Grasim Q2 profit nearly triples as revenue jumps, margins expand

Grasim Industries Ltd reported a 180% year-on-year rise in its second quarter standalone net profit, as demand for its products bounced back and earnings margins expanded on price hikes.

Standalone net profit after exceptional items jumped to Rs 979 crore for the three months through September from Rs 350 crore a year earlier.

Grasim, the holding company for the Aditya Birla Group’s textiles, chemicals, cement and financial services business, said standalone revenue from operations rose 67% to Rs 4,933 crore for the quarter ended September 30.

Operating profit shot up 87% to Rs 1,504 crore. This, the company said, was owing to better product realisation. 

The company's standalone EBITDA margin expanded to 27% for the second quarter from 19% a year earlier.

Grasim Q2: Other highlights

1) Consolidated EBITDA increased 19% from a year earlier to Rs 4,282 crore.

2) Consolidated profit after tax for the second quarter rose 41% YoY to Rs 1,359 crore.

3) UltraTech Cement’s revenue was Rs 12,017 crore, up 16% YoY.

4) Ultratech EBITDA rose 1% to Rs 2,855 crore, net profit increased to Rs 1,314 crore.

5) Revenue of Aditya Birla Capital Ltd grew 22% to Rs 5,593 crore, consolidated profit grew 43% to Rs 377 crore.

6) Operating profit for viscose staple fibre (VSF) business rose 201% on a year-on-year basis to Rs 514 crore.

Grasim commentary 

The company said prices of both caustic soda and VSF recovered during the second quarter. It also hedged a 51.7% increase in total expenses by passing most of it on to the customer. 

Caustic soda prices in India recovered from multi-quarter lows supported by recovery in demand, tightness in supply led by production losses and higher export sales driven by better export realisation, it said.

Grasim said the gap between prices of cotton and VSF increased to record levels, in the wake of a surge in cotton prices. This, the company said, was a positive signal for VSF prices going forward. 

Demand for textile products in India bounced back with the onset of the festive season, phased reopening of schools and offices, and increased sourcing of textile from India by global brands as a part of the China-plus-one strategy.

The demand momentum picked up in the second quarter and continued thereafter across all businesses. Backed by strong demand, realisation and volumes have improved in key businesses, offsetting the cost increase, it said. 

The company said its operations and revenue were marginally impacted on account of disruption in economic activity due to Covid-19. “The management believes that [the] impact is short term and temporary in nature and there is no significant impact on recoverability of carrying value of its assets and future operations,” it added.