Sagar Cements Limited (SAGCEM) Q2 2027 Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome you all to the Q2 FY27 Results Conference. From the management we have with us today, Mr. Srikant Reddy, Joint Managing Director, Mr. K. Prasad, Chief Financial Officer, Mr. Rajesh Singh, Chief Marketing Officer, and Mr. Raja Reddy, the Company Secretary. I would now like to hand over the call to Gavin Deesa from CDR India for his opening comments, post which we will hand over the call to the Thank you, Manish, and thank you for the introduction.

Just like to add that some statements made in today's discussion may be forward-looking in nature, and a note to this effect was stated in the con-call invite sent to you, along with the financial presentation and the statements. I'd now like to request Sritan to start the opening remarks. Over to you, sir.

Thank you, Gavin. Good morning, everyone, and welcome to Sagar Cement's earnings call for the quarter and half year ended September 30th, 2026. Let me begin the discussion with a brief overview of the market, post which I move on to Sagar specific developments. The second quarter witnessed a relatively resilient demand environment for the cement industry, despite the seasonal slowdown associated with demand source. Construction activity across three markets remained reasonably healthy, supported by steady progressive infrastructure projects undertaken by both central and state governments, alongside continued demand from the housing and construction sector. The relatively uneven distribution of rainfall across the regions also helps moderate the seasonal impact on overall cement consumption. On the pricing front, cement prices remained soft during July and August before recovering to some extent during September. Despite near-term seasonal challenges, the industry's medium-to-long-term demand outlook remains encouraging, supported by sustained infrastructure investment. Organization and a healthy pipeline of housing and industrial products. Moving on to cyber-specific developments, we delivered a healthy volume growth of 26% during the quarter, reflecting resilient demand across accreed markets and steady execution despite the monsoon-related slowdown. Consequently, revenue increased by 17% year-on-year, supported primarily by higher volumes. We remain confident of achieving our FI27 volume guidance of approximately 7 million, supported by our expanded capacity and improving demand outflow. From an operational standpoint, EBITDA per tonne for the quarters two-day to 65, profitably We continue to reflect elevated input costs, particularly across fuel, packaging, and other operating effects owing to geopolitical developments in West Asia. Our ongoing cost optimization initiatives, including increased utilization of waste-recovery systems, improvements in operating efficiencies, and benefits from our recent capacity additions help mitigate a significant part of these pressures. The quarter also witnessed planned maintenance shutdown at certain facilities, which had an impact on operating performance. Can I request some of you to please mute? Thank you for your understanding. Looking ahead, we expect profitability to improve during H2-FI27, supported by post-monsoon recovery in demand. Increasing renewable energy usage, ongoing logistics, optimization, and efficiency gains from our recent plant upgrades. These initiatives are expected to progressively strengthen our cost structure and support margin improvement over the coming quarters. On the capex front, we completed 0.75 million ton grinding capacity in Andhra during the quarter, further strengthening our manufacturing footprint and taking our overall capacity to 11.75 million. Alongside the recently commissioned 4.35 megawatt base heat recovery capacity at Buripadu and a half a million ton expansion at Jirabhar, these investments are expected to enhance operating efficiencies, support higher capacity utilization and position as well to capture future demand. Coming to the key operating metrics, power and fuel cost today is Rs. 1473 per tonne during the quarter compared to Rs. 1428 per tonne in Q2-FI26. Trade cost today is Rs. 600 per tonne compared to Rs. 900 per tonne compared with Rs. 855 per tonne in the corresponding quarter last year. In terms of plant-wise operations, our Matampeli facility operated at 73% utilization, while Gudipadu, Bayavaram, Jeerabas, Jajpur, and Dachipeli operated at 85%, 52%, 72%, 38%, and 57% respectively during the quarter. Last, after the profits, true debt, Rs. 52 crore. Turning to the balance sheet, gross debt as of September 30th, 2026, true debt, Rs. 1735 crores, out of which Rs. 1482 crores comprising long-term borrowing, while the balance represents working capital borrowing. Consolidated net worth to date Rs. 1781 crore, while the debt-to-equity ratio was at 0.83 is to 1. Cash and bank balances to date Rs. 106 crore as of 30th September 2026. That concludes my opening remarks. We will be glad to take any questions that you may have. Thank you.

Thank you. We will now begin with the question and answer session. Request all the participants who have questions, please indicate by raise of hands. We'll take the first question from Nitin S. Dharmamat. Please go ahead, Nitin. Yeah, thank you, Manish. Thank you, Mr. Reddy.

Good morning. Am I audible? Yes, you are. Please go ahead.

Okay. So the first question is like, you know, this is tripping out the 7.5 crore CES right back. Standalone EBITDA was at around 47 rupees per ton this quarter. So why are our plants earning less than Andra cements and when do they recover?

Yes, Mr. Nitin, you should be aware during this quarter, Matampelli as well as the plants at Matampelli and Jirabas were under maintenance shutdown, sir. And at Matampelli, it has been a long and expensive kind of a shutdown. So that is the reason why we are happy to say that Andhra is doing well, but other plants had the shutdown, sir. So I'm sure in the coming quarters, even the operation set, all the other units would be equivalent or much better than ANDRA, Mr. Rik.

Perfect. Okay. And so now 3 million ton per annum and did 402 per ton this quarter. So what utilization in EBITDA do you need there for Andhra to recover, to cover its own 127 crore of annual interest? And by when?

See, I think the operations at Andhra, we should see the break-even in the second half, sir, at least at an operational level. Because as we have seen, consistently the volumes have been moving up. We are still falling short of around 20,000 to 30,000 tons per month, which we should make up during the current half. So we don't see challenge for Andhra to break even. If not in the current year, by I think Q1 next year, we should start seeing the break-even point of Andhra and start making money.

So, so far, we used to give plant-wise utilization number. So, can we restore this plant-wise utilization also and also give quarterly pledge number missing in the presentation?

I think even in the current speech that I have told, we did share the plant-wise number.

Yeah, you shared in the speeches.

Yeah, but we will be more than happy sharing it.

Yeah, yeah. Because that will be available beforehand, before the call starts. Yes. And the net debt is rising against our own projections.

So, yeah, net debt has risen. I think it more or less stabilizes because as you know, the capex is almost for conclusion, sir. So, we have more or less drawn the entire thing. I think it should remain more or less at same level for the current quarter. From the next quarter onwards, it should start sliding down, I think. Okay.

And fret, is it five-quarter high at around 900 per turn?

Sir, I think diesel prices have gone up, sir. You should be aware, diesel prices have gone up. I think it should more or less stabilize, hoping that, you know, diesel price, there may not be any significant meaning. So, using that, the fret more or less should remain flat from now.

In May, you avoided, and in current call also, you avoided for 7 million turn transition. And it was at 600 rupees per ton and 580 rupees EBITDA. So H1 came at around 355.

So what is the revised full year EBITDA number? I think we should comfortably do. Unfortunately, the input prices have scaled up, but we should be up of 350 to 375 crores for the full year, which should roughly translate to 525 to 550 tons rupees per EBITDA per ton. Instead of 410-odd crores that we have projected, I think we should end up anywhere between 350 to 375 crores, which should roughly translate to 525 rupees per tonne at EBITDA.

And like peers, like including Ultratech, which is pretty large in size, saying South is doing very well in their con calls. And they repeatedly say it in the last call. So why are we not able to see this in our results?

Sir, I think this statement we fully conquer, sir. I think you'll start seeing it from here on.

Okay. And our ROC is also extremely low. When will we see the improvement in it?

I think, as you would appreciate, there has been a very aggressive kind of capex that has happened over the last two years. Unfortunately, during this time, even market also was not supportive, Mr. Nitin. We see good times from here on, especially on the demand side. As I've indicated, demand has been fairly strong. We believe the same momentum should continue at least for the next two years. Given the scenario, we strongly believe. And that's the reason why we also followed, I would not say aggressive KPEX plan, but we did go for the KPEX, have been waiting for the demand to shape up, and fortunately, it has come now. So we believe from here on, we should strongly start getting an increased kind of a margin and a much better return ratio.

Perfect. So should we conclude that the bottom has been made for the south cement cycle with your experience? Because last time when we spoke, you said that, you know, you're not seeing such a difficult time in your experience of more than 25 years. So should we conclude that the bottom has been already made and now?

Yeah, there are two things, Mr. Nithing. One is on the pricing and the other on demand. Demand, I think, we are going to hit highs every quarter from here on. When it comes to pricing, sir, so far, the pricing for last few months has been, I would say, better than what we have achieved in the past. But these prices at the best would cover the increased kind of a cost. In our own case, the advantage for us at Sagar has been our volume slowly started, our capacity utilization slowly started increasing, and at the same time, some of the capex also was for savings. All of them started acting. So I would say that we have already hit our bottom when it comes to our own margins. From an industry perspective, we believe that bottoms, we don't want to go back to the bottoms, but I would reserve my comments because it's a more market-related issue. As far as Sagar is concerned, I think we have hit our bottom, and from here on, we should only look up for Sagar. Even a small correction in the price should fairly give decent return is what we strongly think.

So, should we say that we'll be crossing 65% overall, 65-70% overall utilization for Sagar?

Yes, sir. I think we are looking at if same demand Trends continue. I think next year we are targeting close to around the 65 to 70% capacity utilization at overall numbers, sir, at full capacity. And for H2? Yeah, I think H2, we should be up close to 70%, 65 to 70%. I think sale numbers is what we are projecting for the coming year, sir.

Got it. Thank you so much and wishing you best, sir.

Thank you, Mr. Thank you. We'll take the next question from Shavansha. Please go ahead, Sam.

Just to get a clarity, for this year, we said that we will be doing a 7 million ton volume, and next year, last time you said, and the way we are saying 65-70% kind of a utilization, so next year, how we can look at in terms of the volume?

I think we are targeting it around 8 to 8.25 million.

Okay, okay. And now, sir, in terms of the profitability part, so you said that for full year, we are looking at 350, 375 crore kind of a EBITDA. So, and then in 1H, we have done 118 odd crore. So, kind of a 230 plus kind of a debt. So, if you can help us, because obviously everything links to the price. So that's the most important. Yeah.

Seven, I'm not preempting. What we are indicating is 350 to 375. Yeah, from what we have closed, it also includes some maintenance costs. So we leave that part behind. But having said that, we are talking of around additional 300 course of 300 rupees EBITDA per ton incremental. Over 355, what we have done for the first half. This 300, actually what we have seen is a 500 to 550 rupees at EBITDA level realization increase. However, we have seen around 200 rupees cost increase because of fuel. So overall, we are seeing around 650 rupees EBITDA per ton for the next half, Mr. Sharma.

Okay, okay, got it. So, and then just to, if you can break down in terms of the price, like so from the Q2

Yeah, Mr. Shravan, let me state the south one first. Quarter could be a challenge because most of the price hikes have happened only in the September month. So, from August to September, what we have seen is a 20 rupees per bag price hike in non-trade and a 20 rupees price hike in terms of trade. Okay. But from September to October, what we have seen is a further 20 rupees hike in non-trade, but only 5 rupees hike in trade. This is in South Sur, whereas in the other regions, what we have seen is only a 5 to 10 rupees kind of a price hike across Madhya Pradesh, and to a certain extent, 5 rupees hike in Odisha, more or less flat in the other markets. Yes. Mara, sir, we have seen some price tag, but more or less it got even down. Okay.

Okay. And in terms of the Vizag land sale, so anything there…

I think the end of this financial year, we should have progressed to the point where we should start receiving the advance, and we should have received some advance before the end of this financial year. Good news is that there are a lot of inquiries. So, there is some progress. So, in the current financial year, we should have seen receipt of advance for the 12-9 administration.

So, how much one can look at in terms of this year?

At this point of time, I will stick to what we have indicated before. So, we are expecting 350 crores of total monetization value for the 12-9. Around 150 odd gross is what we are expecting as advance. Again, I am talking of net value. So, this is post some corrections to the tax that we have to pay and certain expenditure that we have.

Okay. And lastly, in terms of the, for this quarter Q2, in terms of the south and state level, how was the demand and for pull layer? How we are looking at in terms of the demand?

I think cotton would be optical, Mr. Shevan. I think year to date, AP and Telangana have grown up of 15%. Karnataka has grown more or less at 2 to 3%. I would assume that it is flat. Tamangari has grown at plus 10%. Kerala has grown at plus 12%. Maharashtra at plus 10%. Odisha almost flat. Madhya Pradesh has grown at around 7.5 to 8%. Gujarat has grown at closer on the 5%.

Okay. Okay. Got it, sir. Thank you and all the best. Thank you.

Thank you. Anyone who has a question may indicate by raise of hands. We'll take the next question from Rajesh Ravi. Rajesh, please go ahead.

Hi, sir. Good morning. Sir, coming back to this question of margin improvement for second half. First, the volume target 7 million ton is only cement or cement plus clinker?

See, I think we always indicate only cement, sir. We don't indicate the click curve. We have never done. So, the 7 million is only on cement side.

Okay. And the margin improvement which you are looking at, you mentioned that there have been a 20 rupees in the non-trade market as well as in trade. South prices have gone up by 20 rupees per bag both in September as well as in month of October. In October, I think you mentioned trade only 5 rupees increase has happened, whereas in non-trade, both the months we have seen 20 rupees price hike, right?

Yes, Rajesh, it is 20 rupees each for each month.

So on a net basis, net of discounts and anything else, how much is, if this price is, suppose October prices were to sustain a new change has happened.

Mr. Rajesh, we have got net because we are talking of south, but overall we have Odisha, Maharashtra and other states. What we have seen at Sagar is 25 rupees per bag on an average from exit of August all the way so far. Again, it includes September and all the way up to end of October. We have seen on an average 25 rupees per bag, which is roughly translating to 500 odd rupees per ton increase at realization.

But on average basis, average of Q3 versus Q2, this 500 would move.

I think average could always be a challenge. I think we should take this number because bulk of the increase happened only end of September. So we can assume that this should be the average between Q2 to Q3.

That should be so far as being the holding thing. Understood. Understood. And on the costing side, you mentioned there is a 200 rupees jump, and largely that should be…

See, the 200 rupees jump is all the way up to end of January 27th, because more or less our fuels are covered that far. Yeah, we still probably may have to look at last two months of the current financial year. That has not been penciled in. Up to end of August, in our case, it has gone up by 200 rupees.

Okay. So, in that case, because you mentioned that your Matampali plant had expensive shutdowns and maintenance.

Yeah, that is overall from basic recovery running and the maintenance cost reduction, we expect a saving of anywhere between 50 to 75 rupees per tonne setting that we have not penciled in. That's always contingency, Mr. Raj.

Understood. And any uplift gain also you're looking at because your volumes have remained firmed in past two quarters?

That is what we are translating 50 to 75 rupees is because of the operating leverage gains.

No, from the maintenance shutdowns and all which were there in Q2, which would not flow through in Q3, Q4, that would not be an additional savings?

All that has been penciled in, sir, because some of the maintenance has been large, so they have been capitalized, Mr. Rajesh. So whatever is relatively lower, that is what we are trying to indicate here. So, see, we did change We did go for some of the major maintenance, which is more on a capitalized basis, but there are some costs that have been penciled in. Quantifying them at this point of time is a challenge, but we expect it to be better than what we have indicated.

Okay. So, if prices do not go south from here on, is it fair to assume that Q3 will be looking at north of 600 rupees? I think we should look at 650 kind of an investment. For Q3. Okay. Understood. And on CapEx front, I see most of your CapEx is already done. Yes, sir.

Except for probably some cash flow related to CapEx might flow into Q1, but everything is done, sir.

So, everything is done. So, H2 onwards, there should be a strong recovery in operating profits, and the capex outgo should taper down, and hence the net debt number should start to look lower.

We believe that for Q3, net debt probably should remain where it is. From Q4 onwards, it would aggressively start coming down. So, we just commissioned end of September. So, some of the capex also is due into the current October. We did put some capex and into November, but more or less the same number we would not cross this number barring a small delta, but from Q4 onwards it will start increasing curve.

I hope to see a good number and the YJ landfill meaningful progress would be much needed. Thank you, sir. Thank you.

We'll take the next question from Parth, Pau, sir. Please go ahead.

Hi, sir. So, thank you for the opportunity. Sir, you mentioned a couple of things. Your cost, you are covered till Jan, right? And that would basically imply 200 rupees per ton of cost.

Thank you.

Rajesh, if you could mute your line, please.

Sir, so, so, basically your landed cost, fuel cost in Q2 was 1.93. Is that right?

We've been indicating the presentation.

So, basically that calculation is 1.93. So, this would go up to how much? Or like this would stay at current levels?

See, I think more or less there should be a small delta in that, but very minor one, which not really impact all the way up to end of January. The ship has just landed, Mr. Parth, so more or less we should stabilize at those numbers. We are covered all the way up to January is what I have indicated, so it will be sub-2 rupees for the 1,000 kcal per thermi. Yeah, That should be till end of January.

Okay. And then, sir, if we, like, assume that, you know, we have to start buying in that spot, so what sort of price hike would we require to cover up?

I think another 200 rupees would be a safe exemption, Mr. Park, but we have to see how it is shaping up.

Okay. Okay. And, sir, what is the gap between trade and non-trade in all the regions?

Sir, I think in the current situation, south, I think we make more money in non-trade than trade with the increase that we have seen. See, in our case, as indicated even earlier, our trade and non-trade prices more or less would be very similar. See, most of the time, what happens is that the margin level, both are not very different. Yeah, optically, the realization looks higher purely because discounts and everything in trade is offered subsequently. That includes discount and all. So you know it's higher and then offer discounts and all. So optically, the relations look very high in trade. Whereas in non-trade, everything is stripped off. So from a margin perspective, we just should serve historically has been the case barring some time. But relations, margins are almost similar for both trade and non-trade in our case.

All right. And the last question on the fuel mix, the fuel mix that we've mentioned, this would basically continue to be the mix even going ahead, right?

I think we are mostly shifted to domestic. We have less Petco. The Petco primarily is both at Godipadu and Zirabath, and primarily are the domestic sources. There is some percentage which is coming from South Africa or U.S. NAPCO, sir. I mean, this is the mix which should go forward because that's how we have, we have made our inventory.

Perfect, sir. Those were my questions. Thank you.

Thank you.

Thank you. I'll just take a couple of questions from the chat. So one is on the, you are expecting much better H2 FY27 going by a commentary on the volume guidance of 8.25 million ton for FY28. What kind of EBITDA per ton are you looking at? That's first question. And what is the net debt by the end of FI 27 and 28?

See, I think our net debt position, our stated goal is to look at cutting it by half over the next two years' time. Some current 1,650 kind of net debt position. We would like to see some 700 kind of a thing over the next two years' period. What we generally pencil in, like even for the current year, what we looked at was 650 to 700 per ton for the full volume. Same is the numbers that we look at itself. And we end up correcting it closer to the quarter or closer to the timeline. But what we are penciling in is around 650 rupees emitter per tonne for an 8 to 8.25 million tonne kind of volume. Around 500 odd quotes is what we are looking at for the next year. Hope I addressed all the questions, Manish, that you have asked.

Yes, sir. And net debt for FY27 and 28.

See, I think we should start looking at around 250 crores of debt getting reduced from next year onwards each. Plus the realization, monetization from the WISEAT lag. Got it.

Sir, one more question is, what is the average realization today for trade-offs?

Yeah, Mr. Manish, can you repeat the question, please?

What is the average utilization today post the two recent hikes?

I think we are talking of capacity utilization post the hikes?

No, the realization, sir. Average realization.

See, as I mentioned, sir, there has been on an average at a gross company level, at a console level, Yeah, we have seen close to 500 rupees higher realization at the company level compared to Q2 sub. So, that's a simple idea. So, you should look at plus 500 rupees. Got it. And you have to net it off with the GST correction.

Got it. Okay. We'll take the next question from Viva. Viva, please go ahead.

Yeah, thanks. Yes. Hi, sir. So most of the questions have been answered, sir. One question on incentives. So how much incentives we have received for Jeerabad unit, and what is the remaining incentives that we are going to receive in the coming quarter of the year?

See, I think the expected incentive for Jeerabad is at 30 crores per year. I think we did receive another 50 crores is what we are expecting for the next two and a half years, Abhinav.

Yeah, and also secondly, sir, on WHL's capacity, so how much capacity we are going to have in the FI27 and FI28, and what type of savings we are expecting from that?

Yeah, we did indicate there is only one waste heat recovery that is pending, that is at Andhra, which are capexes for FI28, not anytime soon. We are also expecting a 7-8-megawatt solar plant at Jirabat for the coming year. The expected savings, again, is something which we have to pencil in. For Andhra, when Wasteed Recovery will get commissioned, we should expect 1.5 crores per month kind of a saving at Andhra. For solar, we are expecting close to around 4 to 4.5 crores at Jirabat for full year.

Thank you so much, sir.

I request anybody who has a question, we indicate by raise of hands. We can go ahead with Shravan. Please go ahead.

Hi, sir. Sir, anything on the superfine building material division, so anything finalized there?

Yeah, we just got approval from the board for the CAPEX, Mr. Shavan. We did identify the land in Galsea in West Bengal. We should start the operations by end of this quarter from a micro silica perspective. There is some amount of CAPEX that is required at BioRM for making it to ultrafine DGVS. We just got the approval, so we should start looking at some results probably middle of Q4 onwards, Mr. Shah.

So, sir, how one can look at in terms of, so let's say this quarter, once we start and maybe fully…

I think in the current financial year, we are not expecting a major kind of an uptick into the EBITDA. For the next year onwards, next year being the first full year of operations, for that we are only assuming certain capacity utilization. I think it should contribute anywhere between 25 to 30 crores of EBITDA for the next year. Subsequently, to scale up aggressively from there on.

So, there, 2025 crore of EBITDA, so at what revenue we are looking at?

I think in that business, the EBITDA margins are up of around 35 to 40 percent.

Okay, okay. And the capex would be how much are that up?

Very eligible. I think the overall capex that is projected is around 60 crores spread over next to 18 months, Mr. Okay, 18 crores. This is 60 crores, sir. Okay, 60 crores. 60 crores and 20 crores of working capital has been projected.

So this 60 crores we will be spending by in next…

Or 18 months, sir, which… See, this is more… It's not a KPEX at BioVarum, whereas KPEX at Galsi, because in BioVarum, it's more a modification of separators and all, Mr. Chavan. So it's more… Some portion of this KPEX also is a maintenance KPEX, actually.

Thank you.

Anyone who has a question may indicate by raise of hands. Sir, as we don't have any further questions, I would like to hand over it back to you for your closing comments.

Yeah, we would once again like to thank each one of you for joining on the call. I hope you got all the answers you are looking for. Please feel free to contact any of our teammates, Sagar or CDR. Should you need any further information or have any further queries, we will be more than happy to discuss with them. Thank you. Have a good day. Happy DeepAwan.

Thank you, sir. And thank you, everyone. This concludes the call for today. Thank you. Thank you, Manish. Thank you.

Goodbye.