India`s Aditya Birla Group-owned Grasim posts drop in Q2 profit on weak prices
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Aditya Birla Group-owned Grasim Industries reported a decline in profit for the fifth straight quarter on Monday, hit by weak prices in its chemicals and textiles businesses.
The company's standalone net profit fell nearly 18% to 7.95 billion rupees ($95.50 million) in the three months ended Sept. 30 from a year earlier.
Grasim's standalone profit does not include the results of its units including Ultratech Cement and Aditya Birla Capital.
The viscose staple fibre (VSF) business, Grasim's largest segment, took a hit as prices for the key material used in various kinds of clothes fell. This pushed revenue from the segment down to 38.89 billion rupees from 39.03 billion rupees a year ago, despite sales volumes rising 24%.
The drop marks the fourth straight quarterly decline for the segment, which accounted for 60.4% of Grasim's total revenue.
The company's total revenue fell 4.5% to 64.42 billion rupees, its second straight quarterly fall.
"Given the macro-economic situation, demand in global consuming markets like the U.S. and Europe remains muted, though the festive season led to an uptick in domestic demand. Domestic prices remained under pressure due to the softening of international VSF prices," the company said in a statement.
Grasim grappled with declining prices in its second-largest segment, the chemicals business, as well, weighed down by chemical products it makes such as caustic soda, leading to a nearly 27% revenue drop, despite sales volumes rising 3%.
Caustic soda prices have started to improve from their lows in the first quarter, but analysts expect to see benefits only from the third quarter of fiscal 2024.
Last month, Grasim's unit Ultratech Cement beat second-quarter revenue estimates while its diversified financial services subsidiary Aditya Birla Capital reported a climb in profit earlier this month.
The company approved capital expenditure (capex) of 1.44 billion rupees for different businesses and has approved rephasing of spending of earlier approved capex entailing an additional spend of 1.38 billion rupees in the current fiscal.
Budgeted capex for fiscal 2024 is revised at 59.29 billion rupees, the company added.
Grasim's foray into the paints sector under the moniker 'Birla Opus' is scheduled for the fourth quarter of fiscal 2024.
Shares of Grasim closed 0.9% lower ahead of its quarterly results. They have risen 11.9% so far this year.
