Sagar Cements Limited (SAGCEM) Q1 2027 Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome you all to the Q1 FY27 results conference call of Saras Cement Limited. From the management, we have with us today Mr. Srikant Reddy, Joint Managing Director, Mr. K. Prashat, 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 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 a floor open for an interactive Q&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, and a note to that effect was stated in the call-call invite sent to you earlier. I would now like to hand over to Mr. Vikad Reddy for his opening remarks. Over to you, Shrikad.

Thank you, Tevin. Good morning, everyone, and welcome to Sagar Cement's earnings call for the quarter ended June 30th, 2026. Let me begin the discussion with a brief overview of the market, post which I will move on to Sagar-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 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 heatwave across several parts of the country, which in turn affected the construction activity to a certain extent, as well as election-related labor shortages in parts of eastern and southern India that led to a short-term execution challenges. 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 Saga-specific developments, we delivered a healthy volume growth of around 13% during the quarter, reflecting resilient demand across our key markets and disciplined execution by our teams. Consequently, the 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 million tons in FY27, supported by our expanding market presence in the 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 quarters today at Rs.451 has anticipated Profitability and margins moderated during Q1 due to elevated input prices across the energy, fuel, and packaging amid the geopolitical tensions in West Asia. While the price increases undertaken during the quarter helped offset a part of the cost inflation, they were insufficient to 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 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 Budapadu plant and completed the half a million ton capex. Capacity expansion at Jirabath unit during the quarter. These investments enhance our manufacturing footprint, improve operating efficiencies, and position as well to capture the future demand. At the same time, 0.75 million ton expansion at Andhra is likely to be completed before end of this current quarter. From an operational, power and fuel cost today at Rs. 1484 per tonne as against Rs. 1450 per tonne reported during Q1, FI26. Trade cost for the quarters today at Rs. 858 per tonne as against Rs. 860 per tonne during Q1, FI26. From an operational point of view, Matapeli plant operated at 65% utilization, while Godipadu, Bayavaram, Jeerabad, Jajpur and Gajpeli plants operated at 79%, 67%, 96%, 50% and 42% respectively during the quarter. Loss after profit, after tax. For the quarters to debt, Rs. 28 crore. As far as the key balance sheet items are concerned, the gross debt as on 30th June 2026 to debt 1704 crores, out of which 1434 crores as a long-term debt, and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as on 30th June 2026 to debt Rs. 1833 crore. Debt equity ratio stands at 0.78 is to 1. Cash and bank balances at Rs. 105 crore as on 30th June 2026. That concludes my opening remarks. You 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. Anyone who has the question can ask through raise of hands or through chat box. We will take the first question from Mr. Shravan Shah. Shravan, please go ahead with the question.

Hi, sir. Yeah, sir, couple of questions. So first, on the volume front, so we are maintaining a 7 million ton for this year. So obviously, I assume this is only the sales volume and not the clinker sales. So just to get a broad understanding how much clinker cell now we are looking at in Q2 and maybe for the full year or from Q3 onwards, do we will not have any kind of a clinker cell?

Yes, Shrevan, I think the 7 million is excluding the clinker sale. As far as clinker sale is concerned, there are two aspects. One is to be outside and one within the group company. I think Andhra will continue to sell clinker to Bayhavaram. And at Jeerabad, 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 Klinker. Quantifying them at this point of time, I think we would revert with exact volumes in due course of time, Mr. Shevan, but 7 million doesn't include the Klinker sales.

Got it. And for next year, FY28, can we see a kind of a double-digit volume growth for us?

I think even this year, it's a double-digit growth, Mr. Scheven, and for next year also, we are expecting something similar in terms of a percentage, Mr. Scheven.

Yeah, and now, sir, in terms of the profitability, obviously, so that depends on the cost and the pricing. So, just to cover both the aspects, so in Q2, how much more for us in terms of pertinent basis, so whatever the power and fuel increase and maybe some marginal increase could be one on the diesel front, maybe packing back could be a kind of a setting it off. So just to understand in Q2, how much are we, are we looking to have a cost inflation per turn basis, and if whatever the number would be, then in terms of we were looking at 600 odd rupees per turn for full year EBITDA per turn. So are we, are we still sticking to that number?

I think, Shaban, Q2, 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 saving. So, net-net, we might remain very similar. Yeah. Going specific to Q2, sir, we would be taking maintenance at three of our plants. So 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 Q3 and Q4. What we have indicated and what we remain committed is around 500 to 550 rupees EBITDA per ton. I think it is doable because we expect prices to remain stable. But most of our cost initiatives, you know, the waste heat recovery at Gurupadu. So, we expect the expansion at Jeerabad as well as Andhra to be available in the next half, for most part of next half. So we expect whatever cost inflation of 100 rupees, we expect it to more than offset and contribute. So, we do expect anywhere between 500 to 500 rupees EBITDA per ton, Mr. Stevon, assuming that there are no changes in the prices.

Yeah, so there on the pricing front, so currently are the prices stable versus Q1 averages broadly in our poor markets?

See, I think in the markets from March exit to July, it has been flat, sir. And from 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 remained flat. They did not go down, sir. With a slight positive, I think overall 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 very, very minuscule portion or else prices remain very, very stable.

Sir, lastly on Vizak cell, so where are we now? We are waiting for the government, sir.

We are only waiting for one final government approval. We are expecting the GO earlier, we are expecting it specific for us. Now, I think government wants to promulgament as a generic kind of a thing, so we are awaiting for that to come by, for us to start monetizing the land, Mr. Sraman.

So this year, 150 odd crore we were looking at.

I think that remains doable. Okay.

Thank you, sir, and all of us. Thank you.

Thank you. We will take the next question from Janwe Mudra. Janvi, you can unmute yourself and go ahead with your question.

Hello, good morning.

Good morning.

Sir, which regions are expected to contribute the highest incremental demand during the second half of financial year 27?

I think south, see, we have almost a footprint of close to 80% in south, Janvi, 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 remained flat, post-election Tamil Nadu demand also picked up. AP Telangana are doing very well.

Thank you, sir.

In our case, even Madhya Pradesh remains a very strong market because we just expanded by half a million. So we also expect our volumes to slightly be higher even in Madhya Pradesh, move higher in Madhya Pradesh too. So these are the regions which are likely to contribute for our 15% kind of a growth that we have projected for the current year.

Thank you, sir. Thank you. We will take the next question from Mr. Radish Ravi. Radish, you can go ahead with the question.

Yeah, hi, sir. Am I audible?

Yeah, very much.

Good morning, Mr. Raj. Hi, sir. Good morning. Sir, just looking at the, you know, segmental breakup or rather the individual three companies level breakup, how should we look at the cost line, cost items for Andhra? It still seems to be operating at more than 5,000 rupees per ton of cost structure. So, where is this cost line, you know, the operating cost structure of...

Yeah, I think there are two aspects you have to look at. One is the fixed cost and the other is the variable. Yeah, the variable cost is around 100 to 125 rupees higher at Andhra compared to Matamperli. Again, it's only relative, Mr. Rajesh, the specific metric in terms of, you know, Kcal and number of units, I think it is far more efficient. But, or at par with Matampeli, but the only problem is cost per electrical unit. Since Matampeli operates waste heat recovery, Andhra does not have that. So, we still source substantial portion of our electricity from the grain, which is relatively higher compared to the waste heat recovery that we have at Matampeli. So, that unfortunately is translating to 125 rupees higher price on a variable cost basis at Andhra compared to Matampeli.

But sir, if I look at the cost difference here, Matampali plant is operating close to 4,000 rupees, whereas this one is at 5,100, 5,200 rupees per time.

But these are not directly, sir. These are product makes and everything would be substantially different, Mr. Rajesh. See, Matampali would have a lot of PPC relative to Matampali, which would produce OPC. So very specific metric, even if you have to look at each of the product-wise, the gap on a product basis should be anywhere between 100 to 100.

Okay. So, incrementally, if we have to model these three units separately, so we should be looking at, how should we look at the cost?

See, I think fixed cost is very different because as you know, bulk of our debt that sits is at Andhra, not at Matampeli. Matampeli is debt-free, sir. So, it's only a matter of time when Andhra would get consolidated into, I mean, rather merged into Sagar, Mr. Rajesh. But any specific, I think we would 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 clinical sales volume, EBITDA button, which is close to 425 rupees in Q1. For full year basis, we could touch 600 rupees.

Yes, 550 is definitely doable, Mr. Rajesh, as I mentioned to you. See, waste rate recovery at good part has just 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 Jirabad expansion. 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 start contributing, assuming that prices remain stable or where they are. I think 550 rupees is definitely a low goal.

Great. So last question, you know, when you mentioned on the Q2 cost structure increasing by around 100 rupees per turn, 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. Sorry for this quarter, sir.

Q2 versus Q1. Yeah, I think Q2, 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. At the same time, maintenance expenditure, which again, optically looks higher for Q2, which will have a better spread. But Q2 is definitely going to be, I would not say a challenging But these are known operational kind of where we know for sure some amount of operational metrics will be below par compared to the other. And we are more than, I think in our understanding, we will more than make up for that in Q3 and Q4 Seraj.

Understood. And sir, just want to get some update on the real land sale. What is the status?

Yeah, we are just waiting for the final government approval, Mr. Rajesh, and we hope to get 150 crores of realization in the current year. Yeah, we are waiting for the final GEO. Earlier, it was supposed to be specific for that particular asset. But government, after 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 department clarified to us, telling that they would issue a generic G.O., which should be helping us to start the process and start monetizing the asset.

Understood. So, this is more of a formality where you are getting there.

Yes, sir. I think it was the case even before. Even now, we are just waiting for that J.O. to come. Because something similar J.O. was issued in Telangana a few months back, sir. So, something... Similar is likely to happen in Andhra. That's what was the indication from the bureaucracy there. So, we are waiting for that to happen for us to start the process.

And you have the buyer in place, sir?

See, there have been engagements, but in our case, timelines is something which we could not address. But given the buoyancy in the YZAC market now, quite a few people have approached Mr. Rajesh.

Understood, sir. Thank you. Thank you, sir. I'll come back. Thank you.

Thank you. We will take the next question from checkbox from Mr. Rohan. Are we seeing good demand from development of Agravati capital? Should we expect increasing demand and pricing due to this?

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. Even in Telangana, government did start 6 lakh houses in Indirama, 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. Will prices move up? Prices have to move up because if you look at last 10-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 because of the volatility in demand on a month to month. Unfortunately, most of the industry players are losing patience, 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.

Yes, thank you. Thank you, sir. We will take the next question from Mr. Sartak Sanjati. Sartak, 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 give some more flavors about state-wise demand and how is demand flaring in both trade and non-trade segment. And like the channel feedback, which we were getting were actually that the demand in south region is below other regions and it's underperforming. So just if you can give some flavor regarding that.

See, I think for the Q1 year-on-year members that we see both for AP and Telangana together is almost close to 11%. Yeah, Karnataka is flat, as I mentioned. Tamil Nadu has grown close to 4%. This is in spite of April being negative because of the elections and the post-election kind of thing. But June alone, it actually grew very, very heavily at 20% year-on-year kind of a member. Kerala has been growing steadily at 12%. So that makes the overall South demand on an average close to around 6%. That's what we believe that South demand should be anywhere between 8% to 10% for the year, sir. So far, it is close to 6, 6.5% in spite of a few challenging months in the region, primarily on account of elections that have happened, both in Kerala and Tamil Nadu. Usually, the first six months post-election, things tend to be slower, but we believe that it should ramp up to 8 to 10% kind of overall kind of a demand in South. Now, I cannot speak about all India. 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 9 to 10% growth already. So this is the...

Thank you so much, sir. And next question would be like, how has demand actually fared up in July? We have seen delayed monsoon across the country. So like, is this helping pushing up the demand?

I think July, we have to wait. We are ready to conclude the month. But more or less, demand looks to be very, very similar trend as Q1. Like Andhra, Telangana, we expect it to still grow because delay in monsoon in some pockets of this market, construction activity is still going on. I think labor, which was missing for the most part of Q1, have come back. 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 cost. But let's 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?

I don't think we have ability to control the inflation. We only have ability to control the quantity of usage. 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 what we are factoring at this point of time is we do have inventory all the way up to middle of October. So, 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 all the other things. But anything beyond the current price, see, Tinker is at its peak now. We hope some moderation to happen in due course of time. But by October, we expect some amount of moderation. If trends remain where they are, we expect a hundred rupees kind of cost inflation. But as I mentioned before, some of the initiatives with the wasted recovery at Gurupadu and capacity expansion at Jeerabad and new mill edition at Andhra, these things should more than offset and still contribute to cost saving as we speak, Mr. Sen.

Thank you so much, sir. It was very helpful. Thank you.

Thank you. We will take the next question from Mr. Parth Pousser. Parth, you can go ahead with the question.

Hi, sir. Thank you for the opportunity. I just had one question on your net debt. So, on page number 9, we have given a projection that your net debt will move from 1565 to 1159. So, does this factor proceed from land monetization? Yes, sir.

No, it is 150 crores is what we have cancelled in for the current year.

For the current year and for 28? That would be another 250.

Yeah, another 200 should be the number.

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 Tamil Nadu 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 don't think it has any impact whatsoever.

Okay, okay, sure, sir. And also on the superfine building material that we were going to have, sir, any comments on that?

Yeah, we started the work, we would revert with much more operational plan by end of Q2, Ibar.

Sure, sir. And lastly, sir, recently we have commissioned WHRS 1.5 megawatt. So, sir, in the coming quarters and years, what type of savings are you expecting from the waste recovery or, say, renewable energy?

See, I think specific only on wasted recovery at Gurupadu. Overall, on a consolidated volume, we expect a 25 rupees saving on that account. Though at Jeerabad volume, it could be 100, 125 rupees. The only asset which doesn't have a wasted recovery 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 Inber Vibhar.

Sure, sir. Participants request you to ask the question through raise of hand or through checkbox. We will wait for five minutes if there are any questions. Yeah, so next question is from Mr. Park, sir. Park, you can go ahead with your question.

Hi, sir. Sir, my question is related to limestone reserves. I see that on page number 30, you have good access to resources, and the reserve life would be quite high. But in terms of industry, have there been any new limestone blocks in Tamil Nadu and EP that have come for auction, and at what premium are they going for?

See, there are few new, both at Tamil Nadu, Anra, and Telangana, but they are not yet concluded, so the recent ones that we have seen is almost a year, year and a half back, the premiums ranged anywhere between 50 to 75 percent premium.

Sir, and this would be Tamil Nadu or EP?

No, it's in Telangana.

Thank you. Got it, sir. Thank you.

Thank you. We will take the next question from Mr. Avinash Nahata. Avinash, you can go ahead with the question.

Yeah. Hi, Shrikant. Am I audible? Yeah, very much, sir. Good morning. Okay. Good morning. So, in the debt profile, if I see 27 and 28, so there is a reduction of 160 crores odd in the gross debt. Assuming almost 500, maybe 550 rupees a ton, and building in 7 million 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, see, what we are looking at this point of time, yeah, we are not having any capex plans for next couple of years, sir. So, except for the operational maintenance, which is roughly around 30 to 40 crores per year, we do not have any capex plant. Up to end of 28, for sure. What we are expecting is a monetization of land at WISAC and debt reduction. That's the key focus area for us for next two years, Mr. Ma.

No, so, but you have already taken from the sale of Andhra assets, in both the years, you just mentioned 150 crores and 200 crores. So, 350 crores. But the reduction on account of operational cash flow generated…

Yeah, that should be another matching number, sir. That should be another matching number, Mr. Tham.

So that you have not incorporated in your gross debt reduction profile?

No, not yet, sir. Because there are some ongoing capex. 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, Mr. Mahal. Okay, understood. Thanks a lot. Thank you.

Thank you. We will take the next question from Mr. 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 100 rupees per ton sequentially. Very other players have kind of posted a 150 or 200 rupees cost increase quarterly. So, is it because we already had elevated cost in Q4 and that's because we only seen 100 rupees increase?

We had some outstanding, we had some inventory also with us.

Mr. Hush. And this 100 rupees, what would be the breakup of increase? I mean, power and fuel and packaging.

See, I think power and fuel will be a factor of 50 rupees, sir. All the other miscellaneous said 50 rupees, Mr. Hush.

And what sort of cost increase are you looking at Q2?

Yeah, I think Q2 is very specific because we expect maintenance and other costs to be elevated because we have taken most of the plants for check down, at least the larger ones. But that's only for the current quarter. Yeah, we should even out in the next few quarters. Q2 maintenance cost would be relatively higher, sir, because Matapeli plant, yeah, there is a substantial check down. So is the case with Jeerabad. So these two, we expect that. And also inventory cost adjustment also is likely to happen because we have stocked up Tinker for the shutdown. So we don't expect sale to be any way lower. Yeah, since there is no impact on volumes, the inventory adjustment and the other fixed cost spread because of the maintenance shutdown is likely to impact us only for Q2.

Thank you. We will take a couple of questions from the chat box now. First question is from Mr. Rohan. Sir, how is the competitive intensity for Andra cement shaped over the years and how is it expected to be in the future?

See, I think when we took over Andhra close to three years back, we did indicate that we expect a 60% capacity utilization for Andhra. The ramp up has been smooth from sub 30% with increased volumes. We could move close to 50% now. I think by end of this year, we should reach close to 60% capacity utilization. So from that perspective, we believe that Andhra might operate in way between 60 to 70% for the coming years. In spite of very high competitive intensity in the neighborhood.

Sure. Thank you. Sir, my question is from Mr. Harish Singh. So what is the guidance of EBITDA per turn for the full year for FY27?

We did indicate earlier, we are expecting anywhere between 500 to 52 rupees EBITDA per time for the current year.

Sure, sure. Thank you so much, sir. Participants, this is a last reminder. Anyone who has the question can ask through raise of hand or through chat box. So, since we don't have any further questions, so we will conclude this meeting. So, we will request management to give the closing commentary. Thank you.

Thank you, Viva. 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 or CDR should you need any further information or have any further queries. We will be more than happy to discuss them with you. Thank you. Have a great day. Thank you.