Grasim posts 62 percent profit hike

A slowdown in the Indian economy might spell a glut for its cement producers

By Staff and wire reports

MUMBAI, India -- Grasim Industries, the flagship company of the Aditya Birla Group, posted a 62 percent rise in net profit for the year just ended.

That outdid analysts' expectations. Associated Cement Companies, India's second-largest cement company also posted a profit when it released results Monday.

Diversified Grasim, owned by one of India's leading business families, is India's third-largest cement producer. It also makes textiles -- it controls 90 percent of the market in viscose fibers -- sponge iron and caustic soda.

Indian cement makers have cut their production and raised prices. That has led to a boost in profits.

But despite a slowdown in India's growth, the country's top four producers -- including Larsen & Toubro at No. 1 and Gujarat Ambuja Cements at No. 2 -- are adding a large amount of new capacity.

As a result, Associated Cement said there was likely to be a glut of supply for some time.

Grasim saw its net profit for the year ended in March rise to $80.7 million (3.8 billion rupees), up from 2.3 billion rupees for the previous year.

Analysts had predicted a profit of 3.3 billion rupees. Sales rose 12.8 percent to $1.0 billion (48.4 billion rupees).

Associated Cement Companies made $10.1 million (475 million rupees) for the year, up from a loss of 589 million rupees the year before.

Its sales rose 9.5 percent to $631 million (29.6 billion rupees).

Grasim credited strong performance in its cement business. Modernization efforts and increased production helped it post a particularly strong fourth quarter, with net profit tripling at the end of the year.

Its chief financial officer, D.D. Rathi, said demand was likely to grow 7-8 percent a year for the next three years.

The company is spending $113 million to add five cement plants, invest in two power plants and try to prevent bottlenecks in production through modernization.

Both companies saw their shares rise in trading on the Bombay Stock Exchange. ACC rose 11.1 percent to 149.80 rupees. Grasim rose 7.8 percent to 289.95 rupees.

The Aditya Birla Group is headed by Kumar Mangalam Birla, who named it for his father, who died in 1995. It has recently pushed into telecommunications and India's emerging mobile-phone industry.

Reuters contributed to this report.

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Aditya Birla Group

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