Grasim posts flat Q4 profit on sluggish demand

Our Bureau Updated - May 04, 2013 at 11:18 PM.

VSF, cement production expansion projects going on stream this fiscal

bl05 finalGrasim Industries.eps

Grasim Industries, an Aditya Birla Group company, reported a marginal increase in its consolidated net profit at Rs 818 crore for the fourth quarter ended March 31, as against Rs 809 crore in the same period last year due to sluggish demand for viscose staple fibre (VSF) and lower profit contribution from the cement business.

Net revenue during the quarter was up five per cent at Rs 7,672 crore (Rs 7,283 crore), while profit before interest, depreciation and tax (PBIDT) fell five per cent to Rs 1,786 crore (Rs 1,883 crore), reflecting the cost escalation and lower demand across its business.

The company has maintained the dividend payout at last year’s level of Rs 22.50 a share.

Speaking to

Business Line , Adesh Gupta, Whole-time Director, Grasim Industries, said the company will witness a substantial increase in VSF and cement production capacity this fiscal with most expansion projects at the existing facilities going on stream.

However, he added, the concern on demand still lingers. Though expectations are that the domestic cement demand will improve gradually, handling the capacity utilisation will be the key challenge with the addition of new capacity by various companies.

Fall in coal prices

The fall in international coal prices has led to lower energy cost. Coal prices in the overseas market may fall further easing cost pressure in coming quarters, he added.

Fibre prices remained volatile due to the surplus VSF capacity in China and high cotton inventory. VSF sales were flat at 95,161 tonnes (94,904 tonnes), while production grew five per cent to 85,992 tonnes (83,439 tonnes). The company has managed to bring down inventory by cutting down on production.

The net revenue from fibre business was down by one per cent at Rs 1,216 crore (Rs 1,228 crore). PBIT was down 12 per cent at Rs 180 crore (Rs 205 crore) due to lower realisation.

In long term, VSF may hold a favourable position considering cotton production may not keep pace with demand as the coverage of cotton crop is fast shrinking due to farmers’ preference for cash crops, it added.

Sales volume in the chemical business was down nine per cent at 66,357 tonnes (72,839 tonnes). Net revenue grew two per cent to Rs 229 crore (Rs 224 crore). PBIT was up 57 per cent at Rs 42 crore (Rs 23 crore). The gradual ramp up of caustic plant of 1.82 lakh tonnes per annum commissioned at Vilayat in April may increase sales volume soon.

Subsidiaries contribution

The contribution from six subsidiaries, including UltraTech Cement and Idea Cellular, was down 21 per cent at Rs 445 crore (Rs 565 crore). The cement business, which is the major profit generator, chipped in lower profit of Rs 454 crore (Rs 526 crore), down 14 per cent.

suresh.iyengar@thehindu.co.in

Published on May 4, 2013 13:00