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Tuesday, May 19, 2009

Higher interest, depreciation pull Grasim Q4 net down 5%

GRASIM Industries, the Aditya Birla group flagship, on Tuesday posted a 5% fall in consolidated net profit before extraordinary items for the fourth quarter to Rs 569 crore as interest costs and depreciation rose due to commissioning of new projects. Net sales grew 5% to Rs 4,957 crore during the quarter while earnings per share slipped to Rs 62 from Rs 65.
    The diversified producer of cement, viscose staple fibre and chemicals saw its full year consolidated net profit fall 24% to Rs 2,186 crore. Total revenue increased 8% to Rs 18,602 crore. the company has recommended a dividend of Rs 30 per share.
    "The company's profit to some extend has been impacted due to economic slowdown, but we expect current demand will sustain going forward as positive indications trickling in from the new government," Grasim Industries director DD Rathi told ET.
    The company's performance was dragged down by sluggish growth in the viscose staple fibre business. Poor prices and low demand in key markets affected the business, the company said. The outlook for VSF will remain subdued as the company expects overcapacity in China and the prices of other fibres.
    On the cement outlook, the company said the commissioning of new capacities in FY10 may result in a reduction in capacity utilisations which will have an adverse impact on margins. Any slowdown in the economy will aggravate the inevitable surplus in production capacity, it added. "There could be demand slowdown in the monsoon season and prices likely to go down," Grasim Industries CFO Adesh Gupta said. Oversupply could depress prices and squeeze margins in FY10, estimate research analysts. The cement industry may add 40-45 million tonnes of capacity this fiscal, a 21% increase over the installed capacity. Cement demand is growing at 7-8%, it grows at 1.25% of GDP growth rate.
    The downturn hurts cement less than other sectors as demand in rural areas made up for the fall in demand in urban areas. The industry produced 181 MT of cement, and consumed 176 million tonnes last financial year.




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