Grasim’s results for the December 2009 quarter were broadly better than analysts forecast on a standalone basis, with its operating profit margin improving 1,330 basis points YoY to 33.1% while its net sales rose 14.6% to Rs 3,087.9 crore.
However, the third-quarter results are not strictly comparable with a year earlier, given the sale of its sponge iron unit in May 2009. The growth momentum for the company came from its smaller viscose staple fibre (VSF) division, which accounted for nearly 31.2% of its standalone total operating income in the third quarter. From this division, the realisation for Grasim’s portfolio of VSF products improved an estimated 12.8% YoY to Rs 1.18 lakh per tonne in the third quarter coupled with its sales volume that jumped 51.2% YoY.
The current revival in the key user industry, namely the global textile industry, and a low-base effect in the previous year due to the financial crisis, boosted segment profit of the VSF division by a stupendous 904% YoY to Rs 375.28 crore in the December 2009 quarter. In its key cement division, which accounts for 65.8% of its standalone operating income in the third quarter, realisations rose an estimated 1.2% YoY to Rs 4,168.5/t.
The division has a pan-India presence and this helped it offset the tough pricing environment in certain regions, especially the South. Its despatches also grew nearly 16% YoY to 4.87 million tonne in the third quarter and it helped the segment profit of the cement division rise 51.2% YoY to Rs 500.3 crore.