Grasim reports 48% profit growth in Q3 but misses street estimates

Aditya Birla Group flagship Grasim, which operates chemicals and staple fibre business and is also a holding company for Ultratech Cement and the group’s financial services business, reported strong revenue and profit growth for the third quarter but still missed analysts’ expectations.

Grasim said standalone profit after tax from continuing operations rose 47.7% to Rs 489 crore for the quarter ended December 31, 2021 from a year earlier. On a sequential basis, net profit almost halved from Rs 947 crore in Q2.

Net profit after factoring in numbers from discontinued operations rose 46% to Rs 522 crore.

The company’s consolidated net profit from continuing operations, which includes numbers from cement major Ultratech and other units, rose 26% to Rs 1,713 crore for the third quarter.

Analysts were expecting a much bigger jump in standalone net profit for the company with estimates pegging it in the Rs 550-600 crore bracket.

On the other hand, the company did report better-than-expected top line growth.

Standalone net sales rose 56% to Rs 5,785 crore in the quarter on a year-on-year basis and 17.2% on a sequential basis. Analysts were expecting revenue to be around Rs 5,350-5,400 crore.

Grasim’s share price skid 4.3% in a weak Mumbai market on Monday and was trading around Rs 1,637 apiece during the last hour of trade, after the company declared its financials.

Other Key Highlights

1) Standalone EBITDA rose 36% to Rs 963 crore in Q3, in line with street expectations.

2) The company benefited from strong growth in the global demand for textile products in the US and Europe as also its domestic market.

3) Revenue from viscose business (fibre and yarn) grew to Rs 3,335 crore from Rs 2,145 crore in Q3 FY21.

4) Revenue from chemicals business grew even faster with 82% rise to Rs 2,338 crore during the quarter.

5) Earnings were boosted largely because of chemicals unit, which reported over fourfold rise in segment profit.

6) Viscose business reported pressure on margins with segment profit shrinking by a fourth in Q3.

7)  Grasim’s net debt turned zero on a standalone business after the completion of divestment of the fertiliser business effective January 1, 2022.

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