Cement business contributes to 43% of Grasims revenue and 31% of profit, while VSF accounts for 33% and 42% respectively. Sponge iron business brings 15% of revenues and 18% of profits.
For the half year ended September 2004 the net profit has increased by 32% to Rs 439.1 crore, while the net sales have increased by 29.7% to Rs 3,045.2 crore.
According to a company press release, in the cement business, the capital outlay currently on hand is about Rs 589 crore, which will be spent over FY05 and FY06. The company is banking on the continued infrastructure focus of the government.
Grasim CFO DD Rathi said: During the September 2004 quarter the cement business out performed in the north, while it under performed in the west, which was primarily due to movement to other markets like north and south. At the same time, input costs for cement have also been rising.
Mr Rathi added that in the white cement business, competition has increased from subsitutes and hence the company is innovating its product offering.
Digvijay Cement, held by Grasim, has done better in this quarter (net profit of Rs two crore and operating profit of Rs four crore), according to Mr Rathi. Its revival package is pending clearances from authorities.
Grasim is looking at expanding the size of VSF business. Mr Rathi said: The growth could be in any manner including pulp (a key raw material), either inside or outside India. The company has 14% market share in VSF sector globally, with 22% of the worlds production. It has a capacity of 2,51,750 tonne, with expansion of 54,750 tonne underway over the next 18 months at Rs 543 crore. There is nothing to be acquired in India in VSF sector though globally some capacities could be available, according to Mr Rathi. Grasims gross profit for September 2004 quarter has increased by 31% year-on-year to Rs 387.8 crore. Tax expenses have increased by 93% to Rs 102.5 crore, which has been attributed to withdrawal of incentives. Raw material expenses (net of stock) have increased by 44.5% to Rs 430.85 crore, while power & fuel costs have increased by 19% to Rs 262.87 crore.