Mumbai: Grasim Industries Ltd, a flagship company of the Aditya Birla Group, on Saturday reported a 20.14% decline in its consolidated net profit due to higher operating cost.

Net profit for the quarter ended 30 June was at Rs487.13 crore from Rs610.01 crore for the same quarter a year ago. However, net sales for the quarter rose 15.72% to Rs7976.34 crore as compared to Rs6892.76 crore year ago.

Total operating cost rose 20.41% at Rs7184 crore for the reporting quarter.

During the quarter under review, new capacities were commissioned. The company commissioned two lines of aggregate capacity of 77,000 million tonne per annum of viscose staple fibre (VSF) business at Vilayat, Gujarat, in July. It has also added a 25 MW thermal power plant at Malkhed, Karnatak, 2014 and 6.50 MW waste heat recovery system at Awarpur, Maharashtra, during the quarter in the cement business.

Grasim started as a textile manufacturer in 1948. Today its core businesses are VSF and cement, contributing over 90% of its revenues and operating profits. It is also present in chemicals which is essentially a backward integration of VSF.

On Friday, shares of Grasim Industries ended at Rs3218.35 a piece on BSE, down 0.08% from previous close while India’s benchmark Sensex Index fell 1.6% to close at 25480.84 points.

In a statement, the company said margins were under pressure due to the pricing environment in both VSF and cement businesses, given the present over capacity in these sectors.

The PBIDT (profit before interest, depreciation and tax) stood at Rs1,488 crore against Rs1,549 crore for the same quarter a year ago.

The interest and depreciation has gone up with the commissioning of the various projects, the full benefits of which will be available in gradual manner, it said.

The tax charge was also higher due to lower exempt income and recent changes in tax laws, the statement said.

“In the VSF sector, margins are likely to remain under pressure in the near term due to the overcapacity in China. Going forward, the slowdown of new capacity additions in China should lead to an improvement in industry utilization which augurs well for the company. The focus on cost optimisation will continue unrelentingly," Grasim said in its outlook statement.

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