Grasim, The Aditya Birla Group’s Flagship Company Reports Excellent Performance for Q2FY 2007

Mumbai, Maharashtra, India , 2006-10-18

Grasim, the flagship Company of the Aditya Birla Group, has posted excellent results for the quarter ended 30th September, 2006 on the back of superior performance from both its key businesses, viz., Cement and Viscose Staple Fibre (VSF). Turnover, Gross Profit and Net Profit have recorded a significant growth. Cement and VSF businesses continued to be the major business drivers.

Consolidated revenues at Rs.3,184 crores (Rs.2,344 crores) reflected an increase of 36%. Net Profit soared by 109% at Rs.418 crores (Rs.200 crores), in spite of a substantially higher provision for tax expense, which was up by 201% at Rs.207 crores (Rs.69 crores).

The three major factors that spurred performance are:

-- Firstly, growth in volumes;
-- Secondly, higher realisations; and
-- Thirdly, savings in operating costs resulting from ongoing modernization efforts, up-gradation of plants and energy optimization

On a stand-alone basis too, the results have been very encouraging. Revenues rose handsomely by 22% from Rs.1,649 crores to Rs.2,011 crores. Net Profit recorded an impressive growth of 80% at Rs.338 crores (Rs.188 crores). Higher capacity utilisation and optimization of efficiencies have contributed to this peak performance.

Viscose Staple Fibre (VSF) Business

The VSF business’ performance has been commendable. Production was up by 30% at 65,083 MT. During the corresponding quarter, the Company had consciously scaled down its production, with a view to liquidating inventory. Sales volumes improved marginally. On a sequential basis, the volumes reflect a healthy growth of 21%, driven by strong demand, both from domestic and export segments.

Upon the completion of expansion and modernization at an outlay of Rs.664 crores, the Company’s capacity will stand increased from its current level 266,450 tons to 315,725 tons per annum by FY08. This would enable the Company to cater to the increasing demand for VSF in India and South Asian countries.

To get a foothold in China, the world’s largest VSF market, the Company together with its overseas Group companies, has formed a Joint Venture company (Birla Jingwei Fibres Company Limited) with Hubei Jing Wei Chemical Fibre Company. Its current capacity of 30,000 tons per annum is expected to be ramped up to 60,000 tons per annum in about a year’s time. The Company’s stake in the Joint Venture would be 31%. The Group’s stake would be 70%.

The integrated plantation-cum-pulp plant at Laos and the acquisition of St. Anne Nackawic Pulp Mill, would lead to greater cost competitiveness. The Company would stand to benefit from increased output in Indian textile industry, post quota-abolition. Besides, the strong prices of competing fibres also portend well.

The outlook for the VSF business continues to be good.

Cement Business

The Cement business posted an excellent performance. Capacity utilisation was higher at 101%. Revenues surged by 47% led by strong realisations. Operating profit more than doubled as a result. The share of blended cement increased from 51% to 63%. While freight costs increased, its impact was mitigated to some extent due to higher dispatches thru’ rail from 34% to 49%.

The White Cement business too has done well. Production was higher by 6% at 92,766 tons. The steady increase in realisations, which was up by 14% and higher contribution from value added products, saw its turnover step up by 39%.

Cement Subsidiaries

UltraTech Cement Limited (UltraTech), a subsidiary of Grasim, posted a notable performance. Its sale of cement stood at 3.03 Mn. tons and clinker at 0.58 Mn. tons. Domestic cement realizations at Rs.2,890 per ton increased by 42%. Net Profit was at Rs.129 crores, vis-à-vis the loss of Rs.3 crores recorded in the corresponding quarter.

Shree Digvijay Cement Company Limited, another subsidiary, has reported a satisfactory performance. Cement production was higher by 9% at 2.03 lac tons, while sales volumes were up by 7% at 2.07 lac tons. Realisations grew by 33% at Rs.2,688 per ton. Profit before exceptional items, extended by 20% at Rs.8 crores.

Cement Capex plan

The Company plans to augment its Cement capacity by 8 Mn. TPA and also set up thermal power plants at a total capital outlay of Rs.2,475 crores. To this end, the Company is setting up a Greenfield cement plant at Kotputli in Rajasthan (with a split grinding unit at Panipat in Haryana), of a total capacity of 4 Mn. TPA and a new plant at Shambhupura in Rajasthan (with a split grinding unit) of an equivalent capacity along with the thermal power plants. The Shambhupura plant is expected to be commissioned by end-FY08 and the Kotputli plant in Q1FY09.

This would enable the Company cater to the increasing demand in the northern region.

The Company also plans to invest Rs.1,166 crores over the next 2 years on modernization, de-bottlenecking, setting up of grinding unit at Dadri (Capacity: 1.3 Mn. MT), RMC plants and captive power plants.

The Company is buoyant about its Cement business. The growing upsurge in demand from housing and infrastructure sectors along with the increased industrial investment should provide further impetus to the Cement business. The outlook for the Cement business, thus, continues to be highly encouraging.

Sponge Iron Business

The performance of the Sponge Iron business was severely constrained due to the high cost of production and inadequate availability of natural gas. Realisations were up as global scrap prices were higher. The pressure from coal based sponge iron segment continued. Though Operating profit did record some improvement, it continued to remain under pressure due to the high cost of input and lower sales volumes.

Production will be maintained at current levels, due to inadequate supply of natural gas. Profitability is expected to remain under pressure on account of the high input costs and inadequate supply of natural gas. Realisations are expected to improve in line with the rising scrap prices. The competition from coal based segment will continue to be a threat. The prospects for the business are expected to improve in the long term with adequate gas availability, likely by December, 2007.

Chemical Business

The Captive Power plant attached to the Chemical division was shut down for major repairs from the 3rd week of July, 2006. The repairs would take another 3-4 months. Production and consequently, sales volumes may be restricted for the next 4 months.

During the quarter, while the realisations of Caustic Soda recorded a 5% growth, the overall ECU Realisations were lower by 4% due to a major fall in chlorine prices.

To improve the cost efficiency, the Company converted its remaining Caustic soda plant based on mercury cell technology into the new energy efficient membrane cell technology in September, 2006 at a cost of Rs.148 crores.

Prices are expected to stabilize at current levels. The thrust will continue to be on optimum utilization of the plant capacity.

Outlook

With the fortifying of its leadership position in the VSF and Cement sectors through substantial capacity expansions, cost optimization, optimal utilisation of assets and prudent financial management, the prospects for the Company continue to be positive.

To view the complete press release and unaudited financial results please click on the links given below:


http://www.businesswireindia.com/attachments/Grasim_Press_Release.doc

http://www.businesswireindia.com/attachments/Grasim_Results(1).xls





Contact

Dr. Pragnya Ram, Aditya Birla Group, +91 (022) 5652 5000
[email protected]