PRESS RELEASE

25 January 2011

Grasim announces results for Q3 ended 31 December 2010
Click here to view the results

Rs. crore
Consolidated net revenue
5,461
Consolidated net profit
502
Capex under Implementation
  VSF & Allied Chemicals
3,400
  Cement
10,150

Consolidated Financial Performance:
Grasim Industries Limited, an Aditya Birla Group company, today reported its results for the 3rd quarter ended 31st December 2010.

Grasim’s consolidated revenue for the quarter at Rs. 5,461 crores (Rs. 4,846 crores) reflects a 13 per cent growth. Net profit stood at Rs. 502 crores as against Rs. 580 crores in the corresponding quarter. The results include financials of Star Cement Company LLC and its subsidiaries, which have been acquired by UltraTech Cement, a subsidiary of Grasim. The VSF business continued to post good performance driven by the strong demand environment. The cement business remained impacted by excess supply and higher energy costs. On QoQ basis, cement business saw a partial recovery in prices, post monsoons.

Sequentially, net profit soared by 55 per cent from Rs. 323 crores to Rs. 502 crores.

Rs. crore
 
Quarter ended
Nine months ended
31.12.10
31.12.09
% Change
31.12.10
31.12.09
% Change
Net revenue
5,461
4,846
13
15,083
14,720
2
PBIDT
1,267
1,511
(16)
3,615
4,822
(25)
Net profit
(before extraordinary item)
502
580
(14)
1,400
2,105
(33)

Growth in production and sales volumes:
   
Production
Sales
Q3FY11
Q3FY10
Per cent change
Q3FY11
Q3FY10
Per cent change
Products
Cement Mn. M.T.
*10.07
9.00
12
*10.08
9.17
10
White cement M.T.
147,228
137,523
7
143,602
130,188
10
Viscose staple fibre M.T.
83,026
81,991
1
84,621
81,306
4
*Including Star Cement volumes

Viscose Staple Fibre (VSF)
The unprecedented rise in cotton prices benefitted VSF. Globally, prices were firm with rising spot pulp prices resulting in better VSF price in China.

Production was at 83,026 tons with full capacity utilisation. Revenue recorded 17 per cent growth backed by increase in sales volumes by four per cent at 84,621 tons and improved realisations. Pulp prices have risen by 35 per cent over the last year, which resulted in decline in operating margins at standalone level.

VSF capex
The Company is setting up a 120,000 TPA VSF plant at Vilayat (Gujarat) at an investment of Rs. 1,690 crores. The product mix will be in line with the market needs. In addition, the capacity at Harihar (Karnataka) will be raised by 36,500 TPA through a brownfield expansion at a capex of Rs. 449 crores. Both these projects are slated for commissioning in FY13.

VSF outlook
Trends in China, prices of competing fibres and pulp will largely govern VSF prices. Prices are expected to remain firm in line with the competing fibres albeit with volatility. The company will continue to focus on market enlargement through product innovation and application development.

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

The demand outlook for caustic looks positive with the increased offtake from the aluminium industry. Prices are expected to improve with a gradual increase in capacity utilisation. A 182,500 TPA caustic plant and a 60 MW power plant at Vilayat mainly for captive use is on the anvil. This will entail an investment of Rs. 772 crores.

Cement subsidiary (UltraTech Cement)
Volumes grew by two per cent in line with industry. Industry demand growth was unexpectedly low due to prolonged monsoons and the political climate in the south. Bottlenecks in the availability of construction inputs and lower spends in realty and infrastructure projects further impacted the demand. Overall volume including Star Cement grew by 10 per cent. The recently acquired Star Cement Group of companies achieved a capacity utilisation of 80 per cent despite challenging conditions in the Middle East. White cement sales volumes were up by 10 per cent. Lower realisations and higher energy cost led to decline in operating margins. However, margins rose from 14.4 per cent to 19.5 per cent sequentially with better realisation.

Cement capex
In line with its strategy to scale up presence in the cement sector, brownfield expansions aggregating to 9.2 million TPA at Chhattisgarh and Karnataka units with related grinding units and bulk terminals are under implementation. Capex of Rs. 5,600 crores has been earmarked for these projects. Major equipment have already been tied up.
An additional capex of Rs. 4,550 crores has been allocated for the augmentation of the grinding and evacuation facility, logistics infrastructure, captive thermal power plant, modernisation and completion of existing projects.

Cement Outlook
The demand for cement is likely to grow by 10 per cent in the long term linked to government initiative to boost infrastructure spending together with a revival in the corporate capex cycle. Good monsoons across the country augur well for the business. The growth rate can decline in the short term if the present market conditions continue
going forward.

With strong demand growth, the margins are likely to return gradually back to normalcy sometime in FY13. The company’s focus on higher volume growth, better logistics support together with cost efficiency, should help in augmenting its performance.

Standalone Financial Performance
With regard to the standalone performance, revenues were higher by 19 per cent. Net profit increased by eight per cent.
Rs. crore
 
Quarter ended
Nine months ended
31.12.10
31.12.09
% Change
31.12.10
31.12.09
% Change
(over restated)
        (Restated) (As Reported)
Net revenue
1,257
1,058
19
3,184
2,840
7,172
12
PBIDT
448
470
(5)
1,234
1,192
2,576
4
Net profit
(before extraordinary item)
283
262
8
786
695
1,467
13
* The reported results for the nine months ended 31st December, 2009 are not comparable as the same included results of the Sponge Iron and Cement Businesses, which have been sold / demerged during the Financial Year 2009-10, effective from 22nd May, 2009 and 1st October, 2009 respectively. Hence, the restated results, excluding the results of the Sponge Iron and Cement Businesses, have been given for last year for better comparison.

Outlook
The long term prospects of the company remain positive, given its leadership position in both cement and VSF businesses, its focus on profitable growth and strong fundamentals. The substantial increase in capacities, improved cost optimisation and higher productivity bode well for the company in the years to come.

Cautionary Statement
Statements in this “Press Release” describing the company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities law and regulations. Actual results could differ materially from those express or implied. Important factors that could make a difference to the Company’s operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company’s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development,
information or events, or otherwise.