Grasim Q3FY17 results: Building, Consolidating, growing

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Q3: EBITDA up 7 per cent; Net profit up 14 per cent

Consolidated Financial Performance

Grasim has reported improved profitability for the quarter ending 31 December 2016. Consolidated revenue for the quarter was Rs.8,601 crore. EBITDA at Rs.1,878 crore was up by 7 per cent driven by the performance from VSF and Cement Businesses. Net profit for the quarter increased by 14 per cent to Rs.728 crore as against Rs.640 crore in Q3 last year.

The consolidated EBITDA for the nine months was up by 23 per cent at Rs.6,190 crore and net profit rose by 41 per cent to Rs.2,404 crore on YoY basis.

Composite Scheme of Arrangement
The process of seeking the requisite regulatory approvals for the composite Scheme of merger of Aditya Birla Nuvo with Grasim and the listing of the Financial Services Business is underway. The scheme has been approved by the relevant stock exchanges and the Competition Commission of India. Application has been filed with National Company Law Tribunal. The transaction is expected to be completed by H1 FY18.

Business Performance

Viscose Staple Fibre (VSF)
The VSF Business reported an encouraging performance. Its revenue rose by 10 per cent at Rs.1,762 crore. EBITDA increased by 31 per cent at Rs.402 crore as against Rs.308 crore in Q3 last year, led by operating efficiencies and better realisation. Volumes were maintained as the business was able to retain the share of domestic sales despite temporary demand slowdown in textile value chain.

Chemical Business
During the quarter, the demand for Chlorine was impacted due to lower off take in the user industries resulting in restricted caustic soda production in the industry. Consequently, volumes were down by 5 per cent YoY at 1.93 lakh tonnes. ECU realisation was up led by higher caustic soda prices caused by lower supply. The EBITDA of Chemical Business was up by 5 per cent at Rs.186 crore compared to Rs.177 crore in the last year.

For its brownfield expansion at Vilayat, environmental clearance has been received. The civil work is expected to begin soon.

Cement Subsidiary (UltraTech Cement)
UltraTech’s revenue (Net of Excise) stood at Rs.5,998 crore compared to Rs.6,093 crore in Q3 last year. EBITDA was Rs.1,280 crore as against Rs.1,274 crore in the corresponding period of the previous year. PAT was up by 5 per cent, from Rs.566 crore in Q3 FY16 to Rs.595 crore in Q3FY17.

UltraTech announced the plan for setting up of a 3.5 million TPA integrated cement plant at Dhar, Madhya Pradesh at a total cost of around Rs.2,600 crore. The plant is expected to commence commercial production by Q4FY19.

Outlook
The VSF Business will continue to focus on expanding the VSF market in India by partnering with the textile value chain, achieving better customer connect through Brand Liva and enriching the product mix through a larger share of specialty fibre. The company has identified debottlenecking opportunities to meet the growing demand.

The demand for caustic soda in India is expected to grow with the rising demand from the end user industry. The commissioning of new capacities in the industry may increase supply in the medium term. The company’s plan to increase its caustic soda capacity by 208K TPA to 1,048K TPA through brown field expansion at Vilayat (Gujarat) and debottlenecking at other plants is on track.

Continuing government spending on infrastructure, development of smart cities, interest rate cuts supported by interest subsidy schemes for housing will be the key demand drivers for cement. UltraTech will benefit with its presence across the country to meet the expected rise in demand.

Grasim is well poised to reap the benefits of investment in the growth plans of its businesses with the sustained growth in the Indian economy.

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.