Grasim Industries Limited announces its financial results for the quarter ended 30 June 2020

13 August, 2020

Consolidated Financial Results

Rupees in crore
  Q1 FY21 Q1FY20
Net Revenue 13,621 20,103
EBITDA 2,613 4,461
PBT
(Before Exceptional item)
352 1,294
*Owners’ share

The results should be seen in light of the unprecedented disruption in economic activities due to the Covid-19 induced lockdown in all the major markets during the quarter and the resultant demand and supply chain disruptions.

Viscose business

In this quarter, the health and hygiene concerns have assumed primacy in light of the current pandemic. Grasim’s Liva brand has launched antimicrobial fibre. The fabric produced using this special fibre inherently possesses antimicrobial properties, which inhibits the growth of microbes (bacteria and viruses) on apparels and home textiles and kills them to the extent of 99%+. This makes apparels and home textiles safe, without compromising on performance and fashion quotient. We have further responded to the emerging opportunity in the hygiene segment by commencing non-woven production on existing lines.

The operational and financial performance of the viscose business was subdued for the months of April and May 2020 due to lockdown, but witnessed steady improvement in the month of June 2020 and thereafter, with a rise in the capacity utilisation across the plants to approximately 79 per cent currently. The domestic textile industry was severely impacted by the extension of lockdown in key manufacturing hubs and reduced labour availability, which is expected to ease with Government relaxing the norms.

The Net Revenue for the viscose segment (including VFY) stood at Rs.558 crore with a drop in the sales volume for both VSF and VFY. The share of value-added products in the overall sales volume improved to 30 per cent in Q1FY21, up by 6 per cent on a sequential basis. Exports share of portfolio has grown by 26 per cent to leverage relatively faster demand recovery in international markets. The adverse impact on the EBITDA was partly cushioned by significant cost reduction initiatives taken by the business which included fixed costs savings which reduced by Rs.186 crore during the quarter in comparison to average quarterly cost for FY20.

The global prices of VSF continued to remain weak during the quarter, exerting pressure on the domestic grey VSF prices.

Chemical business

In the Chemical business, the chlorine derivatives products demand remained strong driven by demand from disinfectant and hygiene products.

The Caustic Soda production staged a strong recovery in volumes during the quarter, the capacity utilisation improved to 70 per cent in the month of June after a low of 23 per cent utilisation witnessed in April. For the quarter, the production and sales volume were impacted on account of the COVID-19 related lockdown.

The global caustic soda prices have been on a weakening trend and dipped below $300 level, the lowest in last four years. The Net Revenue for Q1FY21 stood at Rs.704 crore and EBITDA stood at Rs.41 crore. The EBITDA performance was supported by strong chlorine derivatives sales.

Fertilizer

The industry demand for urea improved during the quarter with increased farming activities across the country. The Net Revenue for Q1FY21 stood at Rs.605 crore and EBITDA stood at Rs.72 crore. The y-o-y improvement in the EBITDA was driven by lower fixed costs, higher sales of soil health products and release of old freight cost reimbursement by the Government of India.

Sustainability

VSF business collaborated with other global viscose players in formulating the ZDHC Man-Made Cellulosic (MMCF) guidelines covering responsible production and wastewater / air emission standards. We are committed to implementing the ZDHC MMCF standards at all the fiber manufacturing units.

Capex plan

For the current year, the Board has approved capex plan for Rs.1,615 crore keeping in mind the temporary disruption in the company’s earnings. The capex includes raising capacities in VSF in FY22, apart from ongoing modernisation capex at various plants.

Cement Subsidiary - UltraTech Cement Ltd

UltraTech’s Consolidated Revenue was Rs.7,634 crore, EBITDA of Rs.2,353 crore and PAT of Rs.797 crore for Q1FY21. The consolidated sales volume stood at approximately 14.65 MTPA with capacity utilization at 60 per cent across its network of 54 plants around the country.

General disruption as a result of the lockdown impacted the business performance. The Central and the State Governments have taken measured steps towards opening up of the economy, some encouraging trends were seen during the latter part of May 2020, driven largely by better than expected pick-up in cement consumption in the rural markets.

The company’s focus on conserving cash continued unabated. The ‘Overheads control programme’ initiated by the management cut fixed costs by 21 per cent YoY. Prudent working capital management and control on cash flows resulted in reduction of net debt by Rs.2,209 crore to Rs.14,651 crore. The Net Debt/EBITDA for Indian operations stood at 1.44x (Jun-20).

UltraTech Nathdwara Cement Limited, entered into a binding agreement for divesting its entire equity shareholding of 92.5 per cent in its Singapore based subsidiary, Krishna Holdings Pte Ltd. This was done at an Enterprise Value of approximately US$ 120 Mn +/- working capital adjustments on closing, subject to the customary closing conditions and regulatory approvals in compliance with the local laws.

The acquired plants from Century during the previous financial year have been making good progress on integration, achieving an Operating EBITDA margin of 21 per cent as compared to the all India average of 28 per cent. Once the markets open up, the performance will improve further in line with the existing operations.

Financial Services Subsidiary – Aditya Birla Capital Limited (ABCL)

The Consolidated Revenue of ABCL grew by approximately 11 per cent YoY to Rs.4,035 crore. The company, through its subsidiaries, continued its consistent delivery of profit through its diversified business mode. The net profit after minority interest for Q1FY21 stood at Rs.198 crore.

The NBFC and Housing Finance lending book stood at Rs.58,073 crore in Q1FY21. The core operating profit in NBFC and Housing Finance was maintained despite slow recovery under lockdown. The business continues to have strong focus on quality of book and has reduced ticket sizes across the board.

Overall closing assets under management increased by 8 per cent QoQ to Rs.2,17,643 crore and Equity AUM grew by 19 per cent to Rs.78,017 crore in Jun-20. The business is focussed on building retail customer franchise, the retail AAUM and SIP AUM registering a 12 per cent and 27 per cent sequential growth.

In Life Insurance business (Q1FY21), the First year Premium rose 5 per cent YoY to Rs.309 crore significantly ahead of industry YoY degrowth of 23 per cent. The quality of business witnessed a marked improvement with 13th month persistency up 2 per cent YoY to 81 per cent and opex to premium ratio improved to 16.3 per cent in Q1FY21. In the Health Insurance business, Gross written premium increased to Rs.246 crore (Q1FY21), up 72 per cent YoY with retail mix at 73 per cent.

Outlook

With the easing of lockdown conditions and the gradual resumption of economic activities, demand for the company’s products is expected to rise in the coming quarters. The company has initiated various measures to optimize operations across plants, reduce its fixed costs and conserve cash as part of its comprehensive Business Continuity Plan. The company continues to maintain a very comfortable level of liquidity to navigate an uncertain business environment.

The company with its inherent financial strength, operational excellence, and diverse product portfolio (Cement, Financial Services, Viscose and Chemicals) is well poised to withstand temporary disruptions and sustain leadership across its businesses.

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.

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