We want to reach $500 million by 2016
DeLyle Bloomquist, head, Global Chemicals Business, Tata Chemicals, talks to Raghunath Kale about the market, the company's focus on corporate sustainability, its vision, and its plans for the future
What is the vision of your company?
Our vision is to be one of the premier chemical companies in the world, not just one of the biggest, but also one of the best. We plan to achieve this vision through five mechanisms. The first is to leverage science to deliver new offerings which can help society. An example would be the Swach water purifier which addresses the potable water shortage in India. We could export that technology to other parts of the world where clean water is an issue.
The second mechanism involves nurturing innovation within the company with diversity and teamwork among the employees. Tata Chemicals (TCL) is no longer an India-centric company as we have operations on four continents. The third is enhancing value to our customers. The fourth is delivering superior financial returns to the business and to the shareholders. The fifth is leading corporate sustainability.
What is the strategy to achieve this vision?
In order to serve society through science, we have to first determine the needs of society, not just the needs of today, but the needs 10-20 years from now. What is unique about TCL is that it has operations in emerging economies like Kenya, a slightly more advanced economy like India, and two super advanced economies, in the UK and the US. This gives us a line of sight on the future global needs given this broad geographic and cultural exposure.
Looking at society in general and studying the mega trends for the next 20 years, we try to forecast what the needs will be, and then develop a plan to address those needs. One such mega trend is resource scarcity as a result of limited resources and growing populations. Developing economies require more resources to develop their societies and enable people to empower themselves. For example, there is an acute need for water in many parts of the world. Also, arable land is becoming scarce and resources like copper and iron ore are also becoming scarce. The company is working towards addressing such issues.
Another mega trend is that economic centres are shifting away from the developed world to the developing world, which results in an increase in urbanisation. As the middle class in the developing economies grow, they will have demands and needs similar to those in the developed world. Demographics is another big mega trend. The world is experiencing an increase in the average age of populations. This will lead to greater demands for many governmental services, healthcare and other societal resources.
We at TCL observe these mega trends and try to address these through our core competencies. We believe that the intersections between chemicals and physics, and between chemicals and biotechnology, are packed with opportunities. For example, when TCL combined physics with nanotechnology and chemistry, we came up with the Swach water purifier. TCL is focusing on more such projects under the initiative, FEW: F stands for food and fuel; E stands for energy and environment, leading to corporate sustainability; and W stands for water and wellness, including the micronutrients business at the Innovation Centre.
Are you working with academia?
Yes, we are partnering with some of the world’s leading research universities to identify viable solutions to many of the mega trends that I mentioned. For example, we have invested in a novel solar technology currently being developed by MIT. Until recently, there were centres of R&D in companies because it was difficult to collaborate. The internet now enables us to search for solutions by reaching across the globe very easily, allowing for the decentralisation of R&D. It allows us to go out and find the expertise without having to develop it internally.
What are your plans with regard to climate change?
We are a leader in corporate sustainability, but we need to balance our attention to the issue of climate change with our aim of ensuring superior financial results. To achieve these dual and sometimes conflicting objectives, one of our efforts is to tackle the issue of energy consumption because if we lower our carbon footprint by reducing our greenhouse gas production, we could also improve our financial results by reducing our energy costs. We are also looking for ways to use our waste effluents to make saleable products. To give you an example, at Mithapur in Gujarat, India, the solid wastes that come off the soda ash plant are used to make cement which is then sold. Elsewhere in the world, many of our competitors just discard it, creating landfill issues.
What is the biggest challenge that you are facing?
One problem we face is that of resource scarcity. Some of the inputs required to make our products are getting scarce. Costs have therefore increased dramatically. We need to find a way to reduce our need or find alternatives for these inputs. Another challenge is corporate sustainability. As a company we are clear about our objectives, but within the US, more than in other countries, we face regulatory uncertainty. We don’t know what the rules are going to be five years from now. A lot of companies are wondering why they should invest in a solution to a particular problem when the rules may change and risk any current investment becoming worthless. Another challenge is recruiting technical talent. In most of our regions, we have a tough time finding qualified engineers to help us move our business in the right direction. If we have to evolve our business in terms of achieving our vision, becoming a leader in corporate sustainability, enhancing value to customers, in terms of leveraging science to provide new offerings, we need technical skills.
The last issue is trying to meet growth demands. We are a growing business of soda ash, fertilisers, salt, and sodium bicarbonate. We are straining the capabilities of our operations to the break point, so we have to find ways to expand our capabilities while running our operations efficiently.
Is TCL looking for acquisitions and investments in other chemical spaces?
We are not pro-actively looking for acquisitions. We are in the consolidation phase right now. We made an acquisition in 2011 with British Salt which was a strategic need for our soda ash business as it made our soda ash business basic in a key input. We also made a 30 percent investment in a specialty potash producer – Emerald Peak Minerals. So we have some recent acquisitions and investments, but right now we are focused on making our operations more efficient, increasing our production capacities and investing in our people. If an attractive acquisition opportunity comes, though, we will consider it, but it is not our current priority.
What was the thinking behind the acquisition of EPM?
The acquisition was driven by our desire to get basic in one of the principal fertilisers for the world, and, particularly for India, to help address the mega trend regarding resource scarcity, and in this case, food. In India, the population is growing and getting wealthier. This is leading to a change in lifestyle, including a greater demand for many foodstuffs. This demand increase will require greater agricultural productivity, since the amount of arable land is fixed. To ensure supply, fertilisers are a means to achieve this increase in agricultural productivity.
Also, TCL seeks to be “basic” or integrated to its key inputs or raw materials for its products in order to secure its supply and reduce its cost variability. In this way, TCL is basic in nitrogen with urea operations and in phosphates with its investment in the Moroccan joint venture. But it is not basic in potash.
We also believe that EPM is a great investment as it will provide significant financial returns. It is low cost — the process they use to make potash includes solar evaporation, so energy cost per unit will be significantly lower. It is based in Utah, a few miles away from our Green River operations, enabling the sharing of technical talent between the two operations. Also, it is surrounded by “in-place” infrastructure; therefore, we won’t need to invest in schools, hospitals, roads, railroads, electricity generation, and so forth. Since the capital expenditure and the operating expenditure are both low, the project will most likely generate good financial returns.
How do you ensure being responsible to society while playing in a suppliers’ market?
Our mission is to serve the society through science. Salt, soda ash and sodium bicarbonate — these are the things that the society needs. As a company, we have a choice about what to do with the money we earn from our customers. We want to use some of our profits to grow the business, to increase its sustainability, and to develop and produce new products that the society may need. We also want to return some of our profits to our shareholders, which include charitable trusts, which will then address some of the needs of the communities.
What are your plans for the future?
Regarding corporate sustainability, we have a goal to reduce our greenhouse gas intensity by 2 per cent per year for all our operations, even though we already have very low greenhouse gas intensity relative to our industry. We want to profitably grow the Global Chemical Business. We want to increase our earnings before interest and taxes and depreciation to $500 million by 2016.
We also want to increase our management’s speed of execution. The pace of change in the world is getting faster, so we are training our employees to make better decisions quicker. The need to develop our future leaders is also critical. We are identifying and developing our high-potential people to take on key positions.
We must become a more global business. When TCL acquired Brunner Mond and General Chemicals, it did it in fairly quick succession steps. The businesses were initially allowed to run as regional balkanised businesses. They did their thing and did not worry so much about the rest of the globe. We want to push the regional businesses to become more global because there is value to be realised by being a true global business.