Grasim Industries Ltd, part of the Aditya Birla Group, has reported good results for the second quarter ended 30 September 2011, supported by improved performance of both its cement and viscose staple fibre (VSF) businesses. Net revenue increase by 28% to INR57.74bn from INR45.03bn while EBIDT increased in a similar vein from INR8.84bn to INR11.35bn. Net profit advanced by 29% from INR3.23bn to INR4.18bn.
Its UltraTech cement subsidiary recorded a revenue of INR42.09bn and profit after tax of INR2.65bn. While its YoY performance improved from a low base, its QoQ counterpart remained subdued due to seasonal, lower realisation and substantial cost increase impacts. A rise in input and energy costs pushed up variable cost by 14%. A 30% rise in the price of domestic coal coupled with the continuous rise of imported coal prices as well as higher freight costs due to the price hike in diesel had a negative effect on the company’s performance.
In terms of capex, a total of INR110bn has been set aside with INR51.50bn for expansion projects and the remainder towards creating bulk packaging terminals, setting up ready-mix concrete plants, a captive thermal power plant and a number of modernisation projects. The Chattisgarh and Karnataka brownfield expansion projects are progressing on schedule and are expected to add 9.2Mta extra capacity by Q1FY2014.
Looking ahead, the company recognises a challenging operating environment. “In Cement, the surplus scenario should subside gradually over a period of 2-3 years with expected growth in demand. At the same time, if the present rising input costs scenario continues, it will result in a squeeze of margins.
As the present scenario improves gradually, Grasim will stand benefited through its backward integration and cost leadership in its VSF business and brand image, distribution network and operating efficiency in its Cement business. Capacity expansions under implementation in these businesses will enable the Company to grow at a rapid pace and consolidate its leadership even further,” said the company in a statement.