Grasim 4Q10-11 beats expectations

Grasim 4Q10-11 beats  expectations
Published: 12 May 2011

Grasim Industries’ consolidated results for the March 11 quarter were broadly better than analysts’ expectations, thanks to a sharply improved performance in its smaller viscose staple fibre (VSF) and wood pulp division. Its cement interests also reported an improved performance.

Group net revenue was INR6502 crore for the period, up 19 per cent YoY. Net profit was INR865 crore, an increase of 32 per cent compared to the same period of last year.

Cement demand growth remained subdued during the quarter on account of lower infrastructure spending, slowdown in the real estate sector and the non-availability of railway wagons. Cement volumes grew by seven per cent at 11.07Mt, supported by the acquisition of Star Cement.

Operating costs rose due to the substantial increase in input and energy costs, which were partially passed on. While imported coal prices rose by 27% YoY, domestic coal prices shot up by 30% in March, 2011.  Net profit of UltraTech Cement stood at INR716 crores, which included the reversal of income tax provision of the earlier years.

Brownfield cement expansions aggregating to 9.2Mta at Chhattisgarh and Karnataka units are expected to be operational from early FY14. Orders have been placed for major equipments. 

A total capex of INR11,000 crores has been slated for the cement business comprising of   INR5,150 crores on expansion projects and INR5,850 crores towards increasing grinding, logistics infrastructure, captive thermal power plant, modernisation etc.

Going forward, the company’s Viscose Staple Fibre division is expected to be a key driver for growth in the short term, and that’s despite the recent correction in alternative input prices for the textile industry like cotton, from record highs.

UltraTech sees the cement industry growing at over 8.5 per cent per annum to sustain the growth in infrastructure, housing developments and government initiatives in rural development. Around 88Mt of capacity has been added over the last two years resulting in a surplus scenario, which may last for the next 8-10 quarters, according to UltraTech. The pricing environment remains challenging due to surplus capacity. Margins may also continue to remain under pressure.