ET reported that Grasim Industries benefited from a sharply improved performance in its key cement business and the September 2011 quarter results were broadly better than analysts' estimates. The realizations from its cement division also improved 17.7% YoY on a per tonne basis in the quarter, which helped the company's consolidated operating profit margin improve nearly 40 basis points YoY to 17.8% in the quarter under review.

The company's cement division accounted for nearly 72.9% of its consolidated sales in the quarter under review. Grasim's consolidated net sales also rose 28.2% to INR 5,774.1 crore in the September quarter, while net profit grew 29.2% YoY.

The company has highlighted that its results for the September quarter are not strictly comparable with a year earlier, given its subsidiary Ultratech's earlier acquisition of UAE based Star Cement, and that the results were consolidated only from October 2010. Nevertheless, the growth in Grasim's consolidated sales in the second quarter was faster than reported in the June 2011 quarter and for the entire FY11.

In its cement division, Grasim's consolidated dispatches (including Star Cement) grew nearly 8.9% YoY to 9.76 million tonnes in the September quarter, and realizations on a per tonne basis also improved an estimated 17.7% YoY. To the company's credit, higher realizations for its cement division on a per tonne basis in the quarter under review, helped to deal with high input costs, like coal and freight and tonne.

Also, strong growth in cement realizations was partly due to a low base effect in the corresponding period of the previous year, say analysts. In its VSF (viscose staple fiber) division, realizations improved nearly 8.6% YoY per tonne basis in the September quarter, but the company has also grappled with high energy costs.

The segment profit margin of this division also fell on a YoY basis in the quarter under review. Going forward, construction activity is expected to pick up in the post monsoon season, and media reports indicate that cement prices have shown signs of firming up in different parts of the country.

However, rising home finance rates have cast a shadow on demand from the key real estate sector, in the short term. Apart from that, key input costs remain at elevated levels. And in its VSF division, the company has highlighted uncertainty in global demand conditions going forward, especially from the current difficulties in the euro zone.

(Sourced from ET)