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Higher input costs impair Grasim's VSF Q1FY15 margins
Aug '14
Viscose Staple Fibre (VSF) volume rose to 86,389 tons, up 11 percent at Grasim Ltd; a company of  Kumaramangalam Birla-led Aditya Birla Group in the first fiscal quarter ending June 30, 2014.
However higher input cost impaired the margins of the VSF division and realisations remained subdued due to overcapacity in China 
All the divisions of Grasim recorded healthy volume growth, leading to a 16 percent increase in sales from Rs. 6,938 crore in Q1FY15 against Rs. 8,044 crore in the corresponding quarter of last fiscal year. 
“Globally, the realisations from VSF remained subdued owing to overcapacity in China. Realisations for the company could be maintained, consequent to the depreciation of the rupee. But higher input cost impaired the margins in the business”, Grasim said.
PBIDT slipped to Rs. 1,488 crore in the quarter under review against Rs. 1,549 crore in Q1FY14 at Grasim. 
Interest and depreciation went up due to commissioning of the various projects, the full benefits of which will be available in a gradual manner. 
The tax charge was also higher due to lower exempt income and recent changes in the tax laws. As a result, net profit at Grasim too fell steeply to Rs 487 crore from Rs. 610 crore from a year earlier. 
Grasim said, line 1 and 2 entailing a total capacity 77,000 TPA have been commissioned at the green-field VSF project at Vilayat. It added that the work on the remaining two lines with a capacity of 44,000 TPA to manufacture specialty fibre is in full swing. 
The trial run for the 3rd line is expected to commence during this month and for the 4th line within two months thereafter. Post this expansion, the total VSF capacity of Grasim will be 498,000 TPA.
On its outlook for the VSF division, Grasim expects margins to remain under pressure in the near term due to the overcapacity in China. But following slowdown of new capacity additions in China should lead to an improvement in industry utilisation, which augurs well for the company, Grasim said. 
Grasim added that the focus on cost optimisation will continue unrelentingly.

Fibre2fashion News Desk – India

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