Grasim reports outstanding performance for Q2 FY2010

1st November, 2009

29 October 2009

Grasim reports outstanding performance for Q2 FY2010

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 In per cent
Consolidated net profit Rs. 781 crore61
Consolidated net revenueRs. 4,743 crore6

Consolidated financial performance

Rs. crore
 Quarter endedHalf-year ended
 30.09.0930.09.08Percent change30.09.0930.09.08Percent change
Net revenue4,7434,48669,8758,93910
PBIDT1,6301,023593,3112,38039
Profit before taxes1,305737772,6631,82746
Profit after taxes (before extraordinary gain)893563591,8271,35535
Minority share(112)(77)-(302)(196) 
Net profit (before extraordinary gain)781486611,5251,15832
Net profit (after extraordinary gain)781486611,8611,15861
EPS (Rs.)      
Before extraordinary gain85536116612632
After extraordinary gain85536120312661

Grasim, an Aditya Birla Group company, today announced its results for the second quarter ended 30 September, 2009. The company has reported excellent performance in both of its core businesses, viz., cement and viscose staple fibre.

Consolidated revenue for the quarter grew by 6 per cent at Rs. 4,743 crore (Rs. 4,486 crore). Notwithstanding a steep increase of over 143 per cent in tax expenses, net profit rose by 61 per cent at Rs. 781 crore (Rs. 486 crore).

Stand-alone financial performance

Rs. crore
 Quarter endedHalf-year ended
 30.09.0930.09.08Percent change30.09.0930.09.08Percent change
Net revenue3,0262,703126,1135,32515
PBIDT1,159678712,1071,51239
Profit before taxes973543791,7361,24240
Net profit (before extraordinary gain)674419611,20593429
Net profit (after extraordinary gain)674419611,54193465
EPS (Rs.)      
Before extraordinary gain74466113110229
After extraordinary gain74466116810265

On a stand-alone basis, Grasim’s performance during the quarter has been impressive. Revenue was higher by 12 per cent at Rs. 3,026 crore (Rs. 2,703 crore). PBIDT at Rs. 1,159 crore (Rs. 678 crore) increased by 71 per cent. Despite higher interest cost, higher depreciation and a significant increase in tax expenses, net profit rose by 61 per cent at Rs. 674 crore (Rs. 419 crore).

On a stand-alone basis, Grasim’s performance during the quarter has been impressive. Revenue was higher by 12 per cent at Rs. 3,026 crore (Rs. 2,703 crore). PBIDT at Rs. 1,159 crore (Rs. 678 crore) increased by 71 per cent. Despite higher interest cost, higher depreciation and a significant increase in tax expenses, net profit rose by 61 per cent at Rs. 674 crore (Rs. 419 crore).

On a stand-alone basis, Grasim’s performance during the quarter has been impressive. Revenue was higher by 12 per cent at Rs. 3,026 crore (Rs. 2,703 crore). PBIDT at Rs. 1,159 crore (Rs. 678 crore) increased by 71 per cent. Despite higher interest cost, higher depreciation and a significant increase in tax expenses, net profit rose by 61 per cent at Rs. 674 crore (Rs. 419 crore).

On comparable basis, excluding sponge iron business from both Q2 FY10 and Q2 FY09 and consolidation of Idea as an Associate in Q2FY09-

  • Revenue increased by 26 per cent on stand-alone basis and by 17 per cent on consolidated basis;
  • Revenue increased by 26 per cent on stand-alone basis and by 17 per cent on consolidated basis;
  • Net profit (before extraordinary gain) increased by 67 per cent on stand-alone basis and by 66 per cent on consolidated basis.

Highlights of Grasim’s operations

Products ProductionSales
 Q3FY12Q3FY11Per cent changeQ3FY12Q3FY11Per cent change
Viscose staple fibreM.T.84,23383,026178,21584,621(8)
Cement (consolidated)*Mn M.T.10.449.90510.449.935
White cementLakh M.T.1.541.4751.501.444
*Including Star Cement volumes

Cement business
The cement business posted a robust performance during the quarter gone by. Production, supported by capacity expansion, expanded by 27 per cent at 4.63 million tons. Sales volumes registered an increase of 23 per cent at 4.56 million tons, on the back of strong demand growth in the northern and eastern regions. In the RMC business, the performance was impacted by the slowdown in the real estate sector. Higher volumes, softening of fuel prices and enhanced share of captive power resulted in better operating margins.

In the white cement segment, the performance was commendable. Production and sales volumes grew by 30 per cent and 21 per cent respectively over the corresponding quarter. Wall Care Putty clocked a 44 per cent growth in volumes.

Cement subsidiary
The performance of UltraTech Cement Limited, a subsidiary of Grasim, was impressive as well. Cement volumes grew by 10 per cent at 3.75 million tons. Net profit at Rs. 251 crore (Rs. 164 crore) was higher by 53 per cent.

Cement capex
The grinding capacity of 3.1 million tons at Kotputli (Rajasthan) is likely to be commissioned by the end of Q3 FY10. Upon its commissioning, the capacity of Grasim, together with that of UltraTech, will stand expanded at 48.8 million tons.

An overall capital outlay of Rs. 4,150 crore has been earmarked for the cement business (including an outlay of Rs. 2,055 crore at UltraTech). This is proposed to be invested over the next three years on grinding and evacuation facility, logistics infrastructure, waste heat recovery system, captive thermal power plant, modernization and completion of existing projects.

Cement outlook
Industry demand is expected to grow at around 9 per cent p.a. during the next five years, given the Government’s initiatives to boost rural development, infrastructure and housing. The long term outlook is promising, even though the surplus caused by new cement capacities is likely to impact margins over the immediate term. The company’s focus on higher volume growth, captive power generation and capital productivity should help in partially offsetting the impact on margins.

Viscose staple fibre (VSF) business
The performance of VSF business has been notable. Capacity utilisation stood at 92 per cent. Consequently, production was up by 22 per cent at 76,669 tons, though the Nagda plant was shut for eight days during the quarter owing to water shortage.

Signs of revival in the global textile markets augur well for the VSF business.

The company plans to set up a 80,000 tpa VSF plant at Vilayat (Gujarat) at an estimated investment of Rs. 1,000 crore. The company has already acquired land and received environmental clearances for the project. Upon commissioning of the plant in FY13, Grasim’s VSF capacity will stand enhanced at 413,975 tons.

Chemical plant
The chemical business’ performance was satisfactory. Caustic volumes improved by 11 per cent due to aggressive marketing. Lower ECU realisations emanating from lower caustic and byproduct prices, however, led to lower operating margins. Realisations are expected to remain under pressure due to the commissioning of new capacities and cheap imports. However, the recovery in the economy is expected to translate into better performance of the business in the long term.

Cement demerger
As already reported, Grasim has embarked on a restructuring exercise under which the cement business of the company will be demerged into Samruddhi Cement Ltd. (Samruddhi), a wholly owned subsidiary of the company. In consideration, Samruddhi will issue 1 (one) new equity share of the face value of Rs. 5/-, credited as fully paid up, to Grasim’s shareholders for every equity share they hold in Grasim as of the Record Date, in addition to the shares held by them in Grasim. Upon such issue, the shareholding of Grasim in Samruddhi will get diluted to 65 per cent.

This move is designed to ensure Grasim’s majority stake in, and continued support to, the rapidly growing cement business, while simultaneously providing Grasim’s shareholders a direct participation in a pure play cement company.

The demerger will be undertaken through a scheme of arrangement under Sections 391-394 of the Companies Act, 1956, subject to the applicable approvals, inter alia from the company’s shareholders and creditors and the High Courts of Madhya Pradesh and Gujarat.

Outlook
The company’s thrust will be on fortifying its leadership position in the cement and VSF sectors. Even after the demerger, the company will continue to provide all support to the cement business, in the same manner as is being given prior to the demerger. Cost optimisation and maximisation of asset productivity will continue to be the company’s hallmarks. The prospects for the company thus remain positive.

For more information, contact:
Dr. Pragnya Ram
Group Executive President
Corporate Communications & CSR
Aditya Birla Management Corporation Private Limited
Tel: 91-22-6652 5000 / 2499 5000
Fax: 91-22-6652 5741/ 42
Email: pragnya.ram@adityabirla.com