Grasim announces strong growth in Q1 but the outlook for textiles, caustic soda prices is not good

NEW DELHI : Aditya Birla’s flagship Grasim Industries Ltd reported better-than-expected operating results for the June quarter, with the textile and chlor-alkali businesses reporting their highest quarterly earnings ever. now before interest, taxes, depreciation and amortization (Ebitda).

Independent net profit from core businesses in 809 crore up 68% year-on-year, beating Bloomberg analysts’ estimate of 637 crore.

Global caustic soda prices averaged higher at $769/mt in Q1FY23 compared to $719/mt in Q4FY22, due to factors such as supply chain disruptions and higher energy prices. Domestic caustic soda prices were further supported by a weaker rupee and steady demand. Sales of caustic soda reached 278,000 tons in Q1FY23, up 17% y/y and 2% respectively with a utilization rate of 89%.

Ebitda chemicals segment increased by 193% YoY and 62% respectively 890 crore despite weak chlorine demand. While user industry segments such as dyes and pigments contribute to negative perceptions of chlorine, on the positive side, chlorine consumption is bred for value-added products. increased during the quarter.

India’s textile and apparel demand remained strong in the quarter helping to boost the sales volume of the viscose fiber (VSF) business to 197,000 tons, up 10% and 76% year-on-year, respectively. domestic revenue contribution is 94%. The newly commissioned 600 ton/d brownfield plant in Vilayat contributed 51,000 tonnes of sales volume in the quarter.

VSF Ebitda segment at 500 crore improved 3% over the same period but almost doubled. The continued improvement in VSF Ebitda was helped by better performance and sales volume, which offset the increase in input costs of sulfur, caustic soda, coal and other products.

Cost may still be a concern as implementation activities are also decreasing at both VSF and caustic soda businesses.

After peaking in June 2022, cotton prices have dropped as fears of a global recession lead to a drop in demand. Even the price of caustic soda started to fall at the end of June and is currently at $650/ton.

Analysts at Motilal Oswal Financial Services, which released the results, said the recent drop in VSF prices in China along with reduced orders by US and European retailers in anticipation of falling demand could hit margins. short-term profits of the company.

The price of caustic soda has fallen in the global market and as a result, margins in the chemical segment may experience some pressure going forward.

However, continuous expansion of both VSF and chemicals can lead to mass improvement. Analysts at MOFSL expect a compound annual growth rate of 11% in volume in both VSF and caustic soda for the 22-24 fiscal year.

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