The growth in profit was driven by performance of its subsidiaries UltraTech Cement and Aditya Birla Capital
Grasim Industries reported a year-on-year increase of nearly 15.32% in its consolidated net profit before exceptional item to Rs 1,287 crore for the three months of April-June 2019, driven by performance of its subsidiaries, UltraTech Cement and Aditya Birla Capital.
The company’s net revenue from operations increased 12.52% y-o-y to Rs 18,861 crore during the quarter, while the consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) increased 31% y-o-y to Rs 4,217 crore primarily on the back of higher operating income reported by cement subsidiary UltraTech. Consequently, the consolidated Ebitda margins of the company expanded by 300 basis points on a y-o-y basis to 22%, according to company’s investor presentation.
UltraTech Cement had reported consolidated revenue of Rs 10,178 crore up 14% y-o-y and Ebitda of Rs 2,840 crore in Q1FY20 up 61% y-o-y.
However, on a standalone basis, while the volumes registered a growth in both viscose and caustic soda businesses, profitability was impacted due to global softening in prices.
The VSF production and sales volume of 140KT and 138KT respectively witnessed an increase of 4% and 5% y-o-y. Ebitda for the quarter declined a sharp 25% y-o-y to Rs 442 crore as the profitability was impacted with the decline in Chinese VSF prices of about 21% y-o-y and around 8% sequentially. The company said that VSF brand ‘Liva’ has been extended to the new product line of sarees, and it is working with its value chain partners to make ‘Liva’ sarees as popular as the ‘Liva’ tagged garments in the women’s wear segment.
The Ebitda of the chemicals business suffered a decline of 10% on a y-o-y basis to Rs 446 crore as it was impacted by softening caustic soda prices globally, which put pressure on prices in domestic markets, Grasim said in a statement. Rise in imports and production ramp up of newly commissioned capacities in the industry may continue to have an impact on prices in the near term, it added.
The total capex plan of Rs 7,800 crore (at standalone level) is under execution for raising capacities in both the VSF and chemical businesses, apart from ongoing modernisation capex at various plants. This capital expenditure will be incurred over FY20-FY22, it said.
According to analysts, Grasim’s overall debt is increasing sequentially. US and China trade war leading to downfall of overall demand of Viscose business has had a hit in this quarter also, while rupee depreciation is impacting the company’s margin.
Grasim’s consolidated net debt stood at Rs 22,092 crore as on June 30, 2019, while the net debt to Ebitda stood at 1.38X.