Grasim Q2: Profit up 12% YoY after Q1 loss, chemicals segment shines

The company repored higher standalone profit and revenue

Aditya Birla Group flagship Grasim Industries Ltd reported a standalone profit of Rs 805 crore for the July-September quarter, an increase of 12 percent year-on-year. This also represents a return to profitability for the firm, which reported a loss of Rs 721 crore for the April-June quarter, as it built up its capital expenditure-intensive paints business, Birla Opus.

Standalone earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the quarter increased slightly year-on-year to Rs 1,786 crore, due to a large dividend income component.

The company's topline increased by 26 percent year-on-year to Rs 9,610 crore for the reported quarter, with the chemicals business reporting a 17 percent increase in revenue, and Birla Opus continuing to scale up, despite indifferent demand in the sector.

Grasim has not started separately reporting its revenues from the paints division, and plans to do so once all the plants are operational. The company operationalised its sixth and final plant at Kharagpur, West Bengal in October, taking its total capacity to 1.332 billion litres per annum (LPA). Grasim has invested nearly Rs 10,000 crore in the paints business, and aims to break even within three years of full-scale operations.

In Grasim's core cellulosic fibres business, consisting of cellulosic staple fibre (CSF) and cellulosic fashion yarn, demand was mixed. The sales volume of CSF declined by 5 percent year-on-year for Q2, which the firm attributed to temporary logistical challenges at its Vilayat facility. Volumes of CFY increased by 3 percent over the same period, owing to festive demand, although realisations took a hit amid dumping of cheap products by Chinese manufacturers, Grasim said in a release.

Despite caustic soda prices continuing to decline on the international market, realisations in India improved due to higher demand, and the depreciation of the rupee, driving earnings from the chemicals segment. However, sales volumes of caustic soda were flat over the same quarter last year. On the other hand, volumes of specialty chemicals were higher by 34 percent year-on-year.