Grasim said that cement prices will no longer ride north but stabilise at the present levels. “Going forward, I see the cement prices remaining at the present levels. Whatever hike in prices had to happen has already happened,” D.D. Rathi, CFO of Grasim, said.
Grasim, the flagship company of the Aditya Birla Group, also expects a hike in demand this fiscal. “We expect 8 to 10 per cent growth in demand this fiscal,” Rathi said.
Grasim’s observations fly in the face of what most analysts say.
Most analysts believe that cement prices are going to go up further. “There is a huge demand in the market and there is a demand-supply mismatch. Prices are under pressure,” said an industry analyst. Cement prices all over India have been firming up in the past few months. Rathi said Grasim plans two new cement plants, each with a capacity of 4 million tonnes, in Rajasthan over the next couple of years.
Grasim is looking at consolidating its business. “We are not looking at acquisitions as a way to grow this fiscal. Our focus will be assimilating the companies that we have acquired in the last few years,” Rathi added.
Grasim has announced a 39 per cent hike in profit after tax at Rs 347 crore for the fourth quarter ended March 31. Net revenue was Rs 2,901.4 crore, up 17 per cent compared with Rs 2,474.7 crore for the same quarter a year back.
Net revenue year-on-year rose 9.5 per cent from Rs 9,314.8 crore in fiscal 2005 to Rs 10,200.3 crore. Net profit rose 18 per cent from Rs 880.4 crore to Rs 1,038.6 crore in 2005-06.
After-tax profit for the fourth quarter was Rs 408.9 crore, up almost 56 per cent from Rs 260.8 crore in the same quarter previous fiscal.
“Superior performance from the cement business, cost optimisation and a substantially reduced interest burden fuelled Grasim’s growth,” a company statement said. However, the company witnessed a setback in the sponge iron business.
It expects the sponge iron business to pick up in the current quarter due to better availability of natural gas.
Grasim also plans to spend Rs 6,000 crore to expand cement and viscose staple fibre (VSF) capacities in the next couple of years. The outlook for the VSF business, used to make textiles, was also better with cotton prices remaining firm.