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Grasim reports excellent performance for Q1FY 2010
28
Jul '09
Grasim, an Aditya Birla Group Company, announced its results for the quarter ended 30th June, 2009. Consolidated Revenue for the quarter rose by 15% at Rs.5,123 crores (Rs.4,448 crores). Net Profit was higher by 61% at Rs.1,080 crores (Rs.672 crores) which included an Extraordinary gain of Rs.336 crores (net of tax) arising from the sale of Sponge Iron business.

Grasim's stand-alone Revenue for the quarter stood at Rs.3,079 crores (Rs.2,618 crores). Despite higher interest cost and depreciation on new capacity created, Net Profit (after Extraordinary Gain) was higher by 69% at Rs.867 crores (Rs.514 crores). The benefit of these new capacities will accrue fully in the subsequent quarters, as normally new plants take about a year to fully stabilize.

Viscose Staple Fibre (VSF) Business
In VSF business, Production grew by 7% at 62,352 tons. The business witnessed a resurgence of demand and prices, emanating from refilling of dried up inventory in the value chain and marginal improvement in macro economic conditions due to the stimulus packages announced by various countries. This resulted in a 19% growth in volumes. Realisation was, however, lower by 4% over the corresponding quarter but better than the last quarter. With the onset of the monsoon, the production at Nagda, which was suspended from 22nd May, 2009, was resumed on 9th July, 2009.

The mixed signals in the end-consumer off-take at the retail level globally and the increase in the rate of excise duty from 4% to 8% in India, may lead to some contraction in current levels of volumes and lower realisation from H2FY10. Though margins may continue to improve in the short term due to increased realisation and lower input cost, the trend may reverse in the second half unless there is a clear improvement in the global scenario. The Company would continue its focus on cost reduction measures and enlargement of product mix to improve its profitability from this business.

Chemical Plant
The Chemical business' performance was subdued. The steep fall in prices of chlorine and Hydrochloric acid led to a 7% fall in ECU realisation. This, together with higher salt cost, led to a decline in Operating margins.

The demand for caustic is likely to be depressed due to the slowdown in growth from alumina segment in international markets. ECU realisation too is expected to remain under pressure, given the global market conditions.

Outlook
The Company will continue to have leadership position in VSF business. With substantial increase in capacities, improved cost optimization, higher productivity and strong fundamentals, the prospects for the Company in the long term remain positive, though there may be bumpy road in the immediate future.

Grasim

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