Grasim Industries Limited has posted good results for the 3rd quarter ended 31st December, 2007. The improved performance was propelled by its core businesses, viz., Cement and Viscose Staple Fibre (VSF). The Company’s Chemical and Sponge Iron businesses too aided the performance.

Revenues increased by 19% y-o-y to Rs.4,358 crores (Rs.3,668 crores). Gross Profit rose by 26% at Rs.1,420 crores (Rs.1,128 crores). Net Profit was higher by 29% at Rs.722 crores (Rs.559 crores).
Viscose Staple Fibre (VSF) Business

VSF business recorded a positive performance during the quarter.

The Company plans to expand its capacity by 94,875 tons, through capacity additions of 63,875 tons at Kharach (Gujarat) and 31,000 tons at Harihar (Karnataka), at an estimated outlay of Rs.606 crores. Upon completion, the Company’s VSF capacity will be 364,975 tons.

Alongside, a greenfield 88,000 tons plant is being set up at Vilayat (Gujarat) at an estimated capital cost of Rs.840 crores. The plant is expected to be commissioned in about 2-3 years’ time.

The Company plans to foray into the consumer product segment with a test launch of non-woven products.

Chemical Plant

The Chemical plant’s performance improved during the quarter. Production of caustic soda was higher by 68% at 50,452 tons. During the corresponding quarter, production was lower owing to the shut down of a captive power plant. Sales volumes rose by 70% at 49,978 tons.

Cement Business

The performance of Cement business was good. Both production and sales volumes were a tad higher at 3.69 million tons and 3.76 million tons respectively. The share of blended cement increased from 61% to 66%. 13 RMC plants were commissioned during the current year. Higher realisation during the quarter, however, was set off by the steep hike in fuel cost and increased freight cost, which impacted margins.

The White Cement unit reported a healthy performance. While production grew by 15% at 105,123 tons, sales volumes improved by 11% at 103,879 tons.

Cement Subsidiaries

UltraTech Cement Limited (UltraTech), a subsidiary of Grasim, too reported improved performance. Sales of cement and clinker were at 3.66 million tons and 0.71 million tons respectively. Net Profit was higher at Rs.281 crores.

Cement Capex plan

The capex plans of both Grasim and UltraTech are progressing satisfactorily. The Company’s aggregate cement capacity (including that of its subsidiaries) will stand augmented by 17 million tons at 47 million tons, upon completion of all expansions. Besides, both the Company and its subsidiary are setting up Ready Mix Concrete plants at various locations in the country.

The additional capacity of around 90 million tons, as announced by the industry, over the 3-year period FY08 to FY10, could result in a surplus scenario, affecting realisation from end-FY09. Rising energy prices would lead to increased costs. However, the addition of captive power plants at various locations will help contain this impact.

The strong growth in demand emanating from the housing and infrastructure sectors bode well for the Company’s Cement business.

Sponge Iron Business

The performance of Sponge Iron business improved during the quarter. Operating profits improved, despite a steep increase in iron ore prices, owing to higher realisation. The outlook for the business is expected to improve with adequate gas availability, likely by March’08. The pricing of gas, being uncertain, continues to be a concern.

Outlook

Grasim’s outlook continues to be positive. The major expansion of capacity in cement and fibre businesses, relentless efforts towards cost optimization and improved productivity, coupled with effective financial management, portend well for the Company in the years to come.

Sourced From: Aditya Birla Management Corporation Ltd

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