Consolidated revenue of Grasim Industries grew 3 per cent to Rs. 18,430 crore in Q2 FY20. EBITDA at Rs. 3,180 crore recorded a growth of 7 per cent YoY and PAT (before exceptional items and one-time deferred tax benefit) was up 6 per cent YoY to Rs. 639 crore, driven by superior performance of the company’s subsidiaries, UltraTech Cement and Aditya Birla Capital.
At the standalone level, profitability was impacted due to global weakening in prices of Viscose Staple Fibre (VSF) and Caustic soda. In the VSF business production and sales volume recorded an increase of 8 per cent and 5 per cent YoY to 148 kilo tonnes and 142 kilo tonnes respectively.
The net revenue for the VSF business for the quarter stood at Rs. 2,431 crore and EBITDA stood at Rs. 381 crore. The global prices of VSF softened further on account of significant capacity additions in China and Indonesia (in last one year) and ongoing US-China trade war. The Indian VSF prices witnessed a weakening trend driven by a steep 23 per cent YoY correction in the Chinese VSF prices.
The weakness in the domestic VSF realisations impacted this quarter’s profitability. The benefit of falling input costs like pulp prices will get reflected in the coming quarters due to inventory time lag.
The company’s Liva brand for VSF products continues to grow its reach in the domestic market. Today, Liva partners with over 40 retail brands and is available across 3,500 outlets in Exclusive Business Outlets and Large Format Stores in addition to many more Multi-Brand Outlet (MBOs) in 250 cities of India.
Sustainability has been the core focus area for the company. The business along with its global JVs has been the first one in the industry to be carbon positive on scope 1 and scope 2 emissions.
The 219 KTPA Vilayat Brownfield capacity expansion is progressing well and is expected to be commissioned by FY21.
“The VSF business will continue to focus on expanding the market in India by partnering with the textile value chain, achieving better customer connect through its brand Liva, extensions into new categories. VSF continues to be the fastest growing textile fibre globally. However, the new capacities commissioned in Asia in the recent past are expected to create short-term demand supply mismatch and resultant pressure on prices,” said Grasim Industries in a press release. Grasim is incurring capex to increase capacities across its key business lines and is potentially well positioned to leverage the next phase of the economic growth.
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