Significant improvement in profitability across all Businesses
Q2: EBITDA up 29%; Net Profit up 50%
Consolidated Financial Performance
Grasim has reported consolidated revenue of ` 8,387 Cr. for the 2nd Quarter FY17. It’s EBITDA of ` 2,098 Cr. was up by 29%, driven by the good performance from all the Businesses. Net profit for the quarter increased by 50% to ` 846 Cr. compared to ` 562 Cr. in Q2 last year supported by higher operating leverage and lower interest cost.
The consolidated EBITDA for the half year was up by 33% at ` 4,312 Cr. and Net profit rose by 57% to ` 1,676 Cr. on YoY basis.
Board today approved Dividend Distribution Policy for the Company as per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The objective of this policy is to provide dividend distribution framework to the stakeholders of the Company.
During the quarter, following measures aimed at increasing liquidity in the Company’s equity shares were undertaken.
Composite Scheme of Arrangement
The process of seeking requisite regulatory approvals for the Scheme of merger of Aditya Birla Nuvo with Grasim and subsequent demerger & listing of the Financial Services Business is in progress. The transaction is expected to be completed by Q4 FY17 / Q1 FY18.
Business Performance – Viscose Staple Fibre (VSF)
In the VSF business, steady demand globally coupled with high capacity utilisation and low inventory levels led to increased VSF prices in the international market.
Overall sales volume grew by 9% YoY led by 19% growth in domestic markets. With higher volume and realisation, Revenue soared by 21% at ` 1,740 Cr. EBITDA at ` 371 Cr. vis a vis ` 211 Cr. in Q2 last year, rose by 75%. Apart from increased volume and realisation, better sales mix and operating efficiencies also added to higher profitability.
In the Chemical business, sales volume was up by 8% YoY, mainly on account of additional volume from the Ganjam plant which was acquired in September 2015. EBITDA was up by 26% at ` 213 Cr. compared to ` 169 Cr. in the last year, attributable to higher volumes and better operating efficiencies.
Cement Subsidiary (UltraTech Cement)
UltraTech’s revenue (Net of Excise) stood at ` 5,772 Cr. as compared to ` 5,919 Cr. in Q2 last year. A decline in the operating cost due to reduction in energy and logistic costs resulted in improved profitability. EBITDA at ` 1,378 Cr. was higher by 16% as compared to ` 1,186 Cr. in the corresponding period of the previous year.
The outlook for the VSF business is expected to remain stable. The business will continue to focus on expanding the VSF market in India by partnering with the textile value chain, achieving better customer connect through Brand Liva and enriching the product mix through a larger share of specialty fibre. The Company is working on debottlenecking opportunities to meet growing demand.
The demand for Caustic in India is expected to grow with the rising demand from the end user industry. The commissioning of new capacities in the industry may increase supply in the medium term. Our plan is to increase Caustic capacity by 208K TPA to 1048K TPA through brown field expansion at Vilayat (Gujarat) and debottlenecking at other plants is on track.
The government’s thrust on developing infrastructure spending, good monsoon, development of smart cities leading to growth in housing demand in Tier – I and Tier II cities augurs well for the cement industry. The slower pace of new capacity addition will lead to better Industry utilisation. UltraTech will benefit with its presence across the country to meet the expected rise in demand.
Grasim is well poised to reap the benefit of investments in the growth plans of its businesses with the sustained growth in the Indian economy.
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