Annual report 2012-2013 - Grasim

MANAGEMENT DISCUSSION AND ANALYSIS
Grasim Industries Limited - Annual Report 2012-2013
MANAGEMENT DISCUSSION AND ANALYSIS
Business Outlook
The 182,500 TPA expansion at Vilayat was commissioned in May 2013. There will be a gradual rampup in
capacity, during the first half of the FY 2013-14. Volumes will grow significantly with the new capacity
and the favourable demand outlook. The portfolio of Value Added Products is being enhanced continuously
with the twin purpose of utilising chlorine and simultaneously adding value.
UltraTech Cement Ltd. (Cement Subsidiary)
Unit FY 2012-13 FY 2011-12 % Change
Grey Cement
Capacity Mn. TPA 53.90 51.75 4
Production Mn. Tons 42.59 42.11 1
Sales Volumes 1
Mn. Tons
– Cement 42.75 42.60
– Clinker 0.89 1.36 (35)
Cement Realisation (Domestic) `/Ton 4,253 3,901 9
White Cement
Capacity Lac Tons 6.31 5.60 13
Production Lac Tons 5.73 5.53 3
Sales Volumes 1 Lac Tons 5.66 5.55 2
Net Revenue ` Crore 21,319.1 19,232.4 11
PBIDT 2 ` Crore 5,142.9 4,564.7 13
PBIDT Margin % 23.8 23.3
1
Includes captive consumption for Ready-Mix Concrete and value added products.
2
Includes income of cement subsidiary related to unallocated corporate capital employed.
Performance Review
As a direct result of slowdown in GDP growth in India, the year was tough for the cement industry.
The demand growth in industry has slowed down due to subdued offtake from infrastructure and housing
segment. Grey cement sales volume remained flat at the previous year levels.
During the year, prices remained volatile. Although the first half witnessed an improving trend, in the
later part of the year prices declined. Domestic cement realisation was up by 9%, linked to improved
demand in the first half of the year. The increase in logistic costs, input material and additives prices were
passed on. Energy cost at ` 989/ton remained flat. Imported coal prices were lower by around 20-25% in
USD term; however, the benefit of such reduction was partially negated due to rupee depreciation. Your
Company constantly optimise the fuel-mix in kilns and power plants so as to reduce the use of high cost
imported coal and maximise the use of low cost fuel, viz., pet coke, alternate fuel, etc. Pet coke
consumption in kilns and power plants improved to ~35%. White Cement volume grew by 2% from
5.55 Lac Tons to 5.66 Lac Tons.
UltraTech’s turnover crossed the ` 20,000 crore mark, up by 11% over the FY 2011-12. PBIDT increased
by 13% from ` 4,565 crore to ` 5,143 crore.
The Competition Commission of India (CCI) had imposed a penalty of ` 1,175.49 crore on UltraTech for
alleged contravention of the provisions of the Competition Act, along with 9 other cement companies.
Based on the legal opinion, UltraTech has been advised that it has a good case and accordingly it has filed
an appeal before the Competition Appellant Tribunal.
Outlook for Cement Business
The growth prospects of the Cement industry are closely linked to the growth of the overall economy in
general and the real estate, construction sector and infrastructure in particular. The housing sector
consumes nearly two-thirds of the country’s total cement and is the most important cement driver. If the
present slowdown in organised real estate persists for an extended period, it may impact the growth in
consumption of cement.
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