Sagar Cements (NSE:SAGCEM) Q1 2027 Earnings Call

0:28 Good morning, ladies and gentlemen. Welcome you all to the q one FY twenty seven results conference call of SAGCEMENT Limited. From the management, we have with us today mister Srikanth Reddy, joint managing director mister K Prashad, chief financial officer mister Rajesh Singh, chief marketing officer, and mister Raja Reddy, the company secretary. I would now like to hand over the call to Gavin Desa from CDR India for his opening comments, post which we will hand over the call to management. Over to you, Gavin. Thank you, Vibha, and thank you for introducing the management. We will begin this call with opening remarks from the management, following which we will have an open... A floor open for an interactive q and a session. Before we begin, I would just like to point out that some statements made in today's discussions may be forward looking in nature, a note to that effect was stated in the call call invite sent to you earlier.

1:19 I would now like to hand over to mister Sagar Cements for his opening remarks. Over to you, Sagar Cements Thank you, Tevin. Good morning, everyone, and welcome to SAGCEMENT's earnings call for the quarter ended 06/30/2026. Yeah. Let me begin the discussion with a brief overview of the market, post which I will move on to Sagar's specific developments. The quarter witnessed a mixed operating environment for the cement industry. Demand remained broadly healthy across most regions supported by continued government led infrastructure spending, resilient housing activity, and a steady progress in construction across both urban and rural markets. While the underlying demand environment remained encouraging, growth during the quarter was temporarily impacted by heat wave across several parts of the country, which in turn affected the cons... Construction activity to certain extent, as well as election related labor shortages in parts of Eastern And Southern India that led to a short term execution challenges.

2:18 On the pricing front, realization improved at the beginning of the quarter supported by price hikes across several markets. However, pricing momentum moderated towards the end of the quarter amid competitive intensity and regional market dynamics, resulting in broadly stable to marginally improved realization on a sequential basis. Despite these near term headwinds, the industry's long term demand outlook remains favorable supported by sustained infrastructure investments, continued urbanization and a healthy pipeline of housing and industrial projects. Moving on to SAGCEM specific developments, we delivered a healthy volume growth of around 13% during the quarter, reflecting the C and D demand across our key markets and disciplined execution by our teams.

3:04 Consequently, revenue increased by 5% year on year, driven primarily by higher volumes while realizations remained broadly stable. We remain confident of achieving volumes of approximately 7,000,000 tons in FY twenty seven supported by our expanding market presence and ongoing operational initiatives. Our pricing remained broadly stable with a marginal sequential improvement reflecting our disciplined market approach. From an operational standpoint, EBITDA per ton for the quarter stood at rupees $4.51. As anticipated, profitability and margins moderated during q one due to elevated input prices across the energy, fuel, and packaging amid the geopolitical tensions in West Asia. While the price increases take... Undertaken during the quarter helped offset a part of the cost inflation, they were insufficient to fulfill...

3:56 Mitigate the impact. Looking ahead, we expect input cost pressures to gradually ease as the geopolitical situation normalizes. At the same time, our continued focus on cost optimization through waste... Waste heat recovery systems, increased use of green energy, and the ongoing plant efficiency initiatives will further strengthen our cost structure and support margin improvement over the medium term. On the CapEx front, we successfully commissioned the remaining 1.55 megawatt waste heat recovery out of the total installed capacity of 4.35 megawatt at our Udipadu plant and completed the half a million ton CapEx... Capacity expansion at our Jira Baht unit during the quarter.

4:42 These these investments enhance our manufacturing footprint, improve operating efficiencies, and position us well to capture the future demand. At the same time, 500,000... 750,000 ton expansion at Gandhara is likely to be completed before end of this current quarter. From an operational... Power and fuel cost today at rupees $14.84 per ton as against rupees $14.50 per ton reported during q one f y twenty six. Freight cost for the quarter stood at rupees $8.58 per ton as against $8.60 per ton during q one f I twenty six. From an operational point of view, Matapili plant operated at 65% utilization, while Gurupadu, Bayovaram, Jirabad, Jajpur, and Dajpili plants operated at 79%, 67, 96%, 50%, and 42%, respectively, during the quarter.

5:40 Loss after profit after tax for the quarter stood at rupees 28 crore. As far as the key balance sheet items are concerned, the gross debt as on 06/30/2026 stood at $170.04 crores, out of which INR1434 crores as a long term debt and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as of 06/30/2026 to debt INR1833 crore. Debt equity ratio stands at 0.78:one. Cash and bank balances at rupees 105 crores as of 06/30/2026. That concludes my opening remarks. We would now be glad to take any questions that you may have. Thank you. Thank you, sir. So we will now begin the question and answer session.

6:28 Anyone who have the question can ask through raise of hands or through chat box. We will take the first question from mister., please go ahead with the question. Hi, sir. Yeah. Good morning, mister Sagar. Yeah. Sir, couple of questions. First, on the volume front, so we are we are maintaining a 7,000,000 ton for this year. So, obviously, I I assume this is only the sales volume and not the clinker sales. So just to get a a broad understanding how much clinker sell, how we are looking at in q two and maybe for the full year or from q three onwards?

7:13 Do we... We'll not have any any kind of a clinker sale? Yeah. The 7, I think the 7,000,000 is excluding the clinker sale. As far as clinker sale is concerned, there are two aspects, sir. One is to be outside and one with the good company. I think Andra will continue to sell clinker to. And at Jira, till the volume stabilizes, which we expect the ramp up to happen ASAP, but still till such time, we continue to sell some portion of Tinker. Quantifying them at at this point of time, I think we would revert with exact volumes in due course of time, mister Sagar. But 7,000,000 doesn't include the clinker sales. Got it. And for next year, FY '28, can we see a kind of a double digit volume growth for us?

8:04 I think even this year, it's a double digit growth, mister Sagar. And for next year, also, we are expecting something similar in terms of a percentage, mister Sagar. Yeah. And now, sir, on... In terms of the profitability, obviously, so that depends on the cost and the pricing. So... And just to cover both aspects. So in q two, how much more for us in terms of part and basis? So whatever the power and fuel increase and maybe some some marginal increase could be one on the diesel front. Maybe packing back could be a kind of a starting it off. So just to understand in q two, how much are we are we looking to have a a cost inflation per ton basis? And if whatever the number would be, then in terms of we were looking at 600 or, rupees per ton for full year EBITDA per ton. So, are we are we still sticking to that number?

8:59 I think, Shivan, q two, as you know, the fuel increase is... For the full year, we are expecting fuel plus raw material plus other miscellaneous expenditure by 100 rupees a ton, sir. But we expect a matching kind of a savings. Net net, we might remain very similar. Going specific to q two, sir, we we would be taking maintenance at three of our plants. So we we we do expect some amount of cost increases only on account of inventory because we have stocked up. So we would be consuming... We don't expect a big shift in the volumes that we have to sell, but we expect some amount of inventory cost to go up. But all said and done, I think we should more than make up in q three and q four.

9:46 What what we have indicated and what we remain committed is around 500 to $5.50 rupees EBITDA per ton. I I think it is doable because we expect prices to remain stable. But most of our cost initiatives, you know, the... We have seed recovery at Guripadu, expansion at Jirapad as well as Andhra to be available in this next half for the most part of next half. So we expect whatever cost inflation of 100 rupees, we we expect it to more than offset and contribute. So we we do expect anywhere between 500 to 5 rupees EBITDA per ton, mister Sagar. Assuming that, there are no changes in the prices. Yeah. So so there on the pricing front, so currently, are the prices stable versus q one averages, broadly in our core markets? See, I think in the markets from March exit to July, it has been flat, sir. And from...

10:41 I mean, June June to July, also, it has been flat. So, of course, there were certain price increases that have happened in between, but more or less, everything got moderated. So, fortunately, prices remain flat. They did not go down, sir. With a slight positive, I I think, overall, we we we we have seen anywhere between 50 to 60 rupees kind of a realization. But I don't know what we have to attribute it to. Is it product mix or some amount of price increases that have happened in the region? We could sustain a a very, very miniscule portion or else prices remain very, very stable,. Sir, lastly on Vizag's sales, so where are we now? So Yeah. Government, sir. We are only waiting for one final government approval.

11:26 We we we are expecting the GO earlier. We are expecting it specific for us. Now I think government wants to promote them as a generic kind of a thing. So we are waiting for that to come by for for us to start monetizing the land station. So this year, $1.50 odd crore we were looking at, will it be I think that remain... That re... That remains doable, mister Sagar. Okay. Thank you, sir, and all of us. Thank you. Thank you. We will take the next question from. Janmi, you can unmute yourself and go ahead with your question. Hello. Good morning. Yeah. Good morning, Mundra. Good morning. Sir, which regions are expected to contribute to the highest incremental demand during the second half of financial '27?

12:18 I think South... See, we we we have almost a footprint of close to 80% in South January. So so our incremental volumes are coming from South. If you have seen the general market trends in South, they have been very robust barring Karnataka which remain flat. Post election, Tamil Nadu demand also picked up. AP Telangan are doing very well. Thank you, sir. In our in our case, even Madhya Pradesh remains a very strong market because we just expanded by half a million. So we we also expect our volumes to slightly be higher even in Madhya Pradesh, new higher in Manti Pradesh too. So the... These are the regions which are likely to contribute for our 15% kind of a growth that we have projected for the current year.

13:09 Thank you, Sagar. Thank you. We will take the next question from mister Rajesh Ravi. Rajesh, you can go ahead with your question. Yeah. Hi, sir. Am I audible? Yeah. Very much. Good morning, mister Harish. Hi, sir. Good morning. Sir, just looking at the, you know, segmental breakup or rather the individual three companies level breakup, how How should we look at the cost line... Cost items for Andhra? It still seems to be operating at more than 5,000 rupee per ton of cost structure. So also, I don't know. Where is this cost line, you know, the operating cost structure of Yeah. I think I think there are two two aspects you have to look at. One is the fixed cost and the other is the variable.

13:56 Yeah. The variable cost is around 100 to 125 rupees higher at Andhra compared to Matampelli. Again, it's on the relative, mister Rajesh. Yes. The the the specific metric in terms of, you know, KCAL and number of units, think it is far more efficient. But... Or a part with Motempeli, but the only problem is cost per electrical unit. Since Mutampelli operates waste heat recovery, Andhra does not have that. So we still source a substantial portion of our electricity from the grid, which is relatively higher compared to the waste heat recovery that we have at Mutampelli. So that, unfortunately, is translating to 125 rupees higher price on a variable cost basis, said, Andre, compared to Montepalli, sir.

14:44 But, sir, if I look at the cost difference here, Matampali plant is operating close to 4,000 rupee, whereas this one is at $5,152,100 rupees per These are not directly, sir. These are product mix, and everything would be substantially different terms, Rajesh. See, Motempelli would have lot of PPC related to Motempelli, would produce OPC. So very specific metric even if you have to look at each of the product wise, yeah, the gap for... On a product basis should be anywhere between 100 to 120. Okay. So, incrementally, if we have to model these three units separately, so we should be looking at... How should we look look at the cost improvement? See, I think fixed cost is very different because, as you know, bulk of our debt that sits is at Andhra, not at Matampelli.

15:32 Matampelli is debt free, sir. So so it's only a matter of time when Andhra will get consolidated into... I mean, rather merged into Matampelli... Into SAGAR, mister Rajesh. But any specific, think we will be more than happy to share those modeling details offline. Sure. Sure, sir. So you're still confident that on a... You know, including the same sales volume, EBITDA button, which is close to $4.25 rupees in q one. For full year basis, we could touch 600 rupees. $55.50 is definitely doable, Rajesh, as I mentioned to you. See, basic recovery and good part of this got commissioned. So bulk of the savings from that, we should start achieving or realizing in the next few quarters. Same would be the case with the Jirabad expansion.

16:22 And also at the grinding plant, the cement mill at the brand new cement mill at Andhra is due for commissioning end of September. So these three should should start contributing assuming that prices remain stable or where they are. I think $5.50 rupees is definitely a doable Great. So last question. You know, when you mentioned on the q two cost structure increasing by around 100 rupees per ton, you know, and that too largely getting offset by some operating efforts. So you're implying that sequentially your operating cost, assuming sequentially there is a volume decline also, and there will be maintenance related expenses. So for this quarter, sir, that See, q two versus q one? Yeah. I think I think q two, definitely, as you are aware, it's seasonally a difficult quarter because most of the operational metric would be under stress because of rains and shutdown.

17:18 Correct. At the same time, maintenance expenditure, which again optically looks higher for q two, which will have a better stress. But q two is definitely going to be, I would not say, challenging quarter, but but these are known operational kind of... Where where we know for sure some amount of operational metrics will be below par compared to the other. And we are more than... I I I think in our understanding, we'll more than make up for that in q three and q four, Suraj. Understood. And so I just want to... On the... Get some update on the real... The land sale. What is the status? Yeah. We we we we are just waiting for the final government approval, mister Rajesh, and we hope to get 150 crores of relation in the current year.

18:04 Yeah. We are waiting for the final GO. Earlier, it was supposed to be specific for for that particular asset. But government, reviewing, they said that they would come up with a generic because there are quite a few assets which are similar to ours. So government... The the department clarified to us telling that they they would issue a generic Givo, which should be helping us to start the process and start monetizing the asset, mister Raj. Understood. So this is more of a formality where you're awaiting... Getting Yes, I think... I I think it was the case even before. Even now, it is Correct. We are just waiting the... Waiting for that Jivo to come because something similar Jivo was issued in Telangana few few months back, sir. So something similar is likely to happen in Andhra. That's what was the indication from from there.

18:54 So we are waiting for that to happen for us to start the process. And you have the buyer in place, sir, for the confidence that one See, there there have been there have been engagements, but in our case, timelines is something which we we could not address. But but given the buoyancy in the market now, yeah, quite a few people have approached mister Rajiv. Understood, sir. Thank you. Thank you, sir. I'll come back in queue. Thank you. We will take the next question from chat box from mister Rohin. Are we seeing good demand from development of Avnavathi Capital? Should we expect increase in demand and pricing due to this? Yeah. I think, as I mentioned, demand has been very, very strong. I think Amaravati is one of the prime mover for the demand in Andhra.

19:47 Even in Telangana, government did start six lakh houses in Indrama, Patakam, what they call as low cost housing. So these are two flagship demand drivers from a government led initiatives. But even otherwise, private demand also has been very, very strong. Yeah. Will prices move up? Prices have to move up because if if if you look at last ten year inflation on cement pricing, I think it is flat. So that should also push, whereas the cost inflation has been quite substantial. So even from that perspective, prices have to move up. Prices did go up, but, unfortunately, they could not hold up for for... Because of the volatility in demand on a month to month. Unfortunately, most of the industry players are losing patience. So... And competitive intensity sometimes, you know, flares up, but prices are bound to go up. It's a question of when and by how much.

20:50 Yes. Thank you. Thank you, sir. We will take the next question from mister Sagar Cements. Sagar, you can go ahead with the question. Thank you for the opportunity. Hello, sir. So my first question is actually regarding demand. I just wanted to... I I wanted to give you some more flavors about state wise demand and how is demand flaring in both the trade and non trade segment. Like, the channel feedback which we were getting were actually that the demand in South Region is below other other regions, and it's underperforming. So just if you can give some flavors regard... Demand... Flavor regarding that. See, I think for the q one year on year numbers that received both for AP and Telangana together is almost close to 11%.

21:37 Yeah. Karnataka is flat, as I mentioned. Tamil Nadu has has grown close to 4% that this is in spite of April being negative because of the elections and the post election kind of a thing. But June alone, it actually grew very, very healthy at 20% year on year kind of an impact. Kerala has been growing steadily at 12%. That makes the overall South demand on an average close to around 6%. That's what... We we believe that the South demand should be anywhere between eight to 10% for the year, sir. So far, it is close to six six and a half percent in spite of few challenging months in the region, primarily on account of elections that have happened both in Kerala and Tamil Nadu. Usually, first six months post election, things tends to be slower, but we we believe that it should ramp up to eight to 10% kind of... Overall kind of a demand in South.

22:32 Now I cannot speak about all India. Our our market footprints, Maharashtra has been very healthy. Orissa has been extremely healthy because government initiatives slowly started showing up. Madhya Pradesh, we have seen around nine to 10% growth already. Yeah. So this is the information we have for the states, mister Sanjay. Yeah. Thank you so much, sir. And next question would be, like, how has demand actually flared up in July? We have seen delayed monsoon across the country. So, like, is this helping pushing up the demand? This actually... I think I I I think July, we we we have to wait. We we are ready to conclude the month. But more or less, demand looks to be very, very similar trend as q one.

23:21 Like, Anurag, Telangana, we expect it to still grow because, really, in monsoon, in this... Some pockets of this market, construction activity is still going on. I think labor, was missing for the most part of q one, have come back. So so we expect July month to be very similar to how the June was. Thank you so much, sir. And my final question would be, you had mentioned that you are expecting some cost moderation, especially in the power and fuel call. But let's say, hypothetically, if the West Asia crisis, it still goes on and we see further escalation, what levers does your company have to control the inflation power and fuel cost specifically? Yeah. I I I I don't think we have ability to control the inflation. We only have ability to control the quantity of usage.

24:10 So from that perspective, most of our assets are reasonably there on the efficiency, sir. We are one of the top efficient players when it comes to consumption of fuel, specific fuel for each ton of any material. But, yeah, what what we are factoring at this point of time is we we do have inventory all the way up to middle of October. So so we we we know we can go all the way up to middle of October. What we have penciled in is a 100 rupees price hike. On account of fuel, it is 50, and the... All the other things. But but anything beyond the current price, see, Tinker is at its peak now. We we we hope for some moderation to happen in due course of time. But by October, we expect some amount of moderation. If trends remain where they are, then we expect a 100 rupees kind of a cost inflation.

25:00 But as I mentioned before, we are... Some of the initiatives with the basic recovery at Guripadu and capacity expansion at Jirabad and the new mill addition at Andhra, these things should more than offset and still contribute to cost saving as we speak, mister Sagar. Thank you so much, sir. It was very helpful. Thank you. Thank you. We will take the next question from mister Pat also. Pat, you can go ahead with the question. Hi. Hi, sir. Thank you for the opportunity. But I just had one question on your net debt. So on page number nine, we have given a projection that your net debt will move from $15.65 to $11.59. So does this factor the land... Proceeds from land monetization? Yes, sir. Or is it No.

25:47 It is It does not. 50 crores is what we have penciled in for the For the current year and for '28? That would be another $2.50? Yeah. Another 200 should be the numbers. Okay. Perfect. Thank you so much for answering my questions. Thank you. Thank you. Participants are requested to ask the question through raise of hands or through checkbox. Meanwhile, sir, a couple of questions from my side. Sir, we have recently received, an article where government has banned the transport of rough stones and aggregates to the other states for three months. So can you please explain possible impact because of the same? I I don't think it has any impact whatsoever.

26:36 Okay. Okay. Sure, sir. And also on the super fine building material that we were going to have. So any comments on that? Yeah. We we we we started the work. We would revert with much more operational plan by end of q two. Sure, sir. And lastly, sir, on the... Recently, we have commissioned the 1.5 megawatt watt. So, sir, in the coming quarters and years, what type of savings are you expecting from the basis recovery or say renewable energy? Yeah. I think specific only on basic to go at Gurupadu. Overall, on a volume, we expect... On a consolidated volume, we expect a 25 rupee saving on that account. Though at Jira bulk volume, it could be a $100,125 rupees.

27:22 The only asset which doesn't have a wasted carry is Andhra. So next couple of years, the target is to go for a wasted recovery at Andhra. That should also contribute a similar kind of an... With our. Sure, sir. Participants request you to ask the question to raise of hand or to checkbox. We will wait for five minutes if there are any questions. Yeah. So next question is from mister Pat. Pat, you can go ahead with the question. Hi, sir. Sir, my question is related to limestone reserves. I see that on page number 30, you highlighted you have good access to resources, and the reserve life would be quite high.

28:11 But in terms of industry, like, have there been any new limestone blocks in Tamil Nadu and AP that have come for auction, and at what premium are they going for? See, there are few due both at Tamil Nadu, Anurag and Telangana. So they are not yet concluded. So the the recent ones that we have seen is almost a year, year end up back. The premiums ranged anywhere between 50 to 75% premium. Sir, and this would be Tamil Nadu or AP? No. It's in Telangana. Yeah. In Telangana. Yeah. Got it, sir. Thank you. Thank you. Thank you. We will link... Take the next question from mister., you can go ahead with the question.

29:02 Yeah. Hi,. Am I audible? Yeah. Very much, sir. Good morning. Okay. Good morning. So so in the debt profile, if I see '27 and '28, so there's a reduction of $1.60 crores odd in the gross debt. Assuming almost 500, maybe $5.50 rupees a ton and building in 7,000,000 ton. So approximately 800 crores over the two years of operating cash flow, '27 and '28. So are we saying that there would be a CapEx of closer to 900 crores over the two years? No. I think I think... See, what what we are looking at this point of time, yeah, we are not having any CapEx plans for next couple of years, sir. Except for the operational maintenance, which is roughly around thirty to forty crores per year. Yeah.

29:52 We do not have any CapEx plan for up to end of twenty eight for sure. What we are expecting is a monetization of land at WISAC and debt reduction. That... That's the key focus area for us for next two years, mister Nava. No. So... But you have already taken from the sale of Andhra assets in both the years you just mentioned $1.50 crores and 200 crores. Yes, sir. So that's what But the reduction on account of operational cash flow generated That that should be another matching number, sir. That should be another matching number So that you have not incorporated in your gross debt reduction profile? No. Not yet, sir. Because there are some ongoing CapEx.

30:40 For the current year, there is a 240 odd crores of CapEx, which is ongoing, which should spread over this year and next year. So that's what we have penciled in, mister Mahade. Okay. Understood. Thanks a lot. Thank you. Thank you. We will take the next question from mister Harsh Jain. Harsh, you can go ahead with the question. Hi, sir. Good morning. Thanks for the opportunity. So my question is on the total cost front. So if we see we have increased around a 100 rupees per ton sequentially, Already other players have kind of posted a $1.50 or 200 rupees cost increase quarterly. So is it because we already had elevated cost in q four, and that's that's because we only seen a 100 rupees increase or... We we had some we we had some inventory also with us, mister Harsh. So Okay.

31:35 And this this 100 rupees, what would be the breakup of increase? I mean, power and fuel and packaging? See, I think power and fuel, we have factored 50 rupees, sir. All the other miscellaneous at 50 rupees, sir. Sure. And what sort of cost increase we're looking at q two? Yeah. I think q two is very specific because we expect maintenance and other cost to be elevated because we have taken most of the plans for shutdown, at least the larger ones. But that's only for the current quarter. Yeah. We should even out in the next few quarters. Q two maintenance cost would be relatively higher, sir, because Matapali plant, yeah, there is a substantial shutdown. So is the case with Jira. So these two, we expect that. Also, inventory cost adjustment also is likely to happen because we have stocked up for the shutdown, so we don't expect sale to be anything...

32:31 Anyway lower. Yeah. No. No. Since there is no impact on volumes, yeah, the inventory adjustment and the other fixed cost spread because of the maintenance shutdown is likely to impact us only for q two, mister Ash. Yes, sir. Okay. So, I mean, the regular maintenance increase that would happen in q two? Yes, sir. Got it. Thank you, sir. Thank you. Thank you. We will take couple of questions from the checkbox now. First question is from mister Ruben. So how is the competitive intensity for under cement shipped over the years, and how is it expected to be in the future? See, I think when we took our Andhra close to three years back, we did indicate that we expect a 60% capacity relation for Andhra.

33:17 The ramp up has been smooth from from 30... Sub 30% with increased volumes. We could move close to 50% now. I I think by end of this year, we should we should reach close to 60% capacity relation. So from that perspective, we we we we believe that the under might operate anywhere between 60 to 70% for the coming years in spite of very high cognitive incent... Intensity in the neighborhood. Sure. Thank you. Sir, next question is from mister Harish Singh. So what is the guidance of EBITDA per ton for the full year for FY '27? We we did indicate earlier. Yeah. We are expecting anywhere between 500 to $5.02 rupees EBITDA per ton for the client.

34:04 Sure. Sure. Thank you so much, sir. Participants, this is the last reminder. Anyone who have the question can ask to raise of hand or through chat box. So since we don't have any further question, so we will conclude this meeting. So we will request management to give the closing commentary. Over to Sagar. Thank you, Sagar. There you... We would once again like to thank each one of you for joining us on this call. I hope you have all the answers that you are looking for. Please feel free to contact our team at Sagar Cements should you need any further information or have any further queries. We'll be more than happy to discuss everything. Thank you. Have a have a great day. Thank you.