Grasim records 60% surge in Q4 consolidated net

MUMBAI: Aditya Birla group flagship Grasim Industries said its fourth quarter consolidated net profit grew 60% due to a sharp rise in cement and fibre prices, a trend it expects will sustain this year. The potential prompted Grasim to announce a capex plan of Rs 3,216 crore over two years to hike capacities in the two businesses that account for almost 88% of its revenue. The company has posted a net profit of Rs 559 crore in the January-March quarter, compared with Rs 349 crore last year. Its revenue grew 40% in the same period to Rs 4,107 crore.

For the full year, net profit grew 89% to Rs 1,968 crore, while revenue rose 38% to Rs 14,167 crore. Grasim whole-time director DD Rathi was however cautious about the outlook on cement. “I would prefer to wait and watch till the monsoon to see how prices behave,” he said. Consumption slows during the monsoon as construction comes to a halt leading to a sharp drop in prices. Mr Rathi declined to comment on the government’s recent communication to local cement makers to maintain prices to contain inflation. Local cement companies, however, point to rising power and freight costs as the main reasons for price hikes.

During the January-March quarter, cement and VSF accounted for over 85% of the company incremental growth in net sales. Their contribution to the growth in operating profit was even higher at close to 90%. Thanks to a 35% growth in prices, the cement division accounted for over 75% of Grasim’s operating profit during the quarter, against 72% last year.

However, its contribution to Grasim’s revenue fell marginally to 69%, from little over 71% a year ago. This was primarily due a faster-than-expected growth by the viscose staple fibre and sponge iron businesses during the year.

While revenues from VSF business rose 54%, sponge-iron business more than doubled during the quarter. This was due to a combination of faster volume growth and higher prices. Shipments of VSF grew by 13% while prices jumped by 15% during the quarter.

During the fourth quarter sales volume of sponge iron grew by 79%, while prices more than doubled. Grasim said prices of cement have risen 35% in the past year, while that of viscose staple fibre, a cellulosic fibre used in making garments, grew by 15%.

In viscose staple fibre, Grasim is expanding capacity at its Kharach unit in Gujarat by 63,875 tonnes and by about 31,000 tonnes at Harihar in Karnataka. After the expansion, Grasim’s VSF capacity would stand at 365,000 tonnes. The company is also doubling its Chinese fibre capacity to 60,000 tonnes.