About The Company
A well known company of the Aditya Birla Group. The stock has been fancied for long in the capital market and the stock has rewarded the shareholder well every time.
About The Results
The company has posted result for the third quarter ended 31st December 2008. Interest cost rose by 90% due to commissioning of new projects and increased borrowings. Depreciation rose by 38% and these factors coupled with the constrained VSF business performance and general slowdown in economy, impacted the net profit.
Its consolidated revenues were higher by 6 per cent at Rs. 4,632 crore (Rs. 4,350 crore). Net profit was lower at Rs. 460 crore (Rs. 721 crore), down 36% on a YoY due to the weak performance by its viscose staple fibre (VSF) business and higher input and energy costs.
Viscose staple fibre segment during the quarter, on a YoY showed a decline of 27% in production and sales was down 22%. The performance of VSF business was adversely affected due to depressed consumer demand for textile globally. Operating profits and margins dipped, also due to lower realisation, higher pulp and sulphur cost and the weakening of rupee.
In the coming months demand for VSF is not expected to pick up as it is dependent on the textile sector. And it would take a while for the textile sector to start recovering. As such the company has reduced the prices of VSF further with effect from January, 2009 to prevent its substitution by competing fibres and imports. So realisations are expected to take a further hit in fourth quarter too.
Another segment to be affected was sponge iron, whose production fell 21% and sales was down 15%. Growth in cement was flat and ditto for caustic soda. Higher caustic prices were negated by the abnormally low chlorine and HCL prices, which were down by almost 90% and 70% respectively over the corresponding quarter. The lower demand from fibre segment is likely to affect the caustic volumes in the current Q4.
About The Stock
The stock is to remain under pressure for the coming time. Any fresh investment should not be made at present times.
Disclaimer : I do not have any personal holding in this stock.