Grasim 4Q Net profit up 58% on one-off gain

Grasim 4Q Net profit up 58% on one-off gain
Published: 30 April 2008

India’s Grasim Industries Ltd said its consolidated net profit for the fiscal fourth quarter rose 58% from a year earlier, helped by a one-off gain.
However, a drop in its operating margin dragged its share price lower.
Consolidated net profit for the January-March period rose to INR8.81bn from INR5.58bn in the same period a year earlier.
Profit rose due to a one-off gain of about INR2.37bn from the sale of its stake in Shree Digvijay Cement Co Portugal’s Cimpor for INR3.22bn.
Consolidated net profit before extraordinary gains in the fourth quarter rose 15% from a year earlier to INR6.44bn.
Consolidated total revenue rose 16% to INR48.32bn from INR41.68bn a year earlier.
"The results were highly disappointing. With its cement business under pressure, expectations were its viscose staple fiber business would perform well, but even that reported a sharp fall in margin," said Amit Srivastava, an analyst with Karvy Stock Broking.
The cement business contributes 70% to its revenue, and the viscose staple fiber business contributes about 20% to revenue.
Srivastava said Grasim’s operating margin contracted to 25% in the fourth quarter from 32% in the same period a year earlier, hurt mainly by a sharp fall in viscose staple fiber margins, down to 26.7% in the quarter from 30.7% a year earlier.
In a statement, the company said VSF sales volume fell 10% on year to 61,650 metric tons in the fourth quarter, due to a slowdown in textile demand from the U.S..
It expects margins for its VSF business to remain "depressed in the short to medium term" due to rising costs.
Sales volume in its cement business rose a moderate 9% from a year earlier at 4.27Mt.
But the operating margin for its cement business compressed to 28.8% in the quarter from 34.5% a year earlier due to high input costs and sluggish cement price hikes due to federal government pressure.
The company said it plans to invest over INR30 billion in its cement business in the current financial year that began April 1, to expand capacity.