Tatachem: Major restructuring resulted in positive financial results

Major restructuring activities have started showing positive operating and financial results in recent times.

Tata Chemicals on Tuesday said major restructuring activities undertaken at its United Kingdom (UK) and Kenya operations have resulted in 'positive operating and financial results in recent times', allaying concerns raised by ousted Tata Sons Chairman Cyrus Mistry.

Mistry, who was replaced by the Board of Tata Sons on October 24, had written to the directors a day later that Tata Chemicals "still needs tough decisions about its UK and Kenya Operations".

Tata Chemicals said despite not being mandatory, its board had voluntarily formed a risk management committee in February 2015 and "risk associated with all the businesses, including the UK and Kenya operations were reviewed, evaluated and discussed in details at the risk committee meetings regularly".

"Major restructuring activities have been undertaken at the UK and Kenya operations and have started showing positive operating and financial results in these entities in recent times," the company said in a clarification sought by BSE.

It further said: "Additionally, the Board of Directors at their meetings while discussing the performance of each operating business entities also reviewed risks pertaining to those entities."

The company's Kenya operations had faced numerous challenges and in 2014 it was forced to mothball the soda ash plant in Magadi resulting in layoff of 200 employees due to heavy debt and high energy costs. In the first quarter of this fiscal, the company had stated that Magadi continued to focus on improving operational performance.

On the other hand, in August last year Mistry had expressed optimism that Tata Chemical's UK operations would turn profitable in 2015-16 after incurring losses for several quarters. In the first quarter of 2016-17, the company had an impact of depreciation of pound post the Brexit vote.

In its annual report for 2015-16, Tata Chemicals has said that the areas of significant risk for TCML (Tata Chemicals Magadi) surround the ability to recover trona quality, reduce siltation in Lake Magadi, a deteriorating road infrastructure, water scarcity and land and environmental pressures.

"Through concerted efforts including technical collaboration with third parties, greater engagement with local and national stakeholders and focused cost control measures are underway," it had said.

On the European operations, the company said that it faced key risks related to volatility of exchange rates and energy costs, and increasingly stringent environmental EU norms.

"Contractual arrangements to address volatility and engagement with relevant stakeholders are underway to manage the risks," it had said.

Tata Chemicals said that its European firm TCEL expects to continue to strengthen its financial performance further in FY 2016-17 as it drives on from the reorganisation in 2014, with profit forecast to grow in all major products - soda ash, sodium bicarbonate and salt - during the coming year.