The Hindu Business Line : Grasim profit falls 36% at Rs 460 cr in Q3

Mumbai, Jan. 31 Grasim Industries, with interest in cement, viscose staple fibre (VSF), caustic soda and sponge iron, reported a 36 per cent drop in net profit at Rs 460 crore in the third quarter ended December 31, 2008 against Rs 721 crore recorded in he same period last year.

Sales were up 6 per cent at Rs 4,632 crore (Rs 4,350 crore) in the quarter under review. Power and fuel expenses jumped 46 per cent to Rs 1,094 crore (Rs 747 crore).

On a standalone basis, the net profit was down 40 per cent at Rs 330 crore (Rs 554 crore), while sales were marginally higher at Rs 2,690 crore (Rs 2,615 crore) in the third quarter of the financial year 2008-09.

Interest cost rose 90 per cent to Rs 44 crore (Rs 23 crore) due to commissioning of new project and increased borrowings, the company said.

Production of cement was higher by 9 per cent at 4 million tonnes. Sales volume at 4.05 million tonnes registered an increase of 7 per cent aided by new capacity and sectoral growth.

Though realisations improved, the impact was more than offset by the soaring input costs, thereby affecting margins adversely, it said.

The price of cement and, consequently, operating margins may witness pressure in FY’10 and FY’11 owing to the commissioning of large capacities in a phased manner over the next two years.

The company’s VSF production was down 27 per cent at 51,777 tonnes (70,839 tonnes), while the sales fell 22 per cent to 53,758 tonnes (68,552 tonnes).

VSF business hit

The performance of VSF business was adversely affected due to depressed consumer demand for textile globally. Operating profits and margins dipped on the back of lower realisation, higher pulp and sulphur cost and the weakening of rupee.

Margins in the VSF business are expected to remain under pressure, despite lower input costs, on account of further reduction in realisation. The company has reduced VSF prices further with effect from January to prevent its substitution by competing fibres and imports.

Caustic soda

Caustic soda production was up marginally at 52,176 tonnes (50,452 tonnes), while sales rose 9 per cent to 54,688 tonnes (49,978 tonnes) in the quarter under review. Higher caustic soda prices were negated by the abnormally low chlorine and hydrochloric acid prices, which were down by 90 per cent and 70 per cent, respectively over the corresponding quarter.

The sponge iron production was down 21 per cent at 1.12 lakh tonnes (1.42 lakh tonnes). Sales dipped 15 per cent to 1.15 lakh tonnes (1.35 lakh tonnes).

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