Grasim reports financial results for Q4 FY 2013-14

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Projects commissioned during the year:

• Caustic soda (183K TPA) and Epoxy - a chlorine derivative (52K TPA) at Vilayat
• Clinker (3.3 Mn. TPA) at Malkhed
• Cement (3.1 Mn. TPA) at Malkhed and Jharsuguda

Project under commissioning:

• Viscose staple fibre (120K TPA) at Vilayat - Trial runs commenced

Consolidated financial performance

Grasim Industries Limited, an Aditya Birla Group company, announced its results for the quarter and year ended 31 March 2014.

During the 4th quarter, revenue grew by 10 per cent at Rs.8,419 crore (Rs.7,674 crore). Net profit after minority interest (before exceptional item) is up by 11 per cent to Rs.679 crore (Rs.613 crore) and sequentially up by 105 per cent from Rs.332 crore. There was an exceptional gain of Rs.204 crore on the sale of Grasim's stake in Alexandria Carbon Black and Thai Carbon Black in quarter 4 last year.

Despite the prevailing economic slowdown during the year, volumes have been augmented in all the businesses viz. VSF, Chemical and Cement, driven by the commissioning of new capacities. While revenue increased by 5 per cent at Rs.29,324 crore (Rs.27,909 crore), net profit for the year was Rs.2,072 crore as against Rs.2,500 crore (before exceptional item) in the last year. An overcapacity in the VSF business globally and Cement Business in India has impacted the realisations and profitability.

Dividend
The Board of Directors of Grasim has recommended the dividend of Rs.21 per share. The total outflow on account of the dividend would be Rs.200 crore (including corporate tax on dividend).

Viscose Staple Fibre
VSF volume continued its upward trend. For the quarter, volumes crossed 99k tonnes, recording a growth of 4 per cent Y-o-Y. Market development activities in the domestic markets led to an improvement in the demand, supported by higher production at Harihar.

Demand supply imbalance and liquidity crunch in China impacted VSF prices in global markets. The company was able to maintain its realisations, supported by the rupee depreciation. However, the rupee depreciation has led to pulp costs moving up. This has c;reated pressure on margins.

Chemical Business
The Chemical Business reported a growth of 30 per cent in sales volumes during the quarter led by an additional volume from the Vilayat plant. PBIDT was up by 9 per cent at Rs.55 crore as against Rs.51 crore during the corresponding quarter led by higher volumes and ECU realisation. The full benefit of the Caustic and Epoxy plants at Chlor-Alkali complex, Vilayat commissioned earlier will accrue in FY2014-15.

Greenfield project at Vilayat, Gujarat
Trial runs for the greenfield VSF project at Vilayat commenced for line I in April 2014 and will be followed by line 2 very shortly. These two lines have a capacity of 77K TPA out of total capacity of 120K TPA to be commissioned. Remaining 2 lines focusing on specialty fibre are expected to be commissioned in the 2nd quarter of current year.

Cement subsidiary (UltraTech Cement)
The cement and clinker sales for the quarter at 13 mn. tonnes increased by 9 per cent, outperforming the sector. The quarter witnessed pressure on input and logistic costs, given the hike in railway freight and diesel prices. Net revenue for the quarter stood at Rs.6,316 crore (Rs.5,821 crore). Net profit was up by 15 per cent at Rs.865 crore compared to Rs.753 crore last year. On sequential basis, net profit has increased by 119 per cent from Rs.395 crore in previous quarter.

Cement capex
With the commissioning of the grinding capacity (1.45 Mn. TPA) at Malkhed, Karnataka during the quarter, cement capacity rose to 57 Mn. TPA.

Requisite approvals including sanction of respective High Courts and Competition Commission of India have been obtained for the acquisition of the Gujarat Cement unit of Jaypee Cement Corp. (4.8 Mn. MT). The scheme is now subject to the approval of SEBI. The transaction is expected to be completed by 1st quarter of FY2014-15.

On commissioning of the brownfield projects currently under implementation and the acquisition, total cement capacity of the company will increase from 57 Mn. TPA to 70 Mn. TPA and clinker from 46.1 Mn. TPA to 51.8 Mn. TPA

Outlook
In the VSF sector, margins are likely to remain under pressure in the near term due to overcapacity in China. The slowdown of new capacity additions in China should lead to improvement in industry utilisation. With additional capacity coming on stream, the company is well equipped to further consolidate its leadership position in the industry.

In cement, the demand growth for the industry should gradually recover to 8 per cent on improvement in the economic environment.

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.