Tuticorin Alkali Chemicals and Fertilizers Limited’s Capex update: Plans to Double Capacity

Tuticorin Alkali Chemicals and Fertilizers Limited (TFL) operates in the realm of commodity chemicals, specializing in the production of various Soda Ash grades and co-producing Ammonium Chloride Fertilizer. Nestled in Tuticorin, Tamil Nadu, the facility is adjacent to the SPIC Fertilizer Plant, where it plays a pivotal role in the chemical manufacturing landscape.

Established in 1981, TFL holds the distinction of being the sole producer of Soda Ash in South India. It embraces an eco-friendly dual process, enabling the co-production of Ammonium Chloride Fertiliser. Leveraging its strategic location and unique capabilities, the company is poised to meet the rising market demand for environmentally responsible products.

Trading under the scrip name TUTIALKA on the Bombay Stock Exchange (BSE), TFL’s stock has demonstrated a remarkable upsurge of 127.94% since its 52-week low. This financial feat was assessed based on closing prices as of November 2, 2023.

Capex Update

In line with its growth strategy, TFL is embarking on a capacity expansion journey. The financing for this expansion primarily relies on borrowing and internal accruals. The expansion initiative targets both Soda Ash and Ammonium Chloride and is scheduled for completion in September. The existing capacity for Soda Ash stands at 1,00,000 metric tonnes per annum (MTPA), while Ammonium Chloride boasts an existing capacity of 85,000 MTPA. Impressively, these capacities are currently operating at 75% utilization.

The proposed capacity addition for both plants is ambitious, aiming to add 1,25,000 MTPA, effectively exceeding the current capacity by over 100%. This expansion is underpinned by the dual-process nature of Soda Ash and Ammonium Chloride production, aligning with the surging market demand for low carbon footprint products. TFL’s strategic locational advantage in the Southern states, coupled with its proximity to markets and ready access to raw materials, plays a pivotal role in propelling this expansion. The company’s ability to capture its carbon dioxide (CO2) emissions further enhances its competitive edge.

Financials

The financial performance in Q2FY2024 compared to Q2FY2023 paints an interesting picture. Revenues experienced a 25% decline, falling from Rs 119.48 crore to Rs 89.58 crore. This dip can be attributed to the overall decrease in the prices of key components when compared to the previous year’s inflated prices. Despite the decline in sales, the Profit Before Tax stood at Rs 19.07 crore, marking a decrease of 7.6% compared to Rs 20.64 crore in Q2FY2023. The saving grace in this scenario was the improved EBITDA margins, which registered a 370 basis points (bps) increase, climbing to 22.78% from 19.09% in Q2FY2023. Debt reduction played a pivotal role in this positive development.

Zooming out to a half-yearly view, H1FY2024 compared to H1FY2023, TFL exhibited an increased commitment to its plant and property investment, with a disclosed investment of Rs 8.63 crore, in stark contrast to the Rs 1.96 crore for the same period in September 2022. The net cashflows for H1FY2024 amounted to Rs 5.02 crore, marking a substantial fourfold increase compared to the Rs 1.25 crore recorded in H1FY2023.

In essence, TFL’s journey from being the only Soda Ash producer in South India to a key player in the chemical industry exemplifies a commitment to sustainability and growth. With strategic expansions and financial prudence, the company is poised to meet the evolving market demands and continue its upward trajectory.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions