Fitch Ratings revises outlook on Tata Chemicals’ FX IDRs to 'stable' from 'positive'
Fitch Ratings has revised the outlook on the long-term foreign-currency issuer default rating (IDR) of Tata Chemicals to “stable” from “positive" while affirming the rating at 'BB+'.
The revision in the outlook is based on the view that the global soda ash industry will remain oversupplied for longer than previously anticipated.
Demand in Europe has been weaker than expected in the current financial year, leading Turkish soda ash exports to pivot to Asia, resulting in industry oversupply pressuring Tata Chemicals’ operating margins.
“We expect persistent oversupply to weaken Tata Chemicals’ profits and credit metrics in FY25, before a gradual recovery from FY26,” the global ratings agency said.
Fitch expects the oversupplied industry conditions to drive a 5% fall in volumes and a 20% fall in prices for Tata Chemicals’ soda ash business in FY25, squeezing its operating margins to 14% in FY25 (FY24 forecast: 18%).
However, margins will improve to 17% from FY26, supported by a gradual demand recovery, supply tightening, and lower energy cost, the ratings agency said.
Fitch has, however, affirmed given Tata Chemicals’ leading and geographically diversified market position, cost-competitive operations, and the sector's end-market diversification.
This mitigates risks to Tata Chemicals’ credit profile from its smaller EBITDA scale versus 'BBB-' rated chemical industry peers.
Fitch expects the excess supply in the soda ash industry to continue in FY25 as demand growth remains weak in the US and UK, and new
