentioned was the average rate within U.S. is almost stable. Minor, minor changes here or there, and if you adjust for energy and all other benefits the unit is going to have, all of the changes, I think they will have stable margin. It is in exports, which I mentioned, that the current quarter, the coming quarter is likely to see a $100 erosion. But, going forward, it depends on quarterly movements, which we have to wait and watch in the market.
Okay, sure. And we had lined up, you know, our capacity expansion in U.S. as well. Any change in the timelines there, you know? I think we have mentioned earlier around 1.5 years for those capacity to come up, but given the macro, any changes there?
No, I think, let me just explain overall capacity expansion. In India, I think, the power plant is already commissioned, and it is already delivering steam and power to the system. So the soda ash should be finished by May of this year. So those volumes, additional volumes will come. And salt also, we expect additional volumes. Overall, we expect about, so these capacities during the year will yield incremental numbers for the next fiscal year. And in India, we have started the detailed engineering and examining of another 300,000-odd tons, which the work will commence shortly. In U.S., similarly, the basic engineering has... In India, the basic engineering is complete for the next stage. We are going to go to detailed engineering.
In U.S., the basic engineering work has commenced for the 400,000 tons. And then, Kenya, the detailed engineering will also commence for their 200,000 tons. So the 1 million tons, two sites, the detailed engineering will be commencing now that we have the support of the board, and, U.S. has just moved forward with the basic engineering.
Okay, great, sir. Thank you and all the best. Thanks.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah, thanks for the opportunity. You are audible, sir?
Yes, please go ahead.
Yeah. Thank you. First question, you mentioned that there had been demand side challenges. How has been the capacity utilization across different geographies? And is there any issue in terms of excess inventory in the global system for soda ash? Thank you.
There is inventory in pockets, so I'm not going to say where exactly it is. But I think if you see the capacity utilization of the industry as a whole, it is somewhere close to 90% utilization.
That's, I mean, aggregate all across the geographies you are considering, right?
Correct. Correct.
And the second question in terms of different region-wide demand challenges. So are there any specific challenges in certain regions where the user segment demand is, you know, getting hampered? Any cues from you?
So I mentioned in terms of demand side, the challenge is mainly in Western Europe and what we call as Europe. I think that's where the demand challenge is the highest. The rest of the world, the demand is either flat or the sentiment is flat. I mean, it is, we're probably at the bottom end of the curve everywhere. It's in Europe we need to be more watchful.
Sure. That's all from my side. Thank you, and best of luck.
Thank you. The next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Thank you for the follow-up. Two questions from me. One is just to clarify the U.S. export price erosion that we are looking to, about $100. The reference point for that or the base is basically the third quarter, the quarter that's just gone by, or we are referring to, you know, last financial year as a whole or something?
No, this is referencing what you would have seen in the previous year, fourth quarter.
Okay. Understood. Got it. And the other thing was just, you know, given the fact that U.S. domestic prices, contract prices, seem to have corrected far less than export prices are, is that because, basically the year ago period, exports are at a significant premium versus the domestic market, and now that gap is normalizing? Is that how we should read it?
Yeah, you could say that. I think, last year, the export numbers were at a premium, but this year they are at a discount going forward.
Okay. Understood. Great. Thank you so much.
Thank you. We have our next question from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi, sir. Thank you so much for the follow-up. Just two small clarifications. Just on Europe, when you mentioned Europe is also seeing $100 per ton erosion compared to last year, this would be across the board, or does Europe also have a concept of contracted and spot?
I did mention that, U.K., our business will see erosion of GBP 100, probably.
Sorry, GBP 100. So that would be across the board, across all the volumes that you said?
Across the U.K. business and the U.S. business-
UK business.
U.S. export will be under.
Got it, sir. And just a second clarification was, you know, in the presentation, you've given a figure of INR 2,000 crores of CapEx, FY2024 to FY2027. I just wanted to double-check if this also includes the expansions that are coming up in India, US and Kenya?
This is mainly India, which has been clear. The U.S. is going through basic engineering. We will come back to you with those numbers shortly. Kenya, we have mentioned it is a CapEx of about INR 20 million-INR 24 million, but we will come back again because the detailed engineering is underway there. This number is reflective of India, which we are really good at.
Sure, sir. Got it. Thank you so much.
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Yeah. So, in terms of follow-up, if you look at your future expansion, once the detailed engineering is complete, when do you expect to incur the CapEx? Will it be from FY 2026, or will it start from FY 2025, second half? Any timeline you can give on how you will, you know, approach the spend?
See, so I would say, given the experience with the team, once we finish, we expect an execution time of either 24-30 months, probably.
Okay. And the second thing is, you have booked some savings in the power and fuel cost in your India business. So is that run rate, which you see in third quarter, likely to sustain in the fourth quarter and can it sustain for FY 2025, given the current cost structure for your coal imports?
This is, you're referring to consolidated?
No, the standalone. India, India power and fuel.
Yeah, India, I think we more or less would be having the same run rate because our contracts are more or less.
Pretty cool.
Yeah.
Okay, just one last thought. On the U.K. specialty salt, this pharma salt and other specialty salt, any indication you can give in terms of the volumes and the kind of pricing or, delta and margins you can expect, and when you can expect to see that in the U.K. P&L?
So U.K. salt, the pharma is under commissioning or close to getting commissioned fully. We expect the U.K. salt volumes, which used to be around 75,000-odd tons, probably will creep up to 80,000-85,000 tons.
Okay, this is per annum?
No, I'm talking of per quarter.
Per quarter, okay. Okay. There's a 10,000 tons per quarter. Okay. Thank you very much, and all the best.
Sure. Since part of it will be pharma, part of it will get sold as technical because we have to develop the market. So the pricing will come back to you accurately maybe in the next call.
I would appreciate it. Thank you very much. Yeah.
Thank you. The next question is from the line of Ramana Murthy Malla from Ramana Murthy and Company. Please go ahead.
Yeah. Yeah. Thank you for the opportunity and good presentation. A lot of my issues were clarified. I have two points to ask. One is this, consumer related business after Tata Chemicals has been moved to Tata Consumers. Now, what is left with the subsidiaries, et cetera, are there any plans to consolidate the domestic operations, meaning subsidiaries merging with the Tata Chemicals also as a part of cost rationalization? Second question is, Rallis India remained at a small compared to competition. So are there any plans to expand Rallis as an individual company, or are there any plans to merge with Tata Chemicals to make a slightly bigger company? Because part of business has already moved to consumer related to Tata Consumers. So therefore, are there any plans to further consolidation the Tata Chemicals?
That's what is my question. This will help the company to grow and reduce the costs.
Yeah. So on the any listed or unlisted subsidiary, I think the board takes a call from time to time. As far as Rallis is concerned, our intention is to support the management to grow their business, and we'll continue to support Rallis to achieve its full potential. That's, that's all I can comment sitting on the board of the company.
Thank you. We have our next question from the line of Bhavin Soni from Anand Rathi. Please go ahead.
Oh, I thank for the opportunity, sir. Just needed a clarification on the capacity utilization figure that you had mentioned above, if you can just repeat it.
I think broadly, they tend to be closer to 90%. I, I think that it was 89% or 88%, or... We expect for the year finishes will be close to that number. Next year also, we expect a similar sort of a number as before.
This is on a whole, like, each and every geo combined basis, right?
This is on a global basis.
Okay. Okay. Thank you.
Thank you. The next question is from the line of Riya Mehta from Aequitas Investments. Please go ahead.
Thank you for giving me the opportunity again. My first question is in regards to the current expansion, we are doing around 1.85 lakh metric tons in India for soda ash by H2 FY 2024, and over and above that, we are planning for another 300,000 tons. Is my understanding right?
So in terms of the expansion, what we are doing is close to 250,000 or 230,000 ton. And we will be-
This was it currently, right?
Yeah.
Was it overall?
Yeah, yeah So it is basically 250,000 tons and additional stream of about 300,000-odd tons, which is under planning. This is under execution.
By FY H2 FY 2024, we will be around that. We are currently at 12.
Right.
That will be 2:15, okay?
Yeah, yeah. We'll be slightly upward of 1.1 million tons.
We are at 11 lakh tons, right now?
We are at about 850,000 now. 8.85 also effective utilization capacity. I think we went 1 million. 1.1 million.
By H2 FY 2024?
That's correct, yes.
Got it. And, are we planning any further price erosion in India business since the demand is like in low single digits, and we are planning for expansion as well?
No, I told already that the margin is expected to be maintained.
Thank you. We have our next question from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah, yeah. Thank you, sir. So when we look at the power and fuel line item on a Q-on-Q basis, that has gone up from INR 650 crore to INR 700 crore. Is this factoring in the U.S. shutdown? What explains this increase?
Sorry, in the?
Sir, I'm looking at the power and fuel line item. On a Q-on-Q basis, it has gone up by INR 50 crore.
Yeah, correct.
If you could explain this increase, sir. What are the factors that are attributed to it?
I think this is just, you know, in terms of the gas pricing and the oil consumption in Magadi and some bit of both, and energy costs put together. Which is where I think the heading of the commodity that come off. And now they paying the full market price.
Okay, so this will be the run rate going ahead also, keeping the capacity utilization level at nine- at the current level?
I think broadly it should track in that range between 50 and 70.
Thank you. We have our next question from the line of Saurabh Jain from HSBC. Please go ahead.
Thank you for the follow-up. One clarification that there was a disruption that you mentioned in the U.S. business for Q3. Are all the disruptions sorted in the fourth quarter, and will it be a more normalized quarter from volumes point of view?
The only thing which we are clear is that our shutdown got extended about 3 to 3 or 4 days more than what we planned, which was accounting for 50% of the loss earlier. The balance 50 has been because of the railcar shortage. We are working with Union Pacific and other logistics service providers to improve. So, that's always a challenge, because it is not fully within our control, but we are hopeful it will not... They've also done the needful to sort of support them as well.
Okay. And also, can you give some comments around how is the, how are the headwinds in the bicarb business, if at all, in terms of, you know, demand, absorption, and also how, is the profitability, how does it look like in the bicarb business? Some comments on that side will be helpful.
No, in bicarb and salt, we are not seeing any such challenges. It is mainly the soda ash.
Thank you. We have our next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah, thanks for the follow-up. So, we have seen last year, China has coming out with capacity in Inner Mongolia, and they have further plans to expand the capacity next year as well. So will that reflect in terms of benign price environment in 2024 and 2025? So any color on the same? Thank you.
As I mentioned, even in the last quarter, I think we are actually focused on what's gonna unfold in Europe. We remain focused on that, because the challenge part of the world is actually Western Europe. Hopefully, the issues are addressed there, rest of the world probably should rationalize.
Sure. So second question is in terms of the lithium battery space. I think earlier couple of years ago, we had indicated that we will be putting up a lithium battery recycling plant. Any progress on that front? And beyond that, do we have any other area which we are looking at from a lithium battery space, except for supplying the soda ash from the lithium carbonate manufacturing perspective? Thank you.
Yeah, we are engaged with our group company, Agratas. And as I said, as and when we have any finalized plan, we'll come back.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to the management for closing comments. Over to you.
Thank you. So I just wanted to say that we did a phase of fairly challenging quarter this quarter, and most of the challenges have been met positively by the management team, but we remain focused on our long-term strategy. We think while the short-term challenges remain, the long-term future of all the parts of our businesses are positive, so our growth plan are continuing apace as planned before. And fairly, I just want to say that even though we know that the next few quarters will be challenging, we will continue to focus on what we can control, which is our customer engagement, fixed cost and cost competitiveness, and pay down of debt, at the same time, remain focused on long term. Thank you.
On behalf of Tata Chemicals Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.