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Grasim Industries, an Aditya Birla Group company, has reported an improved performance in the June quarterly, largely due to better realisations from the viscose staple fibre (VSF) and cement business.
Though VSF prices softened from its peak levels following weak demand and high inventory, better margins and good performance by the pulp joint venture resulted in enhanced operating profit.
Despite the challenging environment, higher realisations pushed up revenue from VSF by five per cent to Rs 902 crore (Rs 856 crore). While VSF production was up marginally at 69,898 tonnes (69,328 tonnes), sales were down 19 per cent at 54,839 tonnes (67,302 tonnes).
During the quarter, VSF production was impacted due to the suspension of operations at Nagda (Madhya Pradesh) because of water shortage.
The total shutdown lasted for 27 days as against 55 days last year, the company said.
The chemical business was affected by the water shortage at Nagda.
Caustic soda and allied chemical production grew by five per cent in the June quarter.
Caustic prices moved upwards, driven by positive sentiments in the domestic and international markets.
Investment
The company has lined up an investment of Rs 3,400 crore for enhancing capacity of VSF and allied chemical production.
It is setting up a 120,000 tonnes a year VSF at Vilayat in Gujarat and expanding its capacity by 36,500 tpa at Harihar in Karnataka.
Both the projects are slated for completion by financial year 2013. The Vilayat project includes a caustic soda production facility of 182,500 tpa.
The company expects both the VSF and cement business to remain challenging with the sharp fall in cotton prices and uncertainty in Chinese demand to exert pressure on VSF prices.
The glut in production and softening cement demand amid rising input cost may hit profitability from cement business.
Grasim plans to face the present challenges through backward integration and cost leadership in VSF business.
Both VSF and cement will benefit from rising consumption as well as investment in India in the long-term.
Capacity expansions under implementation in these businesses will enable the company to grow at a rapid pace and consolidate its leadership even further, it said
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