Grasim Industries Limited today announced its unaudited financial results for the quarter and nine months ended 31st December 201910 February, 2020
Grasim Industries reported its Q3FY20 financial results today. Consolidated revenue for the quarter stood at Rs.19205 Cr, while Consolidated EBITDA came in at Rs.2968 and PBT at Rs.1454 Cr. For the nine months ended 31st Dec 2019, Consolidated revenue was up by 5% at Rs.57,724 Cr. and Consolidated PBT at Rs.6,387 Cr. recorded a growth of 23% YoY.
The key highlights of the quarter are as follows:
- VSF business reported a 5% and 3% increase in production and sales volume respectively.
- Profitability was impacted by drop in domestic VSF prices, on the back of weakening global prices.
- Benefit of falling pulp prices will get reflected in coming quarters.
- For the Chemicals business, Net Revenue in the Quarter stood at Rs.1362 Cr and EBITDA at Rs. 185 Cr.
- Share of EBITDA from specialty chemicals (including epoxy resins) stood at 1/3rd of Chemical business.
- The total capex plan of Rs. 7,800 Cr. (at standalone level) is under execution for raising capacities in both the VSF and Chemical businesses
Consolidated Financial Results
|Q3 FY19||Q3 FY20||9MFY20||9MFY19|
Consolidated Revenue for the nine months ended 31st December 2019 stood at Rs.57,724 Cr. recording a growth of 5 per cent. Consolidated PBT at Rs.6,387 Cr. recorded a growth of 23 per cent YoY.
Revenue and EBITDA for the quarter, however, remained largely flat.
In the VSF business, production and sales volume recorded an increase of 5 per cent and 3 per cent YoY to 148KT and 138KT respectively. The Net Revenue for the viscose segment (including VFY) stood at Rs.2,194 Cr. and EBITDA for the quarter stood at Rs.256 Cr.
This quarter’s profitability was impacted primarily by the drop in the domestic VSF prices, on the back of weakening global prices owing to large supply surplus triggered by new capacity additions in Asia in last one year and global demand slowdown caused by U.S-China trade war. The reduction in the domestic VSF prices was accelerated to counter surge in cheap yarn imports from China/Indonesia which impacted viability of Indian spinners. The domestic VSF prices may witness some improvement in the near term with improving sentiments post phase-1 of US-China trade deal and near-term global supply constraints from China.
The benefit of falling pulp prices will get reflected in the coming quarters due to lag in inventory consumption.
Our Liva brand for VSF products continues to grow its reach in the domestic market, partnering with over 40 retail brands and is available at over 3,600 outlets.
Sustainability has been the core focus area for the company. Our VSF business has been ranked No.1 VSF Producer by global NGO Canopy in their latest Hot Button Report. Canopy’s Hot Button report ranks the world’s top rayon-viscose producers on their progress in eliminating endangered forests from their supply chain. More than 200 leading global brands, retailers and designers are part of the Canopy Style initiative.
The 219 KTPA Vilayat Brownfield capacity expansion is progressing as per schedule and expected to be commissioned by FY21.
* (Includes a one-time expense of Rs.133 Cr., towards settlement of various disputed and contingent liabilities under Under the Sabka Vishwas (Legacy Dispute Resolution) scheme 2019 announced by the Government of India)
The Net Revenue for Q3FY20 stood at Rs.1,362 Cr. and EBITDA stood at Rs.185 Cr. Global caustic soda prices were soft during the quarter. Domestic caustic prices were impacted due to increased domestic capacity, rise in imports and weak demand.
Caustic Soda sales and production volume for Q3FY20 stood at 257KT and 261KT respectively. The speciality chemicals (Value added chlorine product) profitability was impacted by slowdown in demand. The share of EBITDA from Speciality chemicals including Epoxy resins stood at ~1/3 of Chemical business.
The Caustic Soda capacity expansion projects at Rehla, Vilayat and Balabhadrapuram are at different stages of execution with expansion of specialty chemical products too.
The total capex plan of ~ Rs.7,800 Cr. (at standalone level) is under execution for raising capacities in both the VSF and Chemical businesses, apart from ongoing modernisation capex at various plants. This capital expenditure is expected to be incurred over three years period from FY20-FY22.
Cement Subsidiary - UltraTech
UltraTech reported Consolidated Revenue of Rs.10,354 Cr. and EBITDA of Rs.2,141 Cr. in Q3FY20 up 25 per cent YoY. PAT stood higher at Rs.712 Cr. up 80 per cent YoY. The consolidated sales volume stood at ~20.90 MTPA.
The acquired plants of Century ramped up production touching a capacity utilization of 79 per cent in Dec-19. Brand and operational integration is underway and is expected to reach 84 per cent by Q2FY21.
UltraTech has divested its entire shareholding in Emirates Cement Bangladesh Ltd. and Emirates Power company Ltd. to Heidelberg Cement Bangladesh at Enterprise Value of BDT equivalent of US$ 30.2 Million.
UltraTech Nathdwara Cement Limited is fully integrated with the UltraTech systems and processes. The plants have achieved optimal efficiencies and are PBT accretive.
Financial Services Subsidiary – Aditya Birla Capital Limited (ABCL)
The Revenue and Net profit after minority interest for Q3FY20 (as reported by ABCL) are at Rs.4,326 Cr. and Rs.250 Cr. up by 14 per cent and 17 per cent respectively.
The Overall lending book (NBFC and Housing Finance) stood at Rs.60,123 Cr. (Q3FY20).
NBFC and HFC have optimised asset and liability mix with adequate liquidity to meet growth requirements.
The Average Assets Under Management stood at Rs.2,65,475 Cr. (Q3FY20).
In Life Insurance business, the Individual First year Premium are up 14 per cent to Rs.1,261 Cr. in 9MFY20. The persistency ratios witnessed a consistent improvement, the 13th month persistency ratio improved by 562 bps to 80.9 per cent in Q3FY20.
In the Health Insurance business, Gross written premium increased to Rs.547 Cr. (9MFY20), up 73 per cent YoY.
The VSF business will continue to focus on expanding the market in India by partnering with the textile value chain, achieving better customer connect through its brand LIVA and extension into new categories. VSF continues to be the fastest growing textile fibre globally. The economic standstill in China and improved sentiment post phase-1 of U.S China trade war may lead to some improvement in VSF prices in near term, however the underlying supply-demand imbalance is likely to continue for some time.
The Chemical business is under an expansion mode for both chlor-alkali and specialty chemicals. The ongoing expansion projects at different sites and new product lines for specialty chemicals will enable growth of the business. Simultaneously, the business is focusing in reducing cost of power (a key input) by optimizing power mix and increasing share of renewable power.
In Cement, signs of revival were visible in some markets during the latter part of Q3FY20. This, together with the Government's firm commitment to revive the economy and the thrust on infrastructure spending augur well for the growth of cement demand. The company with its presence across the country, is the best positioned to take advantage of the revival in cement demand, despite the anomalies that may get created in demand patterns in some parts of the country due to extraneous reasons.
In Financial Services, ABCL is a universal financial solution provider catering to the diverse needs of its customers across their life cycle. ABCL is committed to serving the end-to-end financial services needs of its retail and corporate customers under a unified brand — Aditya Birla Capital.
Grasim is incurring capex to increase capacities across its key businesses and is potentially well positioned to leverage the next phase of the economic growth.