Home >Companies >Company-results >Grasim Industries Q2 profit drops 38%, but standalone business shines

Mumbai: Aditya Birla Group flagship Grasim Industries Ltd Tuesday said consolidated net profit in the quarter ending September fell 38% from a year ago to Rs524.9 crore. The company attributed the decline to higher interest expense and employee benefits expense rising over 90% to Rs1,076.6 crore. Revenue, on the other hand, jumped 62.7% from the year-ago period to Rs13,646 crore.

September quarter earnings are not comparable with the year-ago period because of Grasim’s merger with Aditya Birla Nuvo Ltd which took effect on 1 July 2017.

On a standalone basis, however, the company reported strong numbers for both its viscose and caustic soda businesses. While viscose revenue grew 21.8% year-on-year to Rs2,119 crore, thanks to a 8% rise in sales volumes, caustic soda revenue grew 27% to Rs1,168 crore, thanks to a similar 8.3% rise in sales volume and international prices hitting multi-year highs.

Sushil Agarwal, Group CFO of the Aditya Birla Group, attributed the volume jump in viscose sales to de-bottlenecking of the company’s plants. On rising international caustic soda prices, Agarwal said, “There is robust demand for caustic soda because its biggest consumer – the alumina industry – is doing very well. On the supply side too, there are issues in China because of environmental reasons." 

On capex plans, Agarwal said the company has earmarked about Rs3,850 crore for its viscose and chemicals businesses and expects to spend the same over the next 18 months. 

Last month, Grasim’s subsidiary UltraTech Cement Ltd had reported a 28.3% drop in standalone net profit to Rs431.2 crore in the quarter under consideration as it was hurt by higher interest outgo and fuel and freight expenses. UltraTech’s earnings during the quarter was also affected by costs related to its acquisition of Jaiprakash Associates Ltd’s 21.2 million tonnes per annum (mtpa) cement capacity in the first quarter of 2017-18. 

“This being the first quarter of operations post-acquisition, the company has injected the much-needed working capital. The most critical aspect has been to improve and stabilize the quality of cement being manufactured at these plants and bringing it up to the company’s standard. Towards this, initial one-time expenses were undertaken for improving efficiencies and plant maintenance," UltraTech added. 

The company had also said it had graduated all output from acquired assets to the UltraTech brand and that there has been a month-on-month decline in operational cost and an increase in capacity utilization.

On Tuesday, shares of Grasim Industries fell 1.06% to Rs1,209.05 on BSE while the benchmark Sensex shed 0.28% to end the day at 32,941.87 points.

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