Tata Chemicals Ltd
NSE:TATACHEM
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
939.2
1 315.25
|
Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call of Tata Chemicals Limited. [Operator Instructions]
I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you.
Thank you, Yashashri. Good day, everyone, and thank you for joining us on Tata Chemicals Q2 and H1 FY '23 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 discussion may be forward-looking in nature and may involve risks and uncertainties.
I now invite Mr. Mukundan to begin proceedings of the call. Over to you, Mukundan.
Thanks, Gavin. Good morning, and welcome, everyone, to our quarterly earnings call. First of all, let me wish everyone a very happy new year and very happy festival season. Hope all of you are safe. On today's call, I'm joined by colleagues Zarir Langrana and Nandakumar Tirumalai. I will start the discussion with key operational highlights across the geographies following which, Nanda will walk you through our financial performance over the quarter.
To begin with, I'd like to say that this quarter in terms of the volumes, especially on soda ash was impacted by certain extended lines of [indiscernible] outages in India and U.S. Otherwise, we have continued our growth momentum during the quarter. And overall, H1, we have ended on a strong note. Also, you would have noticed during the quarter, which Nanda will talk about [indiscernible] go to page number 16 of the investor presentation, it shows historically Q2 and Q3 the percentages go down and it moves up again in Q1 and Q4. So keeping in trend of the past and we will leave it at that. I wanted to address these 2 points because I'm sure these will be at the top of the mind of all the people who have joined the call.
Overall, we have seen a good improvement in revenues, profitability on the back of favorable demand supply dynamics and better cost control. Actually, all our businesses across geographies have performed well in line with our plans. Let me now move on to individual business. On soda ash, the overall market remains tight. There is no softening in majority of a new market as of now. There is a talk of inflation, slowdown, but this not been seen by the customers with whom we are interacting and it continues to be in a very balanced situation to price situation from market to market. In India, the demand was really driven by glass. During monsoon, the detergent market does go through a bit of softness. But on the ground, the demand continues to be strong, and we've already seen pickup during Q3 in terms of market demand go up higher level and we should move to a stronger level by Q4.
Moving on to U.S. business. Other than the issue related to the volume which I addressed already in the beginning, we also had the specific issue of exiting from [indiscernible] during this quarter. This gives us a greater flexibility is terms of servicing our customers and addressing our customers directly in several of the export market. This is part of the transition to build one unified -- U.K. and Kenya benefitted from improved margins and especially on the back of new contracts. U.K. in addition marketing network around the world.
U.K. and Kenya benefitted from improved margins and especially on the back of new contracts. U.K. in addition benefited from increased sales volume of higher margins and salt. There is also in business restructuring benefits which have slowed in the U.K. and also the stability of carbon markets, crystallization of historical derivatives and distribution and one-off review from man transactions have given us onetime uptick in the numbers in U.K. In terms of salt business across the board, we remain stable and the bicarb sales have also remained healthy across India and the US. The silica business continues to be at optimum level. We are already gaining a capacity as I explained in the previous calls. On specialty chemical, we continue to gain customer retraction and this will gradually tail up going forward. On Nutra, despite development and challenges, the business delivered good top line growth.
[Technical Difficulty]
So let me start right at the beginning and go through quickly in terms of the point at which the disturbance started. This is on -- the U.S. business I already mentioned that we have the issue related to the volume during the quarter. More importantly, this is a quarter where we've executed the transition agreement which allows us to address our customers directly and build one unified marketing network around the world to serve our customers. UK and Kenya benefited from improved margins for new contracts which came into effect during the quarter. UK also benefited from higher-margin products as well as salt sales, the effect of business restructuring and the stability of U.K. carbon markets. Now they are being more of a stable in a narrow band. There was also crystallization of historic hedges and derivative positions and one-off received from land transaction.
In terms of salt and bicarb sales, they have remained steady. A quick word on Nutra and Silica. The Nutraceuticals business is holding steady, continues to track positively, and we are only adding capacity of 50,000 in 2 traches of 25,000 tons per annum. On nutraceutical business, we continue to gain traction from customer.
Moving on to Rallis, despite challenging external development, the business delivered a strong top line growth, especially the international business delivered a strong 67% revenue growth. Domestic business also registered good growth, and we believe that going forward the company would maintain its momentum. On CapEx, the current expansion in Mithapur is on track and further expansion of capacity planning are underway. To conclude, I would like to reiterate the core business continues to be strong. Business outlook for all our products have been promising and our effort towards completing CapEx on schedule and meeting customer requirement is on time, is well under way.
With this, let me hand over the floor to Nandakumar.
Thank you, Mukundan, and good morning to everyone, and happy Diwali to you and your family. First, let me simply walk you through the financial performance, after which we can take the Q&A. Starting with financials. Our revenues grew the 40% over Q2 of last year. The growth was broad-based with all the businesses and geographies performing well. EBITDA for the quarter was INR950 crores, 84% higher than last year's Q1, driven in part by operating leverage and strong demand during the quarter, offsetting the rising input prices.
Moving on to individual businesses with India. Revenues for the quarter was 40% higher than last year in Q2. Growth was mainly contributed by higher derivations. Current quarter volumes are reflective of the strong on ground demand as existing segments like glass and newer segments like solar panels and lithium carbonate continue to grow. Salt and bicarb were steady in the quarter, margins were stable. Currently, U.K., despite the challenging inflationary external environment, the business reported profit of INR99 crores for the quarter. Soda ash volumes were stable. As far as Kenya is concerned, Q2 witnessed a good and stable performance in volumes and profits, both improving. Kenya is our lowest cost manufacturing unit and benefits the most from any incremental finding. Moving on Nutra and Silica, as Mukundan mentioned earlier, Silica is operating at optimal levels and with demand and client approvals in place, we war working towards gaining up capacities in both Nutra and Silica.
As far as Rallis is concerned, Q2 saw a good revenue growth, largely driven by the strong performance of international business. Domestic business is average, which was impacted by monsoons, which has showed decent double-digit growth rates. Margins for the quarter were impacted due to higher input costs. We are happy to inform that we repaid $92 million of our loans during the quarter. In total, we repaid $125 million in the last 6 months’ time. Our cash portion in India of cash, include funds and bank deposits have moved to INR1,365 crores in September. Capital spending was INR220 crores for the quarter as against INR115 crores for the previous quarter. On a consolidated basis, we had INR197 crores of cash at the end of September. Net debt stood at INR4,409 crores and consol CapEx of INR304 crores in this quarter as against INR2,000 crores last year.
With that, I close my comments and hand the floor back to moderator to open up for the questions. Thank you.
[Operator Instructions] We have our first question from the line of Sumant Kumar from Motilal Oswal.
Yes, sir. My first question is regarding the margin trajectory for U.K. and Kenya business. We have seen a strong margin expansion. So can you talk about how sustainable both the region margin?
As I mentioned, this quarter there were -- this quarter and coming quarters there will be some benefits which will be coming off certain one-time historical derivatives and hedge positions in the U.K. especially. In Kenya also I think the reflection is on the basis of the strong market price, which continues to be there. So while overall -- while overall the way we will see the trajectory going forward during the current year, they will remain range beyond within a narrow band. And maybe tapering down towards the later quarters as some of these hedges will be unwind. The other critical issue is that, overall the margin trajectory in the other business will move in the reverse direction, which means they will continue to improve. So the UK and Kenya had the benefit of certain levels of unwinding which has happened and they will moderate and as the US and India would probably have a fair...
Yes. Can you hear me now? So can you talk about the U.S. business, the price negotiation and export realization, any price increase in the coming quarter? Or is the price has already stabilized at this level?
No, I think the U.S. would certainly see by Q4, certain changes in the pricing level because the new contracts will come in. We have not got the benefit of new contracts, because some of them are annual so we will have transition in the Q4 this fiscal year. And on the export side, we'll continue to see uptick improvement in pricing. So every quarter we you are going to see improvement and directly a mass movement in quarter 4.
So when we see the improvement, sir, what range of price improvement, we are -- we can expect in the next 2 quarters, you are talking about the Q3, Q4 you will see a price increase because of contract prices.
So let me again reiterate. The export volumes in the US are moving every quarter. And the domestic volumes and pricing will change in the Q4 because the Q1 of the calendar year. [indiscernible] Okay. This is last question. So all the contract is on quarterly and half yearly basis for the U.S.? So export volumes of the 2 markets in Southeast Asia and also in Latin America more or less have move to quarterly, whereas the domestic market within U.S. has remained more or less the same.
Okay. Sir, a small request, whenever there is a plant shutdown or maintenance plant shutdown, we should intimate to the exchanges so we'll get a clear picture for the earnings performance of the quarter.
[Operator Instructions] We have our next question from the line of Vivek Rajamani from Morgan Stanley.
One clarification and one question from my side. On the clarification side, the shutdown that you mentioned for India and the U.S. that was a plant shutdown? Or was that an unplanned shutdown for U.S.?
No, it was a planned shutdown, and we had taken longer outage than normal mainly because we wanted to have a very, very strong run by Q4 when the new prices come in, so that is part of the approach, rather than take short terms, we are taking longer one in U.S. And in India of course the shutdown has been longer than planned mainly because of heavy monsoon, nothing to do with our internal operations.
The shutdown is over and now the plants are running as per normal, is that you say?
Yes, they have already -- these we somewhere in the middle of the quarter, so they are all back.
Got it, sir. Thank you. And coming to the question, sir, obviously, we've seen a lot of volatility across the energy cost for the past many quarters and you've been highlighting that as well. I think what we've seen so far is a lot of these costs have corrected quite materially. Could you just give some color in terms of how you're seeing your costs playing out by geography over the next couple of quarters? And potentially, if this fall in prices also has an impact on the prices. Thank you so much.
So let me just break it down geography wise. As far as the Indian growth is concerned, which is usually indexed to have the -- and the index numbers on whole come down, the Indian will also fall, but there will be a bit of a time lag of at least a quarter before it starts to fall, but it has moved in that direction. As far as U.S. gas is concerned, that market is more or less stable. I don't think it went to new level, but have been more or less stable. It has not spiked or it has not gone to the extent of a [indiscernible] European gas is where I think the sharp increase will happen, but we were covered to our own understanding of certain risk positions which we take, risk mitigation positions which we take, and we are very protected in terms of ensuring that we can manage these increases.
But there are also I think the prices are coming down and they are cooling off with higher visibility of the gas storage across the U.K. market. And what we are working to is to work with customers in terms of certain margin number so that they have visibility on the gas. And on that basis, they are able to price the product and this is our understanding we are changing off with our customers. As far as Kenya is concerned, it is on [ HFO ] And again, this HFO also has stabilized and its invest to crude oil. Crude oil did spike up, but I think it is now stabilized. So we are seeing all around stability and a bit of tapering.
We have our next question from the line of Abhijit Akella from Kotak Securities.
First on the shutdowns that we've taken. Just a few clarifications regarding that. If you could just share with us how much volumes were lost in both geographies, India and the U.S. because of this? And if you could also share, I mean, some estimate of the lost profit because of these shutdowns?
Yes. So let me put it like this, that as far as the issue on the financials are concerned, I think they will all be brought back going forward because the plants are full back, because this would have happened in certain quarter and at certain point of time. In terms of the volumes which we had planned to take out during the quarter it was about broadly in the range of about 60, 000 tons between both geographies put together.
Just to clarify, it was 60,000 tons?
Put together, India and U.S. put together, 60,000.
Okay. The reason I was asking this is just to get a sense for what the normalized EBITDA per ton would have been in both these geographies. So that was really the key question I was driving at. So I mean...
Also, let me add, for example, in India during this period because the monsoon the consumption and other parameter also come in the way, it is not just volume driven. So -- and certainly that's not an issue in the volumes. If you go to historical numbers, you would get a trend which sort of follow every year with some slight increase. So if you look at the price increase [indiscernible]
Okay. But just to conclude that, is it fair to conclude that despite the spike in power and fuel costs that you've seen, I presume largely in the U.S. and U.K., the core EBITDA per ton would have been at least in line with what we saw last quarter in the June quarter, if not higher.
So let me take this. I think the input cost is one parameter, but the market price is different parameter. So the margins are very much continuing to hold. And secondly, as you said, as far as U.S. is concerned, the margin fully -- the margin has not fully played out in that market because the contracts would move quarterly upward and also the domestic market reset has not yet happened, so that will happen only in Q1.
Fine. And one last thing from my side before I get back in the queue. In the U.K. you spoke about some one-time hedging benefits. Is it possible to share how much that was? And number 2, just the tax rate seems rather low this quarter. So what's happening there? And what should we estimate for the full year?
On tax rate, Nanda will address it. We'll come back to you on that hedging fees. Also, there's also a one-time land sale transaction which got approved this quarter.
So on tax rate, Abhijit, that was mostly in Kenya because we are getting profit for the first time for increment deferred tax asset in the quarterly accounts. That's what came as a one-off kind of a thing in the tax line in the accounts. See, there is no loss every quarter, but now they made a profit and therefore we have a deferred tax asset to contain the mass process which can be recovered going forward. The reason for the credit in the tax line will be announced.
Any guidance for the full year you can give, sir, for the tax rates?
We can't talk about that.
We have a next question from the line of S. Ramesh from Nirmal Bang.
So if you're looking at the operations in U.S. and India, and U.K. and Kenya. In terms of the volume, there is certain amount of toward pressure which you've explained as attributed to the shutdown. So going forward, in terms of growth, if you revert the issues regarding cost and pricing, big geographies do you see delivering volume growth on a Y-o-Y basis, say, in the second half and, say, in FY '24?
So in terms of volume I think we should be looking what we normally do in a in a quarter because I think our capacity expansion is coming on stream lately only and that will be coming towards the beginning of next -- first quarter next fiscal year. So the volume will be -- moreover we can produce and every quarter I think, as we have mentioned, this quarter probably -- quarter 2 -- broadly if you say that shutdown impact on the volume has been about 64,000. So you add that, you will get the volume what we should possibly want.
The next thought is if you're looking at the European situation, there is report about a lot of industries reducing operating rates and shutting down, especially in glass and there are reports of some pressure in the area of automobile. So why in the period we have done so for we may have seen any impact of the slowdown. What is the sense you're getting on the ground for the next 2 quarter this fiscal and how do you see that shape up in terms of the segments for FY '24? And how are you planning your operations based on that?
As far as U.K. is concerned, we have not seen any customer sort of moving away or not complaining to volume. In fact, that most customers are eager to conclude that sheer volumes also. And Nutra as you would know does not have fat glass or supplies from us and mostly it is containers.
And so the flexibility to pass on the cost increases., do you think we'll continue to enjoy that, which is one of the key drivers for your growth EBITDA margins and EBITDA. So because if the customers are under pressure in terms of the similar cost structure, wouldn't there be some resistance? And is it that something which can potentially bring down margins?
So I think the point which you mentioned is that we should be finally be very sensitive towards the customers' demand for these products. I think that we are planning. We are keeping a very slow watch. So I have only relayed back what we are hearing from all customers. Our customers are continuing to be producing full and running in full and including wanting to contract for next year on the margin structure basis.
[Operator Instructions] We have our next question from the line of Vishal Biraia from Max Life.
Sir, my question pertains to the global demand supply. Could you touch upon the supply sources that you were expecting over the next few years. We've seen substantial delays in capacities in China and some other regions. But if you could touch upon as to what is the status now? And what do you see in the next few years?
So in terms of fresh capacity coming on stream, we have already always highlighted that there is about 1 million to 1.5 million tons which can come in, but I think that is probably going to serve the internal Chinese market because of a distance from port and the other issue there, and that anticipated date is somewhere closer to '26, '27 or so, and there was also announcement of capacity expansion in U.S. of about of 4 to 5 million tonnes. That initially the announcement was for somewhere around '27, '28, but I think the date has moved to 2030 now. So actually we are not going to see big capacity come on stream, except some debottling which people may do or certain capacities getting added -- added layers at the hedges in terms of 200 or 300,000 tons. So overall, we not anticipate major fresh capacity coming at least in the announcements which we are aware of, any time before '26, '27, that is in inner Mongolia and closer to 2030 in U.S.
Okay. And just touching part on demand relative to the last question that you answered. So you're saying in Europe as well you are not seeing demand curtailment as yet.
Sorry, I'm not answering for Europe, I'm answering for U.K. only because we don’t sell much in Europe, so there will be regional differences which will play out. There are announcements by some manufacturers in continental Europe also, large companies who are closing. But in U.K. and especially the customers, these jobs are mostly container people. They continue to have continued operations and demand I think we'll continue to serve them.
Fair enough, sir. Sir, my last question pertains to the energy contracts in U.K. Could you tell us what are the sort of the contracts that we currently have and how are we planning to manage this in the future?
We disclosed this information now to an outside world how we hedge, that is supreme to us. What I can say is we got a hedging policy in place and we go as per the policy which is approved by the Board.
And as far as the customers are concerned that they have visibility on the market price and our contract with them is on the basis of market price.
What is the extent of increase in energy cost that you've seen in Europe operations. Could you give some perspective as you compare the first half of last year to the first half of this year, what will be the increase in energy costs for the U.K. plant?
Again, difficult to say because we have a combination of our past hedge and the current market being there and what energy cost is a mix of what is open and what is covered, and therefore we really don't share such information in terms of the outside world. But I want to reiterate that we are getting positive increase and we hedge as per that.
So I think just to give a color to the question you asked, for example, this is in terms of if you look at the index number of 100, the European natural gas prices went as high as 6 times that number for these period in September, but today they are settled at about 200, so on an index of 100 they are at 200 today but they did briefly go up to 600 number. So that should give you the point that the market has actually cooled off, it is now twice the normal number 100 what we have seen, a similar period maybe prior to conflict in Europe.
We have our next question from the line of Rohit Nagraj from Centrum Broking.
Sir, first question is on India and soda ash pricing. So I believe the last pricing that we had taken was on 1st of June. So after that have we taken any price increases? And given that the energy costs are coming down, incrementally is there a possibility of the pricing correcting to the extent of the energy costs coming down?
So in terms of the Indian domestic pricing, I think is not just that the dollar number is cooling off. Also, in terms of the finished product it is the index in USD. So if you look at the depreciation, that certainly also gives a cover in terms of the protection of the rupee pricing in the EU. On the price increase, July was the last pricing we had, June, sorry.
Yes. And whether the benefit will be passed on given that the energy prices will come down even the next 4 to 6 month.
It is not linked like that. So the market price is a function of demand and supply and the cost structures are cost structures. It is a very specific situation in the U.K. where the energy cost height up to very sharp level, and for visibility with the customers we are fundamentally moving into a margin kind of a structure -- but the rest of the market it is fundamentally healing, I mean, the costs are on one side and the pricing is on the other side.
Got it. Sir, the second question is on China market. So there's been a real estate slowdown in China. So any demand-related challenges from the last years in real estate and whether that sodas volumes will come into the global market, any broader trends from your side.
See, really the only main impact seen and I think this is not about the volume number, but it is more related to as the trade costs have come down, the standard price in some markets have corrected to about $24 and that is related to freight. I mean, beyond that we have not seen any major role.
[Operator Instructions] We have our next question from the line of Rajesh Raina from ITI Limited.
Sir, my question is on the EBITDA margin on EBITDA per ton across the geographies. If I look at it, U.S. is the largest contributor to our top line from soda ash side. There our margins are now back to, let's say, slightly under $50 per tonne. And the margin upside which we had in this quarter was mainly from U.K., where our margins are almost in excess of $150 per tonne. Same in the case with Africa wherein on the margin side as high as more than $225 per tonne. So my question was what is normalized level of margin that we can see. And secondly, in U.S., although we have seen the tightest or the realization went up from $200 to $270, our margins are actually in a similar range, let's say $45 to $50 per ton. So how exactly -- what are the margin determinates across U.S. and India U.K., I understood there are some hedging contracts which would have benefited us. And going forward, it may not be there, like I think there is a one-off factor. So similarly, U.S. and Africa, what are the margin returns and what kind of outlook do we per ton margins.
So let me just say as far as the U.S. and India are concerned, the quarter in which we take maintenance shutdown also increases fixed cost because we're spending on the maintenance costs. So I think there is an element of, say, $3 million, $4 million expenditure, which is ahead of the normalized number. Then the second element is that as far as U.S. is concerned we did highlight that the blended number usually is going to back up in Q3 on the back of the quarterly reset and export pricing and the both domestic and export would reset even higher for the quarter 4. So you will continue to see the margins move. As far as India is concerned, the prices are more or less stable as well as the costs are more or less stable. So, say for the additional expenditures will happen in Q2, that would sort give you the margin uptick as far as.Q3 is concerned. That is all I wanted to...
Sir, in U.K. as well as in Africa, I mean, these are extraordinary margins, like $160 or $200 plus. So what is like a normalized level of the margin because certainly when we calculate in a more price level on the realizations have gone up very, very sharply in Africa, comes to around $440-plus, same is the case with U.K. Of course, U.K. is understandable because there are some energy costs which is across all the products, but in Africa, what is the sustainable price level and why are these prices almost doubled over a period of a year? Sir, my question was about Africa and intake rising or the realizations. In U.K., I was saying is understandable because of energy costs putting through. But in Africa, what's the reason? I think prices as well as margins are at almost supernormal levels, say, EBITDA of around $235 per tonne. So what are the factor here and what is the sustainability?
So, Kenya more or less it is a function of market prices are hurting us because it is a low cost unit it does end up delivering high EBITDA, the prices go up so that is really the outcome. And as far as U.K. is concerned, I have already highlighted the unwinding of hedges and one-time income and also certain increased numbers in terms of product portfolio issues.
We have our next question from the line of Ranjit from IIFL Securities.
In the opening remarks you have mentioned that we are likely to expand the capacities by putting of 2-phase 25,000 each capacity. Can you provide a rough for CapEx outlay for this particular thing? And whether this would be sufficient to turn this particular segment back in green?
So this was the more comment about silica plant. Silica, we have 10,000 ton silica plant and we have very good traction from customers in terms of especially in other entire customers for addition in green where it is partly added to [indiscernible] and we are putting up 50,000 tonnes in 2 steams of 25,000 ton each. And broadly this CapEx will be funded through internal accruals and our estimated number was about INR400 odd crores. It will take about 30 months to redo and you saw the execution plan and it has a good return profile including return. As far as [indiscernible] is concerned, we are still not operating at full utilization of the 5,000 ton plant which we have [indiscernible] and we should probably close it at the exit of this year of getting the plant started.
Okay. That is helpful. And the second thing, the production figures are kind of missing in the presentation. So just wanted to check if you can provide that for stand-alone and the other operations, soda ash production volumes.
Generally production and sales both are marching all the quarter. So there's no real meaning in actual numbers. The sales numbers are working [indiscernible] they track many quarters, both are almost to be done and they track pretty closely because we don't hold much inventory in our books. [indiscernible]
Okay. So going forward, we won't be sharing the production volumes.
[indiscernible]
Sure, sir. And lastly, the onetime impact of the land sale and the hedges cost sir, just awaiting the details on that front.
Come back to you.
We have our next question from the line of S Ramesh from Nirmal Bang.
So if you look at your CapEx expenditure, what is the amount you expect for the second half? And what is the CapEx plan for the next 2 years, FY'24 and '25?
Ramesh, I have given those numbers in my opening remarks, I think INR220 crores for the spend in India and INR304 crores for Q2. I will come back to you to the Q1 number which we last time we'll combine. So we spent INR304 crores in Q2 of the current year in looking console in CapEx.
And I'm asking about the future CapEx plan. So if you can confirm the CapEx number for the second half of this year and the FY '24 and '25, we'll be able to tie in the overall CapEx for the next 2...
Slide number 21, Ramesh talks about the future spend of the CapEx. So INR1,050 crores is amount we spent between second half of H1 '24. So next 1 year’s time, 1 INR1,000 crores spent approximately.
Okay. And the full impact of that will come from FY '25?
Yes. So [indiscernible] starting from this year second half and next year's first half. So the benefit of volumes will come to us next year.
In terms of your working capital and the inventory days and reservable days, do you see that declining given the softness in prices and is it going to release some working capital? And how do you see your debt profile moving in terms of the gross and net debt in the next 2 years.
That is why I talked about next 2 years probably, but broadly the working capital has been steady over the last couple of quarters. And as we generate more and more cash, idea is to pay down debt. And so therefore we will use all the cash to deleverage.
We have our next question from the line of Abhijit Akella from Kotak Securities.
Just a couple of updates on the CapEx programs that have been underway. One is on the Phase 1 CapEx at Mithapur. When we announced it, there was a significant component towards energy saving investments, particularly steam turbines, et cetera. So just wanted to check if that part of the CapEx has already been commissioned. And if so, has it already started to contribute to energy savings at the site.
The turbine should get commissioned by somewhere in the month of Jan, that is the commissioning date. It is now going through funnel free test procedures, and it should get commissioned towards middle of Jan.
And would we expect a meaningful decline in power and fuel cost, sir, after that's up on stream?
In fact, what it does through is that we will turn down some of the inefficient turbines and inefficient. But more importantly, it allows us to produce more immediately more vacuum salt because that will push more of salt volume in our factory.
Okay. And the other one I just had was on the U.K. Of all the projects that have been going on there, there have been 3 or 4 of them one after the other, including combined heat and power plant and waste to energy and then the salt and bicarb transition, et cetera. So what's the status on all of these? Are all of those done? Or are we still waiting for a few of these 2.
See, the combined heat and power in the salt plant is commissioned fully. The carbon capture has been commissioned fully. The pharmaceutical grade salt project has started. The civil work has started and I think that should get commissioned in about 18 to 24 months. These are the announced ones, in addition to the warehouse, which is a warehouse stocking facility which is also under. So these are the big projects which are there, but the biggest one, the next big one is in the pharmaceutical grade salt, which should get commissioned in the next 24 months. But the rest of them are being commissioned.
Okay. The rental income that we are earning from leasing out the land, I believe, for the energy project, that has already started to come in.
That I think some income has already come and the land thing which was stated by me in the opening remark was more to do with the warehouse, which warehouse provider has bought the land from us, and then we will be centralizing all our warehouse in U.K. in one location.
We have a next question from the line of Resham Jain from DSP Investment Managers.
So I had just one question. In the annual report you mentioned about co-creating high-purity silica for battery applications. So the CapEx which you highlighted a while back, is that also related to that? Or -- because actually I couldn't hear, I can actually hear a lot of other participants, but management...
The Silica -- currently induced on rubber and tire, but the same silica grade goes also for battery. So we're already selling them. And this unit will be able to service that market also.
Okay. So how much expectation is there from that particular segment in terms of application? When you look at overall silica, the incremental capacity which you are putting up.
We will be able to sell out full 50,000. We got enough market traction to say that the increases when it comes [indiscernible] customers are lined up for this already.
We have our next question from the land of [ Saket Kapoor from Kapoor Company ].
Yes, Namaskar sir, and thank you for this opportunity. Firstly, in terms of this freight and forwarding charges, that the significant reduction in the container space and ocean freight charges, what should be -- what should that translate into going ahead, sir. There have been significant change. Does it materially affect us going ahead?
The effect of that is mostly in terms of the market price in some of the markets, they may deploy $10,00 to $20,000 because these markets do get serviced by them. In terms of container freight movement, the maximum use of containers which is about and annal volume about 300,000 tonnes, which is about 10% of our total sales volume. So delivering by local of this in U.K as well as in India where it goes by rail and road in U.S., again, it is mostly by rail. And then they have got shipping lines to take, they don’t move in containers.
So this line item of INR528 crores, which has gone up quarter-on-quarter will remain in this vicinity only, the small point I was trying to make -- on the same...
Except for staging with Magadi, which is our Kenyan unit and that accounts for about 10% of our volume. So it is going be at the...
Sir, about the change in prices, in dollar terms have we seen any correction in soda ash prices internationally? And I missed what Zarir sir had mentioned about any price division that we have taken post the month of July?
No, we have not taken any further price changes at the month of July and as far as the prices are stable. And in some markets the freight has fallen, the landed prices sort of reduced to that extent, but being ex factoring realization has remained constant.
Very small points which you have [indiscernible] if you could give the 20 seconds to me again.
Yes, please go ahead.
Yes, sir. Sir, as you have summed up that going ahead, U.S. contribution would start improving. And for Kenya and U.K., the contribution will flatten out for the coming 2 quarters. This understanding is correct, sir?
Yes. Correct.
And how will the Indian performance being pushed our plant shutdown? How is India going to contribute going ahead to quarter 3 onwards now?
They cannot go to normal run rate that's about it, and they won’t have that higher maintenance costs that they had this quarter.
Okay. And higher prices will reflect for Indian operations also? Higher realization.
The Indian price are more flat. After July they've not moved up. So they want to be flat.
I now hand the conference over to the management team for closing comments. Over to you, sir.
Thank you. And I just want to close by saying that I think the overall if you look at the market context for all our products to market remains balanced or tight and we will expect this condition to continue. We do believe that in certain pockets, especially in Europe and U.K. we need to stay extremely close to our customers given the challenging market conditions there. But as of now, we are not seeing any negative buyers from any quarters. In fact, we have seen continued uptake and continued interest to conclude their events for next year. As far as the -- our strategy is concerned, we remain focused on executing the expansion plan which was announced in India and also further capacity expansions all across all operations, which are competitive, which is India, the U.S. and Kenya. But for this the work is being done and we'll announce and come back to you shortly. Thank you.
Ladies and gentlemen, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.