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Impressive performance of VSF business – Grasim
May '10
Grasim Industries Limited, an Aditya Birla Group Company, has reported improved performance during the 4th quarter of the year ended 31st March, 2010, as well as the entire year. These results are given after considering the effect of the demerger of the Cement business of the Company to its subsidiary, Samruddhi Cement Ltd. (SCL), w.e.f. 1st October, 2009.

The results have been driven by improvement in both its Cement and VSF businesses. While the Cement business has performed well supported by higher output from the new capacities including its captive power plants, the VSF business has recovered from the extreme downturn of the last year leading to an impressive performance.

There is no change in the consolidated revenue and operating profit of the Company on account of the demerger of its cement business.

The Board of Directors of Grasim has recommended a dividend of Rs.30 per share, which is the same as per last year. Additionally, the Board of Directors of SCL, has proposed a dividend of Rs.1.75 per share for six months' working. Each Grasim shareholder will be receiving one equity share of Rs.5 in SCL for every one share held in Grasim on 28th May 2010, the record date fixed for this purpose, in terms of the demerger scheme.

Viscose Staple Fibre (VSF) Business
VSF business has reported an excellent performance on the back of higher volumes and realisation.

Production was up by 35% during the quarter, supported by additional volumes from the new capacity installed at Kharach towards the end of FY08. Sales volumes were up by 31%. While in the corresponding quarter, the business was impacted due to the global economic downturn, this quarter saw an improvement in operating margins, given better realisation and higher economies of scale.

Captive facilities and long term contracts have helped in containing the rise in the cost of inputs, which resulted in increase in the margins and profits for the year under review.

As informed earlier, the Company plans to set up a 80,000 TPA VSF plant at Vilayat (Gujarat) at an estimated outlay of Rs.1,000 crores. The project is likely to be commissioned in FY13. The capacity of the overseas joint venture at China will double from 35,000 TPA to 70,000 TPA by the end of Q1FY11.

The demand outlook is expected to be stable in the short to medium term. However, high VSF prices may lead to substitution with the other competing fibres, thereby impacting volumes and margins. The upward trend in the prices of input costs, mainly pulp, with limited opportunity to pass on the same to customers, may lead to a fall in the operating margin.

Chemical Business
The performance of the Chemical business was satisfactory. Caustic volumes grew by 15% on higher demand from the end user industry. Depressed caustic prices have lowered ECU realization by 20%. Prices are expected to remain under pressure due to the commissioning of new capacities and cheap imports. However, a gradual price recovery is expected with improvement in global markets.

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