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Grasim reports improved performance for Q2
25
Oct '11
Grasim Industries Limited, an Aditya Birla Group Company, has reported good results for the 2nd quarter ended 30th September 2011 supported by improved performance of both Cement and VSF businesses. Net Revenue increased by 28 per cent at Rs.5,774 crore (Rs.4,503 crore). PBIDT grew by 28 per cent from Rs.884 crore to Rs.1,135 crore. Net profit rose by 29 per cent at Rs.418 crore (Rs.323 crore).

Viscose Staple Fibre (VSF)
Global fibre markets are stabilising after the sharp volatility witnessed in Q1. The demand for VSF picked up due to improved consumption and restoration of the depleted inventory in the value chain. Globally, VSF prices staged a marginal recovery with improvement in sentiments.

The business recorded improved performance despite higher input costs. Production grew by 20 per cent with full capacity utilisation at Nagda plant during the quarter which was shut for 25 days in the corresponding quarter. Sales volumes were up by 17 per cent supported by the market demand.

The performance of the Pulp units was impacted by higher energy cost, scheduled annual maintenance and nominal forex losses.

Chemical Business
The Chemical business has reported an excellent performance. Production grew by 21 per cent on the back of full capacity utilisation. Sales volume increased by 30 per cent. Caustic prices continued to move upward with higher international prices and lower imports. As a result ECU realization increased by 24 per cent.

Standalone Financial Performance
The standalone results for the quarter displayed all round growth with Net Revenue and Net Profit higher by 30 per cent and 23 per cent respectively.

VSF & Chemical Capex
The progress on 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 is on track. Civil work is in full swing. Both these projects are slated for commissioning in FY13. A total capex of Rs.3,400 crore has been earmarked for the VSF and Chemical business. This comprises of Rs.2,850 crore for expansion projects and Rs.550 crore towards modernisation.

Outlook
The environment in both the businesses continues to be challenging. In VSF, the demand is expected to be volatile due to macro economic conditions and the uncertainties in the Euro Zone. In Cement, the surplus scenario should subside gradually over a period of 2-3 years with expected growth in demand. At the same time, if the present rising input costs scenario continues, it will result in a squeeze of margins.

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.

Grasim Industries Limited

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