Grasim reports financial results for Q1 FY 2014-15

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Consolidated net revenue: Rs.8,044 crore, PAT: Rs.487 crore

Volume growth in all the businesses, supported by capacity creation

Consolidated financial performance

Grasim Industries Limited, an Aditya Birla Group company, announced its results for the first quarter (Q1) of FY2014-15.

All the businesses of the company have recorded healthy volume growth leading to 16 per cent increase in revenue from Rs.6,938 crore in the corresponding quarter of the last year to Rs.8,044 crore. Margins were, however, under pressure due to the pricing environment in both Viscose Staple Fibre and Cement Businesses, given the present over capacity in these sectors. The PBIDT stood at Rs.1,488 crore (Rs.1,549 crore).

The interest and depreciation has gone up with the 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. Last year, the company had benefit of commissioning of the power projects.

As a result, net profit was Rs.487 crore (Rs.610 crore).

Viscose Staple Fibre (VSF)
VSF volume at 86,389 tonnes was up by 11 per cent. Globally, the realisations remained subdued owing to overcapacity in China. Realisations for the company could be maintained, consequent to the depreciation of the rupee. Higher input cost impaired the margins in the business.

VSF Business capex
At the greenfield VSF project at Vilayat, Line 1 and 2 entailing a total capacity 77K TPA have been commissioned. Work on the remaining two lines (44K 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 498K TPA.

Chemical Business
The Chemical Business volume grew by 33 per cent, led by the ramp up of production capacity at the Vilayat plant. PBIDT rose by 81 per cent on the strength of volume growth and rise in ECU realisation. The epoxy plant, commissioned last year achieved break even, during this quarter. It will be fully ramped up in the next two quarters.

Cement subsidiary (UltraTech Cement)
Cement and clinker sales are up by 14 per cent, outperforming the sector even as prices remained under pressure. The variable cost increased by 3 per cent mainly on account of the rise in the price of petcoke and input material. The net revenue attained was Rs.6,032 crore as compared to Rs.5,296 crore in the corresponding quarter of the previous year. PBIDT was up by 2 per cent at Rs.1,296 crore, and PAT Rs.627 crore (Rs.666 crore).

Cement capex
The merger of the Gujarat units (capacity 4.8 mtpa) of Jaypee Cement Corporation Limited was completed during the quarter. Post this acquisition, the consolidated cement capacity of the company is 61.8 mtpa.

During the quarter, the company commissioned a 25 MW thermal power plant at Malkhed, Karnataka and a 6.5 MW Waste Heat Recovery System (WHRS) at Awarpur, Maharashtra. With this, the total power capacity of UltraTech (including WHRS), stands at 709 MW.

Outlook
In the VSF sector, margins are likely to remain under pressure in the near term due to the overcapacity in China. Going forward, the slowdown of new capacity additions in China should lead to an improvement in industry utilisation, which augurs well for the company. The focus on cost optimisation will continue unrelentingly.

In cement, with the new government in place, the infrastructure sector has got a renewed focus as announced in the recent budget. The industry demand is slated to grow at 7-8 per cent, with the expected double digit growth in the second half of the current year.

With additional capacity coming on stream in both the businesses, the company will further consolidate its leadership position and is well-poised to benefit from the business environment turning positive, particularly for the construction industry.

Cautionary statement
Statements in this "Press Release" describing the company's objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities law and regulations. Actual results could differ materially from those express or implied. Important factors that could make a difference to the company's operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.