Grasim Industries Limited, an Aditya Birla Group Company, announced its results for the 1st quarter ended 30th June 2012.
The Company’s revenue increased by 16% from Rs5,907 crore to Rs 6,832 crore despite the challenging market conditions. PBIDT was marginally up at Rs1,767 crore (Rs1,748 crore) led by the enhanced performance of the Cement business. However, due to higher taxes and increase in minority interest on higher Cement profits, the net profit for the quarter was Rs718 crore against Rs752 crore in corresponding quarter.
Viscose Staple Fibre (VSF)
The weak global economic environment continues to impact the textile industry. Rupee depreciation led to higher input costs.
VSF sales volumes rose significantly by 40% at 77,013 tons, driven by the uninterrupted operations at the Company’s Nagda plant during the quarter. The plant was closed in the corresponding quarter for 27 days due to the water shortage. Average realisations were lower by 16% on YoY basis despite the rupee depreciation, as prices were at their peak in the corresponding quarter of last year. The decline in realisations coupled with the increase in caustic soda and coal prices impacted profitability. The effect of higher caustic prices was however, reflected in the higher profitability of Chemical business.
The acquisition of assets of Terrace Bay, a pulp mill in Ontario, Canada in a JV with Thai Rayon, a Group company was completed this week and the production should restart by Oct. 2012. This will help in meeting the increasing pulp requirement after the mill is converted into a dissolving grade pulp mill.
Cement Subsidiary (UltraTech Cement)
UltraTech reported improved performance for the quarter. Cement sales volume for the quarter at 10.83 Mn. tons was higher by 5%. Net Revenue stood at ` 5,363 crore as compared to ` 4,589 crore, an increase of 17%. Net Profit at ` 764 crore was up by 14%.
The variable cost rose by 10% mainly on account of higher energy and raw material prices due to the increase in railway freight and diesel prices. Although imported coal prices softened by around 19%, the depreciation in rupee by 21% offset the benefit.
Chemical Business
The Chemical business also reported good performance. The plant operated at full capacity on the strength of captive consumption of Chlorine in value added products, though the industry capacity utilization was impacted due to lower Chlorine off take in markets. Caustic sales volumes increased by 28% to 69,466 tons consequent to the uninterrupted plant operations. Caustic prices remained firm in line with international prices.
VSF & Chemical Capex
The VSF (156,000 TPA) and Chemical (182,500 TPA) expansions are on track. The expansion in Harihar, Karnataka will go on stream in two phases in the 2nd quarter and the 4th quarter during the current year. Projects at Vilayat, Gujarat are slated for commissioning towards the end of the current financial year.
Cement Capex
The Chhattisgarh and Karnataka brownfield expansions are on track and are expected to be operational by Q1 FY13-14. Consequently, UltraTech’s cement capacity will be enhanced by 10.2 Mn. TPA to total 62 Mn. TPA.
Outlook
In VSF, stability in the Euro Zone and macro-economic policies will influence demand. The Cotton crop in the ensuing season will influence realisations in the short term. In Cement, despite the 8% projected growth in demand, the surplus scenario is likely to continue for 3 years.
Capacity expansions under implementation in both VSF and Cement will provide additional volumes, driving growth and will further consolidate the Company’s leadership.