Grasim Industries Limited an Aditya Birla Group company announced its results for the third quarter ended December 31st 2011. The company's performance has been encouraging. Cement business has been the major driver. Net revenue increased by 17% at INR 6,364 crore (INR 5,461 crore). PBIDT grew by 23% from INR 1,267 crore to INR 1,554 crore. Net profit at INR 669 crore (INR 502 crore) rose by 33%

Viscose Staple Fibre
The business performance was subdued due to the challenging environment. After witnessing an upturn in September, sentiments were affected during the quarter as cautious approach was adopted by the textile value chain, given the Euro zone uncertainties. Consequently, demand and prices remained under pressure, impacting volumes by 8%. Increase in input costs due to rupee depreciation, impacted operating margins.

Cement subsidiary (UltraTech Cement)
UltraTech reported revenue of INR 4,865 crore and PAT of INR 598 crore. The sector demand growth improved to around 10% during the quarter on account of a lower base effect in the corresponding quarter. The sector capacity utilization during the quarter improved to 73% as compared to 68% in the preceding quarter. Although post monsoon, the pricing scenario indicated some improvement, the pricing environment is expected to remain challenging.

Variable cost rose by 16% mainly on account of increase in energy cost. This is attributable to 30% rise in the price of domestic coal during Q4 FY10-11 and continuous increase in price of imported coal as also the rupee devaluation by approximately 14%

Cement CAPEX
The Chhattisgarh and Karnataka Brownfield expansion projects aggregating 9.2 million tonne per annum are on track. Both these projects are expected to be operational by Q1FY14.

A total CAPEX of INR 11,000 crore is under implementation in the cement business towards the expansion projects, strengthening of logistic infrastructure, setting up of captive thermal power plants, ready mix concrete plants and modernization projects.

Outlook
In VSF, the demand may remain volatile in the present macro economic conditions. In cement, the surplus scenario should subside gradually over a period of 2 to 3 years with an expected growth in demand. The changed pricing mechanism by Coal India Limited with effect from January 2012 will lead to increase in energy costs. The rising energy cost is a challenge in both the businesses in the present context.

Capacity expansions under implementation will enable the company to grow at a rapid pace and consolidate its leadership even further.