14 November, 2019Share
|Q2 FY20||Q2 FY19||YoY|
Consolidated revenue for the quarter stood at Rs18,430 Cr. recording a growth of 3%. Consolidated EBITDA at Rs 3,180 Cr. recorded a growth of 7% YoY and PAT (Before Exceptional items and one time deferred tax benefit) was up by 6% YoY to Rs 639 Cr. driven by superior performance of the Company’s subsidiaries, UltraTech Cement Limited and Aditya Birla Capital Limited.
At the Standalone level, profitability was impacted due to global weakening in prices of VSF and Caustic soda.
In the VSF business production and sales volume recorded an increase of 8% and 5% YoY to 148KT and 142KT respectively.
The Net Revenue for the quarter stood at Rs2,431 Cr. and EBITDA for the quarter stood at Rs381 Cr. The Global prices of VSF softened further on account of significant capacity additions in China and Indonesia (in last one year) and ongoing U.S.-China Trade war. The Indian VSF prices witnessed a weakening trend driven by a steep 23% YoY correction in the Chinese VSF prices.
The weakness in the domestic VSF realizations 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.
Our 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 MBOs (Multi-Brand Outlet) 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 Net Revenue for Q2FY20 stood at Rs1,347 Cr. and EBITDA stood at Rs273 Cr. Softening of Caustic Soda prices globally has led to decline in the domestic prices, resulting in lower profitability on YoY basis.
Caustic Soda sales and production volume for Q2FY20 stood at 249KT and 241KT respectively. Weak demand conditions from user industry for chlorine and caustic soda, capacity addition in domestic market and increase in the imports impacted the company’s production.
The Speciality Chemicals (chlorine Value added products) witnessed a consistent operational and financial performance. The share of EBITDA from Speciality chemicals including Epoxy resins stood at ~29% of the Chemical business.
The Caustic Soda capacity expansion plan at Rehla, Vilayat and Balabhadrapuram are at different stages of execution with expansion of specialty chemical products too.
The company has entered into a Joint Venture with Maschinenfabrik Reinhausen GmbH (“MR”) of Germany for the manufacturing and sale of Composite Hollow Core Insulators (CHCI) used in Power Transmission & Distribution industry globally. Aditya Birla Power Composites Limited ("ABPCL") the new JV company, will set up a state-of-the-art CHCI manufacturing plant at Halol (Gujarat) bringing the latest technology for Composite Hollow Insulators from Europe.
Composite Hollow Core insulators is the fastest growing segment of insulators, and improves the performance as well as safety of Power Equipment. This facility will be the first such large scale plant for this range of products in India and will be the largest such plant outside of China.
The total capex plan of ~ Rs7,800 Cr. (at standalone level) is under execution for raising capacities in both the VSF and Chemical businesses, apart from ongoing modernisation capex at various plants. This capital expenditure is expected to be incurred over three years period from FY20-FY22.
UltraTech reported Consolidated Revenue of Rs9,620 Cr. up 4% YoY and EBITDA of Rs2,072 Cr. in Q2FY20 up 33%YoY. The consolidated sales volume stood at ~18.69 MTPA.
UltraTech completed the acquisition of Century Textiles and Industries Ltd.’s cement business, with the Scheme of Demerger becoming effective from 1st October, 2019. With this acquisition, UltraTech’s cement manufacturing capacity stands augmented to 117.4 MTPA, including its overseas capacity. This makes UltraTech the 3rd largest cement company in the world, outside of China. It is also the only company in the world to have a capacity of over 100 million tons in a single country, outside of China.
The Revenue and Net profit after minority interest for Q2FY20 (as reported by ABCL) are at Rs3,976 Cr. and Rs256 Cr. up by 11% and 37% respectively.
The Overall lending book (NBFC and Housing Finance) grew 4% YoY to Rs60,477 Cr. (Q2FY20).
The Average Assets Under Management stood at Rs2,69,393 Cr. (Q2FY20).
In Life Insurance business, the Individual First year Premium are up 12% to Rs423 Cr. in Q2FY20. The persistency ratios witnessed a consistent improvement, the 13th month persistency ratio improved by 610 bps to 80.2 % in Q2FY20.
In the Health Insurance business, Gross written premium increased to Rs315 Cr. (Q2FY20), up 78% YoY.
During the quarter, Aditya Birla Capital decided to raise Rs2,100 Crore of equity capital through preferential allotment to marquee investors and the Promoter / Promoter Group entities. The equity capital raised at Rs100 per share, at a premium over the traded price, reflects the strong confidence in the business.
In pursuance of above, in October 2019, the company invested Rs770 Cr. in preferential allotment which has increased its shareholding in Aditya Birla Capital to 56.61%. Post participation from Advent (Jomei Investment) the company shareholding will get diluted to 54.29%. Advent, through its affiliate, will hold approximately 4.15% of ABCL’s equity capital and is currently awaiting regulatory approval.
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.
The Chemical business is under an expansion mode for both chlor-alkali and specialty chemicals. The ongoing expansion projects at different sites and new product lines for specialty chemicals will enable significant growth of the business in near future.
On the basis of positive demand seen in North India in Q2 as many parts of North India were not impacted by heavy rains and floods, there is a good possibility of a normalized demand for cement going forward. The Government’s firm commitment to revive the economy and the thrust on infrastructure spending augur well for the growth of cement demand. The heavy rains in the country should also prove beneficial for the kharif crop, which should again help revive rural demand. The company with its presence across the country, is the best positioned to take advantage of the revival in cement demand, despite the anomalies that may get created in demand patterns in some parts of the country due to extraneous reasons.
In Financial Services, ABCL is a universal financial solution provider catering to the diverse needs of its customers across their life cycle. ABCL is committed to serving the end-to-end financial services needs of its retail and corporate customers under a unified brand — Aditya Birla Capital.
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.