Mumbai, Maharashtra, India
Grasim Industries Limited has performed well during the quarter ended 31st March 2008. Revenues increased by 15% from Rs.4,090 crores to Rs.4,715 crores. Net Profit (before Extraordinary gain) was higher by 15% at Rs.644 crores (Rs.558 crores).
The FY 2008 results have been impressive. Revenues crossed US$ 4 billion mark, at Rs.17,037 crores (Rs.14,142 crores), a rise of 20%. Net Profit (before Extraordinary gains) rose appreciably by 35% at Rs.2,655 crores (Rs.1,967 crores).
Dividend
The Board of Directors of Grasim has recommended a dividend of 300% (last year: 275%). The total outflow on account of dividend, including Corporate Tax on Dividend, would be Rs.316 crores, vis-a-vis Rs.287 crores for FY07, an increase of 10%.
Viscose Staple Fibre (VSF) Business
Macro economic factors impacted the VSF business during the quarter. The deceleration in demand was primarily due to the slowdown of textile demand in USA and liquidation of inventory in the value chain. Additionally, the anti-dumping investigation by Turkey on import of VSF based yarn and the substitution effect on account of high VSF prices contributed to the subdued performance.
The performance of VSF business for the financial year as a whole was however, impressive. Production increased by 13% at 279,901 tons. Sales volumes were higher by 8% at 269,781 tons.
During the quarter under review, the Company expanded its VSF capacity at Kharach (Gujarat) by 63,875 tons. The Company's VSF capacity thus stands increased at 333,975 tons. To meet the growing demand, the Company plans to increase its capacity at Harihar (Karnataka) by 31,000 tons at an outlay of Rs.335 crores, which is expected to be operational in Q3FY10. Also, an 88,000 TPA greenfield project is being pursued at Vilayat (Gujarat). The conversion of the AV Nackawic plant from paper grade pulp to rayon grade pulp is expected to be completed in Q2FY09.
Margins in VSF business are expected to remain depressed in the short to medium term due to rising prices of sulphur and pulp, coupled with softening of VSF prices.
Chemical Plant
The Chemical business posted a moderate performance during the quarter. Production was marginally lower at 46,491 tons. Sales volumes were lower by 6% at 44,872 tons on account of inventory buildup for planned partial shutdown.
For the year under review, the performance has improved. Production, which was affected in the corresponding year due to breakdown of a captive power plant, grew by 38% at 188,537 tons. Sales volumes too rose by 36% at 187,356 tons. Its performance would have been better but for the cost pressure on key inputs and fall in realisation.
Cement Business
The Cement business has recorded good performance during the quarter. Higher capacity utilisation resulted in production increasing by 8% at 4.20 million tons. Sales volumes were up by 9% at 4.27 million tons.
The performance for the year was equally encouraging. Both Production and Sales volumes grew by 7% at 15.36 million tons and 15.54 million tons respectively. However, the sharp increase in fuel cost led to lower operating margins. The Company continued its efforts to achieve over hundred percent capacity utilisation to meet the growing demand. Sequentially, the realisation remained flat despite increase in cost, leading to lower operating margins.
RMC (Ready Mix Concrete) volumes expanded by 62% in Q4FY08 and by 36% in FY08, buoyed by the rapid expansion in RMC network.
Cement Subsidiaries
UltraTech Cement Limited (UltraTech), a subsidiary of Grasim, performed well. Domestic Cement sales during the year were higher at 14.25 million tons, an increase of 7%. However, exports of Cement and Clinker were down by 25% from 3.48 million tons to 2.61 million tons.
During the quarter under review, Grasim sold its entire holding of 75,816,681 equity shares representing 53.63% of the capital of Shree Digvijay Cement Company Limited (SDCCL) to Cimpor Inversiones S.A., Spain at Rs.42.50 per share.
Cement Capex plan
During the quarter under review, the Company commissioned its following plants:
-- 3.3 million TPA clinkerisation plant at Shambhupura (Rajasthan);
-- 1.3 million TPA grinding unit at Panipat (Haryana); and
-- 23 MW captive thermal power plant at Jawad (M.P.).
UltraTech too commissioned its 3.3 million TPA clinkerisation plant at Tadpatri (A.P.) during the quarter. Debottlenecking at existing locations saw both Grasim and UltraTech increasing their respective capacities by 2.40 million tons and 1.20 million tons during the year.
The expansions at Shambhupura and Tadpatri will be operational in H1FY09, while the Kotputli (Rajasthan) plant of Grasim is expected to go on stream in Q3FY09. Upon completion, the Company's aggregate cement capacity (including that of UltraTech) will stand augmented at 48.7 million tons.
The significant increase in input costs will have an adverse impact on margins. Besides, the industry will experience a surplus of supply over demand on account of additional capacity of 118 million tons during the XIth Plan period which is expected to have an impact on domestic price in CY09. However, the strong momentum in demand would help in absorbing the increased supply in the long term.
Sponge Iron Business
Inadequate supply of natural gas coupled with the high prices of alternate fuels resulted in production being curtailed by 20% during the quarter at 134,490 tons. Sales volumes, as a result, declined by 18% at 140,317 tons. The surge in global scrap prices led to improved realisation. However, the gains on this account were offset by increase in prices of iron ore, naptha and propane.
Production of Sponge Iron during the year increased by 7% at 562,000 tons. Sales volumes were lower by 2% at 557,187 tons.
The outlook for the business is expected to improve with increased availability of natural gas by Q2FY09.
Outlook
Going forward, VSF and Cement will continue to be the growth enablers. Shoring up of its leadership position in the VSF and Cement sectors, cost optimization, maximization of asset productivity and prudent financial management will continue to be the Company's hallmarks. The prospects for the Company continue to be positive.
To view the press release with tables and Results, please click on the links given below:
Press release with tables
Grasim Results
Source: Grasim Industries Limited (Business Wire India)
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