Conference Call      
          Grasim Industries
Capex for H2FY12 at Rs 4845 crore


Grasim Industries came out with financial results for the quarter ended September 11 and conducted concall to discuss financial performance and prospects of the company. Adesh Gupta – Whole time Director and CFO, KC Birla – Sr Executive President and CFO – UltraTech Cement, Sharad Agarwal – General Manager (Finance) addressed the call.

Highlights of the call are:
The company has reported 29% increase in consolidated Net Profit at Rs 417.94 crore over 28% increase in total income from operations at Rs 5774.13 crore in the quarter ended September 11.
On the standalone front, the company has reported 23% jump in Net Profit at Rs 344.84 crore over 30% increase in total income from operations at Rs 1248.52 crore. Operating margins slipped 360 bps to 26.9% on the back of cost pressure in VFY business.
VSF business witnessed higher volumes led by improved consumption and restoring of dried pipeline inventory. Sales volumes improved 17% to 78959 MT in quarter under review. VSF prices staged marginal recovery and improved 7% to Rs 124689 per MT. On the standalone front, supported by better volumes EBIDT of VSF business grew 13% to Rs 307.90 crore. However, profits from JV's were affected due to planned maintenance shutdown at AV Nackawic. Revenues from JV's marginally grew 3% to Rs 242 crore and that of EBIDT slipped 61% to Rs 21.9 crore in the quarter under review.
Production in chemical business grew 21% to 65907 MT in quarter ended September 11. With 30% increase in sales volumes and 24% increase in ECU realizations PBIDT was up 44% to Rs 46.6 crore despite higher energy costs. Caustic capacity expansion of 182500 TPA at Vilayat is progressing as per schedule and is expected to commission in Q4FY13.
The Indian cement industry has witnessed 6 million MT of capacity addition (4.1 million MT Jaiprakash and 1.5 million MT – Chettinad Cements) during the quarter taking total industry capacity to 314 million MT. With domestic growth of 6.9%, Capacity utilization stood at 70%. The management expects 17 million MT of capacity addition in FY12.
With the additional volume from acquisition of Star Cement at 0.65 million tons, total cement production of the company inched up 11% to 9.51 million Mt, Cement sales volumes inched up higher 9% to 9.76 Million Mt and Clinker sales volumes increased 19% to 0.28 million Mt in quarter under review. Domestic cement realization has improved 17% to Rs 3638 per MT while that of clinker has improved 38% to Rs 2255 per MT respectively.
During the quarter, market share of Star Cement increased from 12.8% at end of September 10 to 14.9% at end of September 11. The company has reported break even at EBITDA level.
Spike in the coal prices (both imported and domestic) coupled with spike in diesel prices (which have impacted transportation cost) has pressurized margins in cement business. Raw material cost has inched up to Rs 355 per ton against Rs 341 per ton in previous period. The management expects demand growth to be 7-8% for H2FY12.
The standalone capex for FY12 is Rs 1680 crore and that of Cement business is Rs 4710 crore. The Company has already spent Rs 1545 crore of capex in H1FY12 and is confident of spending capex in H2FY12 as noted i.e., Rs 4845 crore.