Grasim beats Q1earnings estimates but revenue growth below expectations

AV Birla Group flagship Grasim, a diversified holding company for various businesses, posted strong quarterly profit numbers with both operating and net profit exceeding analyst estimates but its revenue growth lagged expectations.

The company clocked a net profit of Rs 482 crore for the first quarter ended June 30against a net loss of Rs 283 crore a year earlier. Standalone EBITDA zoomed to Rs 805 crore from a loss of Rs 128 crore in the year-ago period. Analysts had expected net profit in the region of Rs 310-320 crore for the quarter.

Grasim, which makes viscose staple fibre, filament yarn and chemicals and is also a holding company for the group’s cement and financial services businesses, saw its standalone revenue rise to Rs 3,763 crore from Rs 1,336 crore in the same quarter a year ago.

While the company did benefit from the low base of last year, some analysts had expected this to be higher. On a consolidated basis, the company’s net profit rose seven-fold to Rs 1,667 crore while EBITDA shot up 86% to Rs 4,736 crore. Revenue increased 53% to Rs 19,919 crore. These number exclude the figures of its fertiliser business, which is being hived off for a sale.

Other Key Details:

Viscose fibre business rose almost four-times to Rs 2,103 crore in Q1.

Revenue from chemicals business, which includes caustic soda and allied chemicals, doubled to Rs 1,436 crore.

Covid-19 lockdowns affected sales of textile products, leading to lower volumes of its VSF business on a sequential basis.

The caustic soda capacity utilisation stood at 85% in Q1. The Advanced Materials business reported strong performance, driven by robust demand and better pricing environment.

Grasim is on track to commission VSF expansion at Vilayat, Gujarat. It expects to start the first line in the current quarter and the second line in the next quarter. In the chlor-alkali business, the commissioning of plants is projected over the next four months.

Management Commentary:

The company said that, globally, the impact of the second Covid-19 wave on textile demand was not as severe as the first wave. India observed selective restrictions on business activities during most of Q1.This impacted the sale of textile products, leading to an accumulation of inventory in the value chain.

However, the domestic fibre demand has recovered swiftly after easing of the lockdown and is now nearing the pre-Covid level, Grasim said. It also said that the second wave had a marginal impact on the operational performance of the chemical business.

It added that the second wave slowed down the pace of economic activity. However, with the accelerated pace of vaccination by the government and the receding impact of the second wave, the economy is seeing a strong rebound.