Grasim net down 27%

Weak show in cement business drags down consolidated performance, while VSF and chemicals too see some pressure

Grasim Industries, an Aditya Birla Group company, has reported a 27 per cent fall in consolidated net profit to Rs 450 crore, mainly due to sluggishness in the business of its 60.3 per cent subsidiary, UltraTech Cement.

Grasim gets around 70 per cent of consolidated revenue from the cement business. It reported revenue of Rs 6,849 crore in the September quarter, compared to Rs 6,615 crore in the year-ago period, a rise of 3.5 per cent. In the standalone business, the company managed to increase the volumes of viscose staple fibre (VSF), which saw production rise by 15 per cent year-on-year. The company faces huge competition from Chinese imports. Grasim said demand had emerged in the market for the fibre but the price remains under pressure due to surplus availability. VSF accounts for 85 per cent of standalone revenue.

Due to completion of expansion of its VSF capacity, the company was able to raise production this quarter, which helped increase their volumes. As a result, sales volumes in the segment were up nine per cent over a year, to 93,025 tonnes; revenue rose four per cent year-on-year, to Rs 1,211 crore. The difference was due to a fall in realisations. However, depreciation of the rupee helped arrest the decline in realisation to four per cent as against 16 per cent internationally (in dollar terms).

However, the rupee depreciation did have an impact on pulp prices, as this is largely imported. Some cushion came from a decline in caustic, sulphur and energy costs.

Grasim said demand for VSF in the long term is expected to increase, which will help the company.

In the short term, demand for VSF depends on the recovery of global economies. The trend in supply of the fibre by China will continue to have a bearing on realisations.

Grasim's standalone revenue grew 4.2 per cent year-on-year to Rs 1,421 crore in the quarter. The chemicals business reported an eight per cent increase in sales at Rs 254 crore. Standalone PBIDT (profit before interest, depreciation and tax) fell 3.4 per cent year-on-year to Rs 483 crore. PBIDT in the VSF business fell 4.4 per cent to Rs 240 crore, while that in the chemicals business was down 7.5 per cent to Rs 62 crore, compared to the year-ago period. Total standalone PBIDT was Rs 483 crore versus Rs 500 crore in last year's quarter. The company said unexpected floods in Gujarat impacted the power plant trial run, as well as commissioning of the VSF and Epoxy projects. These are expected to be commissioned in the March 2014 quarter.

UltraTech, the country’s biggest cement maker, had on October 19 reported a 52 per cent fall in net profit to Rs 264 crore.

Due to lower selling price and weaker demand. Net sales in the September quarter fell to Rs 4,502 crore from Rs 4,699 crore in the year-ago period. The company sold 9.1 million tonnes of cement and clinker in the quarter.