Conference Call with Grasim Industries Management and Analysts on new business updates. Listen to the full transcript.
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Grasim Industries management held a call with analysts and investors to discuss the impact of COVID-19 on the business, and overall outlook. Click here to listen in to the full transcript.
Call participants: Mr. Dilip Gaur (MD), Mr. Kalyan Ram (CEO, Global Chemicals and Group Business), Mr. Jayant Dua (CEO, Chemical Division), Mr. Ashish Adukia (CFO)
Introductory Remarks from Ashish Adukia, CFO, Grasim Industries
Highlights from his remarks
We have been running many scenarios to evaluate the strength of our businesses. We will identify key focus areas:
1) Employee Safety: We started work from home for all our employees before the lockdown was announced. It has been very efficient and has not caused any hindrance in our work. Even the employee safety and government directives, we’ve stopped down some of our plants and some are running at low capacity utilization.
2) Liquidity: We have treasury of around Rs 2,000 crore in December 2019 and will be able to maintain a similar level of treasury by year end as well. We are not holding any specific financials on this call as we are yet to declare our last financials.
3) Third is Capex: As of today, we have put our large capex plans on hold. We are closely monitoring the situation. Because not to say, we are withdrawing all our Capex but we will take decisions on this Capex based on the lockdown situation as well on the demand outlook.
4) Fourth and the last focus area is cost management. We are deeply monitoring our costs and we are looking at different scenarios of lockdown to monitor our costs and we will evaluate ways to optimise them if required.
Updates and inputs from Dilip Gaur (MD)
As we all know the situation in the world is highly uncertain and very unpredictable. Therefore, it is extremely hazardous to make any guesses at this stage. What we have done, is we have maintained multiple recovery scenarios and developed the business continuity plan by stress testing our business against these scenarios.
Supply chain readiness is very important for our BCP because we have ensured that there is adequate material available in the pipeline because when our customers start, they don’t starve for the material. We also have got permission to run three out of our four factories from the government because we are a continuous process industry. One of the factories is already running. Therefore, we can ensure a vertical start-up when the demand resumes.
We have also made sure that we have adequate raw material available, enough stock, enough input material and because most of our factories are in townships where people live in the premises, it won’t be very difficult for us to get the workers. So, what we have done is we have also built up plans to run the factories with a flexible team because availability of workmen has to be constrained because of social distancing now.
We have put very strong SOPs and controlled hygiene and social distancing. We have built up a hygiene channel, dedicated buses to have our employees come to the office and a lot of other actions taken. So far, we have no cases at all anywhere at our units or townships. In terms of markets, globally all the textiles consuming and production centres are under lockdown state. The biggest consumers are the EU and USA. The biggest production centres are Turkey, Bangladesh, Pakistan, Indonesia are all in similar situations. There is no pull from the market right now. As the stores open, the demand will put up.
Inputs from Kalyan Ram, CEO, Global Chemicals and Business Group
Keeping in view the current situation of COVID, one of the strengths of Grasim is its products or significantly diverse range of industries. The products that we produce of various chemicals or fertilisers and insulators, we actually supply into the food industry, phosphoric acid, sugar refining. We supply into the water industry, essential household items, we supply into industrial continuous processing, pharmaceuticals, agriculture and raw materials in agro chemicals. Our own fertiliser plant supplies urea. We have one or two plants which are operational continuously in the lockdown. Couple of plants have not shut down at all. Several plants are running at lower levels and older plants have so far received permissions for starting in the next few days.
We really focused on ensuring our safety and health process are upgraded to the new reality. We have a very strong business continuity plan as of now because of the scenario test that we have done. We believe even if there are some more unpredictable changes, given we have global understanding of how our plants across East Asia, Europe are manufacturing. We are hoping for a lot more production to start in the coming days.
Jayant Dua (CEO Chemical Division)
Couple of our plants are running at 30-40% from Day 1. We have got permission to run our plants as and when the demands balance. From a customer perspective, aluminium never stopped, refineries never stopped, disinfectant is doing pretty well as there is large demand. We have been able to cater to largely all these demands on time. There is steady improvement in the supply chain. We expect that all our plants will be running by the end of this month.
COVID-19 Impact
The situation is very fluid right now. As you know, Chinese plants never stopped even when COVID was at the peak in China also. The Chinese plant is in a continuous process and that’s why they have been running those plants and building up of inventory. Post the normalcy in China, the demand hasn’t picked up the way it should have. The yearn capacity is running at a very low operational rate at less than 40%.
Until the consumer market opens, there will not be any demand so the Chinese plant is finding it difficult to sustain the operation. They are realising that they can’t keep building inventory and not sell. I think we are seeing some closures but it will be too early to say what will happen. So, it all depends how fast Europe and the US come back to normal because Chinese domestic demands have also not picked up the way we had expected. I see some rebalancing happening but it will take time.
Before the lockdown, the demand of yarn was very good. Only since the last 10-15 days, the European retailers started cancelling orders.
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