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Grasim expects VSF industry to remain under pressure
Feb '13
Given the challenging global and domestic market conditions, the Company has performed satisfactorily, maintaining its PBIDT for the quarter.

The results for the current quarter are not strictly comparable as:
- Financial results of UltraTech Cement, the cement subsidiary, for Q3 FY 2011-12 included subsidies amounting to Rs.86 crore for the earlier period, and
- Grasim’s proportionate share amounting to Rs.25 crore in the loss incurred by the recently acquired pulp JV, AV Terrace Bay, Canada is included in the current quarter.
- Comparable Net Profit for the quarter adjusted for a. and b. above is Rs.574 crore against Rs.634 crore in corresponding quarter.
- During nine months, the Company’s comparable Net Profit have gone up by 7 per cent from Rs.1,801 crore in last year to Rs.1,920 crore in the current year.

Viscose Staple Fibre (VSF)

Market conditions for the textile industry, the key consumer of VSF, continued to be challenging. This was compounded by the surplus VSF capacity in China and depressed cotton prices. Despite the difficult environment, sales volumes at 78,579 tonnes have been sustained. However, volumes during the nine months have grown by 14 per cent. Global VSF prices declined sharply by 14 per cent as compared to Q3 last year. The rupee depreciation has reduced its impact in the domestic market to some extent. Higher Caustic prices coupled with lower realization, have led to pressure on margins. The Chemical business, however, benefited from the increase in Caustic prices.

While in Nagda, the water shortage issue has been resolved with the construction of reservoir, due to abnormally deficient rains in Karnataka, production at Harihar is likely to be impacted intermittently from February onwards till onset of monsoons.

The performance of pulp JVs was adversely affected due to the decline in realisations and volumes.  AV Terrace Bay, Canada, the pulp JV acquired in Q2 FY 2012-13 with Grasim holding a 40 per cent stake, commenced operations in October, 2012, as planned. Its losses are expected to be reduced and converted into profit in a phased manner thru’ mill upgradation and cost optimization.

Cement Subsidiary (UltraTech Cement)

UltraTech has reported satisfactory performance for the quarter. Cement sales volumes were maintained at 10.4 Mn. tonnes as demand remained subdued. Net Revenue stood at Rs.5,164 crore as compared to Rs.4,800 crore, up by 8 per cent. Net Profit for the quarter was at Rs.608 crore as against Rs.598 crore, inclusive of subsidies for the earlier period as explained.

The increase in railway freight and hike in diesel prices led to higher costs of raw materials and logistics. The softening in prices of imported coal and fuel mix optimisation helped in reducing energy costs, though rupee depreciation partially offset the benefit.

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