VSF sales volumes go up significantly by 40% at Grasim

The company’s revenue increased by 16 per cent from Rs. 5,907 crore to Rs. 6,832 crore despite the challenging market conditions. PBIDT was marginally up at Rs. 1,767 crore (Rs. 1,748 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 Rs. 718 crore against Rs. 752 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 per cent at 77,013 tonnes, 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 per cent on Y-o-Y 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 the chemicals 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 October 2012. This will help in meeting the increasing pulp requirement after the mill is converted into a dissolving grade pulp mill.   

The chemicals 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 utilisation was impacted due to lower chlorine off take in markets. Caustic sales volumes increased by 28 per cent to 69,466 tonnes consequent to the uninterrupted plant operations. Caustic prices remained firm in line with international prices.

The VSF (156,000 TPA) and chemicals (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.

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 per cent projected growth in demand, the surplus scenario is likely to continue for three years.

Capacity expansions under implementation in both VSF and cement will provide additional volumes, driving growth and will further consolidate the company’s leadership.

Grasim Industries Limited