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Grasim reports better performance for Q1FY12
01
Aug '11
Grasim Industries Limited, an Aditya Birla Group Company, announced results for the 1st quarter ended 30th June 2011. The Company has recorded higher revenue and net profit led by better performance of both its businesses, VSF and Cement. Net Revenue at Rs.5,937 crore (Rs.5,119 crore) increased by 16 per cent. PBIDT grew by 19 per cent from Rs.1,464 crore to Rs.1,748 crore. Net profit was higher by 31 per cent at Rs.752 crore (Rs.575 crore).

Viscose Staple Fibre (VSF)
The textile industry witnessed a significant softening in prices of all fibres from their peak level as cotton prices declined sharply. The high inventory level in the value chain has resulted in lower demand.

Despite the challenging environment, revenue grew by 5 per cent aided by higher realisations. Higher margins and better performance from the Pulp JVs resulted in an enhanced operating profit. During the quarter, production was impacted due to the suspension of operations at Nagda because of water shortage. The plant resumed operations from 30th June, 2011 with the arrival of monsoons. The total shutdown has lasted for 27 days as against 55 days in the last year including 31 days in the corresponding quarter.

Chemical Business
Production grew by 5 per cent though operations were affected due to the water shortage at Nagda. Caustic prices moved upwards, driven by positive sentiments in the domestic and international markets.

VSF and Chemical Capex
The VSF expansion projects at Vilayat, Gujarat (120,000 TPA) and Harihar, Karnataka (36,500 TPA) are on track. Orders have already been placed for long delivery critical equipment. Civil work has commenced at both the locations and will be in full swing post monsoon. Both these projects are slated for commissioning in FY13. A total capex of Rs.2,450 crore has been earmarked for the VSF business. This comprises of Rs.2,100 crore for expansion projects and Rs.350 crore towards modernisation. The 182,500 TPA caustic soda project at Vilayat, Gujarat is progressing in line with the schedule.

Outlook
The environment in both the businesses has become very challenging. In VSF, the pressure is caused by correction in cotton prices and market conditions in China. With the onset of monsoons, cement prices have fallen amidst surplus scenario.

Grasim hopes that while the present scenario will improve gradually, the Company will be able to face the present challenges through its backward integration and cost leadership in VSF business and brand image, distribution network and operating efficiency in Cement business. Both VSF and cement will benefit from rising consumption as well as investment in India in the long term. Capacity expansions under implementation in these businesses will enable the Company to grow at a rapid pace and consolidate its leadership even further.

Grasim Industries Limited

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