Grasim Inds

A 18% (YoY) rise in freight cost, 17% jump in raw material costs and 13% rise in fuel cost and all these together pulled down the net profit, which came down YoY by 17% at Rs.679 crore. The 64% drop in tax outgo helped shore up the decline, which otherwise would have dropped further. Consolidated net revenue was at Rs.8419 crore, up 10%. Costs apart, an overcapacity in the VSF business globally and Cement Business in India has impacted the realisations and profitability.

In terms of segments, VSF saw good demand and volume build up but lower global prices, supported by falling rupee though helped maintain prices, it impacted the pulp costs, putting pressure on margins. Its chemical business showed a 30% growth in sales volume, with a 9% rise in EBIDT. The company expects full benefit of the Caustic and Epoxy plants at Chlor-Alkali complex, Vilayat commissioned earlier will accrue in FY15. Its Greenfield VSF project in Gujarat started trial runs in April for Line 1 while Line 2 is to commence soon. These two lines have a capacity of 77K TPA out of total capacity of 120K TPA to be commissioned. Remaining 2 lines focusing on specialty fibre are expected to be commissioned in the 2nd quarter of current year. Cement plant, which is Ultra Tech Cement showed a 15% (YoY) rise in net profit  and during Q4, its cement capacity rose to 57 mtpa. The acquisition process of Jaypee Cement is expected to be completed by 1st quarter of FY15. On commissioning of the brownfield projects currently under implementation and the acquisition, total cement capacity of the company will increase from 57 mtpa to 70 mtpa and clinker from 46.1 mtpa to 51.8 mtpa.

Looking ahead, the company has stated that VSF margins are likely to remain under pressure in the near term due to overcapacity in China and in cement, it expects demand to recover to 8% once economic environment improves.