Grasim Industries has reported an eight per cent increase in net profit at Rs 283 crore (Rs 262 crore) for the third quarter of this fiscal on the back of high realisation in viscose staple fibre (VSF) and higher chemical production. Sales increased 18 per cent to Rs 1,214 crore (Rs 1,030 crore).

The unprecedented rise in cotton prices benefitted VSF. Globally, prices were firm with rising spot pulp prices resulting in a better VSF price in China. Production was 83,026 tonnes with full capacity utilisation.

Revenue for the VSF business grew 17 per cent backed by an increase in sales volumes by four per cent at 84,621 tonnes and improved realisations. Pulp prices were up by 35 per cent over last year which led to a fall in operating margins.

China demand

VSF prices were largely driven by demand trends in China and prices of competing fibres and pulp. They are expected to remain in line with competing fibres though with a degree of volatility, the Aditya Birla Group company said.

Grasim is setting up a 1.2-lakh tonne a year VSF plant at Vilayat in Gujarat with an investment of Rs 1,690 crore.

In addition, capacity at Harihar in Karnataka will be up by 36,500 tpa through a brownfield expansion costing Rs 449 crore. Both projects will be commissioned in FY'13.

The chemical business attained the highest-ever production and sales volumes supported by capacity utilisation of 104 per cent. ECU realisations grew 10 per cent led by the recovery in chlorine and HCL prices.

The demand outlook for caustic soda is positive with increased offtake from the aluminium industry. Prices are expected to improve with a gradual increase in capacity utilisation. A caustic soda plant of 1,82,500 tpa and a 60 MW power plant at Vilayat mainly for captive use are on the anvil with an investment of Rs 772 crore.

The Grasim scrip was down 1.21 per cent at Rs 2,369 on Tuesday.

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