Grasim Industries Ltd has posted results for the third quarter ended 31st December,2011.
The company has posted net profit of Rs6.69bn as compoared to Rs5.02bn for the corresponding quarter.
Viscose Staple Fibre (VSF)
The business performance was subdued due to the challenging environment. After witnessing an upturn in September, sentiments were affected during the quarter as cautious approach was adopted by the textile value chain given the Euro zone uncertainties. Consequently, demand and prices remained under pressure, impacting volumes by 8%. Increase in input costs due to rupee depreciation, has impacted operating margins.
Cement Subsidiary (UltraTech Cement)
UltraTech reported Revenue of Rs4,865 Crore and PAT of Rs598 Crore. The sector demand growth improved to around 10% during the quarter on account of a lower base effect in the corresponding quarter. The sector capacity utilization during the quarter improved to 73% as compared to 68% in the preceding quarter. Although post monsoon, the pricing scenario indicated some improvement, the pricing environment is expected to remain challenging.
Variable cost rose by 16%, mainly on account of increase in energy cost. This is attributable to 30% rise in the price of domestic coal during Q4 FY10 -11 and continuous increase in price of imported coal as also the rupee devaluation by ~ 14%.
Chemical Business
The Chemical business continued to deliver good performance. Caustic production at 68,741 tons grew by 3% supported by full capacity utilization. Sales volumes were higher by 6%. Caustic prices remained firm in line with international trends.
VSF & Chemical Capex
The VSF (120,000 TPA) and Chemical (182,500 TPA) greenfield projects at Vilayat, Gujarat and brownfield expansion (36,500 TPA) of VSF at Harihar, Karnataka are in line with the schedule. The construction activity is in full swing. These projects are slated for commissioning in FY13. A total capex of Rs3,400 crore has been earmarked for the VSF and Chemical business for expansion projects and modernization.
Further, plans are afoot to set up a 180K TPA greenfield VSF plant in Turkey in joint venture with Group companies. Grasim has invested 1/3rd of the initial capital required for acquiring land and meeting initial expenses.
Cement Capex
The Chhattisgarh and Karnataka brownfield expansion projects aggregating 9.2 million TPA, are on track. Both these projects are expected to be operational by Q1FY14.
A total capex of ` 11,000 crore is under implementation in the Cement business towards the expansion projects, strengthening of logistic infrastructure, setting up captive thermal power plants, ready-mix concrete plants and modernization projects.
Outlook
In VSF, the demand may remain volatile in the present macro economic conditions. In Cement, the surplus scenario should subside gradually over a period of 2-3 years with an expected growth in demand. The changed pricing mechanism by Coal India Limited w.e.f. Jan’ 12 will lead to increase in energy costs. The rising energy cost is a challenge in both the businesses in the present context.
Capacity expansions under implementation will enable the Company to grow at a rapid pace and consolidate its leadership even further.