1st August, 2010
31 July 2010
Grasim announces results for quarter ended 30 June 2010
Click here to view the unaudited consolidated results
Click here to view the unaudited standalone results
Consolidated net revenue: Rs.5,119 crore up 2%
Consolidated net profit: Rs.685 crore down 8%
Consolidated financial performance
Grasim Industries Limited, an Aditya Birla Group company, today announced its results for the first quarter ended 30 June 2010. Its consolidated revenue stood at Rs.5,119 crore (Rs.5,134 crore). The revenue was up by 2 per cent, excluding the revenue of the discontinued sponge iron business from the corresponding quarter on a comparable basis.
Net profit for the quarter was at Rs. 575 crore (Rs.744 crore). On the demerger of the cement business, which until 30 September 2009 was a division of Grasim, into Samruddhi Cement Ltd. (SCL), Grasim's shareholders were allotted equity shares of SCL, enabling them to have a direct participation in SCL. As a result, an amount of Rs.110 crore out of the net profit of SCL, which was the share of Grasim's shareholders, has been reduced as minority share. This has affected the net profit for the quarter. When added back, the net profit is at Rs.685 crore, lower by 8 per cent on a like to like comparison to the corresponding quarter.
| Rs. crore | |||
|---|---|---|---|
| Quarter ended | |||
| 30.06.10 | 30.06.09 | Per cent change | |
| Net revenue | 5,119 | 5,134 | - |
| PBIDT | 1,464 | 1,681 | (13) |
| Comparable net profit (Including Samruddhi minority share) | 685 | 744 | (8) |
Operationally, all businesses have performed well as reflected from the volumes as given below:
| Production | Sales | ||||||
|---|---|---|---|---|---|---|---|
| Q1 FY11 | Q1 FY10 | Per cent change |
Q1 FY11 | Q1 FY10 | Per cent change |
||
| Products | |||||||
| Cement (consolidated) | Mn. M.T. | 9.92 | 9.43 | 5 | 9.85 | 9.45 | 4 |
| White cement | M.T. | 133,015 | 105,299 | 26 | 133,052 | 106,898 | 24 |
| Viscose staple fibre | M.T. | 69,328 | 62,352 | 11 | 67,302 | 67,418 | - |
VSF has achieved better profitability. But, this has been negated by the sharp fall in cement realisations, more particularly in the southern and western regions, and high energy costs.
Viscose staple fibre (VSF)
VSF business has reported an improved performance. The recovery in global markets vis-à-vis the corresponding quarter, coupled with the cost push effect, has led to an increase in VSF prices. Capacity utilisation was higher, despite the suspension of operations at the Nagda plant in June 2010, due to the water shortage. With the advent of monsoon, the plant has resumed operations from 26 July 2010.
As reported earlier, the company plans to set up an 80,000 TPA VSF plant at Vilayat (Gujarat). The project is likely to be commissioned in FY13.
The recovery in the textile sector has slowed down due to Euro zone issues. The demand outlook remains cautious. High inventory level in the textile value chain is a cause of concern. This, coupled with rising pulp prices, may impact margins, going forward.
Chemical business
The performance of the chemical business has been encouraging. Caustic volumes grew by 9 per cent on higher captive use. ECU realisations were lower by 11 per cent on YoY basis, given the depressed caustic prices, though sequentially ECU realisations are up by 10 per cent led by the recovery in chlorine and HCl prices. A gradual price recovery is expected with the improvement in global markets.
Cement subsidiaries
Cement production has grown by 5 per cent, almost touching the 10-million mark. Production levels could have been higher, but for the disruption in operations of UltraTech in the eastern region. Cement sales volume grew by 4 per cent. The realisations suffered in line with the industry, particularly in the southern and western regions, due to bunching of new capacities.
In the white cement business, sales volumes were up by 24 per cent with both domestic and export markets, witnessing strong demand. The sharp escalation in prices of coal and raw materials, and higher freight cost coupled with lower realisations, impaired margins. Sequentially, the operating profit improved on higher average realisation and lower overhead expenses.
Cement capex
A capex of Rs.4,475 crore has been earmarked towards augmentation of the grinding and evacuation facility, logistics infrastructure, waste heat recovery system, captive thermal power plant, modernisation and completion of existing projects. The company would like to tap the enormous growth potential in the sector and further scale up its presence. As a first step, brownfield expansions aggregating to 9.2 million tpa at Chhattisgarh and Karnataka units with related grinding units and bulk terminals, are being taken up. An additional capex of Rs.5,600 crore has been earmarked for the same.
Star Cement acquisition
UltraTech Cement Ltd., through its wholly owned subsidiary UltraTech Cement Middle East Investments Ltd., has entered into a share purchase agreement (SPA) with the shareholders of ETA Star Group for acquiring a controlling stake in Star Cement Company LLC, Dubai ("Star") and its operations in UAE, Bahrain and Bangladesh. The acquisition is likely to be completed during the quarter. Consequently, the cement capacity will stand augmented to 52 million tpa.
Cement outlook
Industry demand is likely to grow by over 10 per cent. The increase in consumption, both on account of government and private spending together with a revival in the corporate capex cycle, will bolster the demand.
Cement prices are likely to remain under pressure due to oversupply. The surplus scenario in the industry may last for a limited period of six to eight quarters as capacity addition in FY12 is likely to be modest. The company's focus on higher volume growth, better logistics support together with cost efficiency, should help in partially mitigating the impact.
Cement restructuring
The amalgamation of SCL with UltraTech Cement Limited w.e.f. 1 July 2010 (the appointed date) will become effective on 1 August 2010, as envisaged originally. With the completion of the restructuring, while the cement business will be consolidated in a pure play company, Grasim, at the consolidated level, will continue to be a cement and VSF major.
Stand-alone financial performance
On a stand-alone basis, Grasim's performance has been better, compared on a like to like basis. Revenue rose by 17 per cent at Rs.964 crore. Net profit at Rs.224 crore was up by 62 per cent.
| Rs. crore | ||||
|---|---|---|---|---|
| Quarter ended | ||||
| 30.06.10 | 30.06.09* | Per cent change (over restated) |
||
| (Restated) | (As reported) | |||
| Net revenue | 964 | 822 | 3,090 | 17 |
| PBIDT | 361 | 246 | 947 | 46 |
| Net profit (Before extraordinary item) | 224 | 138 | 531 | 62 |
| * The reported results are not comparable since cement and sponge iron businesses have been demerged. Hence, the restated numbers have been given above excluding both businesses for better comparison. | ||||
Outlook
The company may face pressure on profitability in the short term. However, the long term prospects of the company remain positive with its leadership position in both cement and VSF businesses, focus on profitable growth and strong fundamentals. The company will emerge stronger from the downturn through proactive cost management and better asset productivity.
Cautionary statement
Statements in this "Press Release" describing the Company's objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities law and regulations. Actual results could differ materially from those express or implied. Important factors that could make a difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.
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
