Tata Chem sees rising costs hurting margins

By Kaustubh Kulkarni

MUMBAI (Reuters) - Tata Chemicals Ltd expects rising input costs to exert pressure on margins, while it sees early signs of demand contraction for soda ash, its chief financial officer said.

Tata Chemicals, India's top salt and soda ash maker, raised soda ash prices by average $15-$20 a tonne globally during the December quarter to counter higher costs, P.K. Ghose, told reporters on Friday.

The chemicals maker, part of India's salt-to-software conglomerate Tata group, earlier said its consolidated net profit jumped 35.8 percent to 2.24 billion rupees in December quarter.

Analysts estimated net profit at 1.53 billion rupees, according to Thomson Reuters I/B/E/S.

Sales rose 32 percent to 8.78 billion rupees, it said.

"China is the key player in production and consumption of soda ash and we have seen moderation of demand there," R. Mukundan, managing director, said.

"...while demand in UK is robust, it is just about alright in the U.S. and parts of Africa."

Soda ash constitutes about 45 percent of Tata Chemicals' total revenue and is sold at various prices globally between 18,000-23,000 rupees per tonne.

Tata Chemicals also sees prices of diammonium phosphate (DAP) and muriate of potash (MoP) to soften in near future, Mukundan said.

DAP and MoP are key soil nutrients that are mostly imported in India and higher prices of these fertilisers have led to demand contraction in the current financial year.

While prices of DAP have already fallen to $600 per tonne from a high of $700 a tonne in August last year, Indian fertiliser companies are importing MoP at $530 per tonne during the January-March this year.

"I expect prices of DAP and MoP to soften further. The potash contracts would be renegotiated in April," Mukundan said, referring to slowing demand.

Valued at $1.83 billion, shares in Tata Chemicals rose 1.55 percent to 357 rupees on Friday when the Mumbai market <.BSESN> fell 0.46 percent.

(Editing by Subhadip Sircar)