Aditya Birla Group-owned Grasim Industries saw its net loss widen to Rs 118 crore on a standalone basis for the June quarter compared to Rs 52 crore a year ago, on the back of Grasim's continued Rs 10,000 crore investment into its decorative paints business - Birla Opus - as well as other new-age businesses such as e-commerce. Margins were also impacted by higher input costs in the key cellulosic fibre segment, the company reported.
The standalone revenue grew by 34 percent on year to Rs 9,223 crore, while operating margin fell to 4.41 percent as against 5.07 percent in the same quarter a year ago. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) on a standalone basis improved to Rs 528 crore, compared to Rs 418 crore in the year-ago period.
Birla Opus build-up continues
In a press release, Grasim said that the Birla Opus business reported a "double-digit" revenue growth for the quarter on a sequential basis, although it did not detail the exact revenues from the segment. The release added that as per its internal estimates, Birla Opus is now the third largest paints brand in India. Grasim noted that the organised paint industry grew by 5 percent year-on-year, with a slight de-growth excluding Birla Opus.
Of the Rs 10,000 crore planned capital expenditure on the paints business, it has spent Rs 9,555 crore till June, Grasim said in the release. The company plans to have a total paint manufacturing capacity of 1.332 billion litres per annum across six manufacturing plants across India. Five of them are up and running, while the sixth one, at Kharagpur in West Bengal, is currently under trial production, and its expected to be commercialised in the ongoing quarter.
In its decorative paint business, Grasim has set a break-even timeline of three years from the start of full-scale operations, with the management having expressed confidence in meeting the timeline. The company has scaled up its dealer onboarding programme, as well as marketing spends and influencer outreach.
Fibre segment pressures
For cellulosic staple fibre (CSF) and cellulosic fashion yarn (CFY), which are used extensively in the apparel and allied industries, the company reported pressures due to higher input costs, and lower export volumes. Segment revenue during the quarter increased by 7 percent year-on-year to Rs 4,043 crore, but EBITDA declined by 20 percent to Rs 322 crore.
Domestic CSF volumes grew by 2 percent year-on-year. Grasim, however, noted that overall CSF sales volumes declined by 1 percent to 209,000 tonne, owing to a decline in exports. Despite CFY volumes growing by 6 percent year-on-year, realisations suffered due to competition from cheaper Chinese imports.
Chemicals business improves
Revenue from the chemicals vertical grew by 16 percent to Rs 2,391 crore, on the back of caustic soda sale volumes growing by 8 percent year-on-year, even as international spot prices remained largely flat during the quarter.
The company indicated that despite improving realisations, oversupply continued in some product categories. In specialty chemicals, where Grasim has aimed to ramp up its capacity, the company said that realisation is being impacted due to cheap imports and higher input costs.
Consolidated results
On a consolidated basis, Grasim reported a 32 percent growth in net profit for the June quarter at Rs 1,419 crore, backed by the strong performance of cement business - UltraTech Cement - which declared its financial results in July. Grasim's consolidated revenue was higher by 16 percent year-on-year at Rs 40,118 crore.
Grasim owns a 56 percent stake in UltraTech, India's largest cement maker, whose net profit grew by 49 percent year-on-year to Rs 2,226 crore, on the back of strong pricing and volume growth during the quarter.
The company declared its Q1 financial results during market hours. Its shares were under pressure throughout trading, having closed on August 8 at Rs 2,691.60 apiece on the National Stock Exchange.
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