JK Lakshmi Cement Limited (500380) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the earnings conference call for the quarter ended 30th June 2026 of JK Lakshmi Cement Limited, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you, and over to you.

Thank you, Ryan. Good evening, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the Q1 FY '27 call of JK Lakshmi Cement Limited. On the call from JK Lakshmi Cement, we have with us Mr. Arun Shukla, President and Director; and Mr. Sudhir Bidkar, Executive Director, Corporate Affairs and CFO of the company. I would like to mention on behalf of JK Lakshmi Cement Limited and its management that certain statements that may be made or discussed on this conference call may be forward-looking statements based on current management expectations and also something that relates to future expected business developments by JK Lakshmi Cement's management. Such statements are subject to a number of risks, uncertainties and other important factors, which may cause the actual developments and results to differ materially from any management projection made on this call. JK Lakshmi Cement Limited and the management of the company assumes no obligation to publicly update or alter these forward-looking statements whether as a result of new business development, information or future events or otherwise. Also the participants of the call can download a copy of the Q1 FY '27 results presentation from the company website. I will now hand over the floor -- call to JK Lakshmi Cement management for their opening remarks, which will be followed by interactive Q&A. Thank you, and over to you, sir.

Yes. Thanks, Vaibhav. Good afternoon. Good afternoon to all of you. Thanks for joining this call of JK Lakshmi Cement, which we are discussing -- going to discuss quarter 1 results. So before we take questions, I'll just give you a brief update, though we have already uploaded our result and also all the parameters. Still I think a couple of things, which is important to note here. And of course, I think if you really look at demand side, quarter 1 FY '27 was reasonably all right despite having a lot of issues externally and one of them was geopolitical situation which we are in. Despite that, I think demand was better. Industry has grown by about 8%. Supply side, around 11 million tonnes has been added. That is what I think information which we have. And overall addition is going to be about 52 million tonnes as per the estimation which we have with us. Overall installed capacity of cement in India after 11 million tonnes addition is about 725 million tonnes. Capacity utilization last quarter industry level was on an average about 73%, 74%. A couple of players higher than that and some of them are lower than that. This is on the supply side. If you look at cost side of it, all of us know that the cement industry is being impacted by geopolitical situation, which is existing in different parts of the world and the major being Middle East conflict which is happening. That has disrupted the entire supply chain. And the impact of that is on import, which we do, particularly fuel from outside and coal and pet coke. So those players who are there in northern part of India, I think they were dependent more on imported coal and pet coke. So that has impacted our cost part of it. Even related other products also because of geopolitical situation, be it explosive, chemicals, other things also prices have gone up. If you look at the price side of it, price increase has happened, but not to the extent cost has gone up. Pass-through has happened partially. And in our market where we operate, non-trade prices have gone up. Trade largely we were kind of flat in some of the market, even trade also improved a bit. But overall, pass-through has not happened to the extent cost has gone up. Internally, JK Lakshmi Cement, we have been working on various ways to mitigate this external situation by working on different levers which we have within our control. And of course, how we can really readjust to the reality of fuel situation or energy situation, which is existing. We can use, let's say, a little more of indigenous coal and replace pet coke, which was getting imported. And similarly on renewable energy front, AFR, on logistics front and even on top-line elements like volume, premium product, geo mix and all of that. So we have been kind of telling all of you that this is what our focus is. We focus internally and externally wherever we can mitigate with our internal action, that is what we have been doing in the last quarter. So this is what just a bit. So there's kind of uncertainty in terms of cost landscape and particularly on fuel part of it. Now we are through this cyclicity. So of course, I think this is going to be a kind of double impact this quarter. One is leverage part of it. And second, cost impact, it is going to be a little more in quarter 2 than what it was before. So this is what is there from my end as of now. And now this is open for question and answer from you.

Yes. Before we take up the question and answers and throw the floor open, I would like to make a mention that you would -- all investors would know that we had an AGM last week and in which we had proposed various resolutions. And unfortunately, despite the fact that all these resolutions were in full compliance of the law and as per the SEBI LODR guidelines, the proxy advisers had proposed a negative voting for some of the resolutions. And some of the investors, just based on the negative recommendation of the proxy adviser, had casted a negative vote on some of the resolutions. Fortunately, for us, very many mutual funds and FIIs took a pragmatic view based on the representation made by the company to these proxy advisers. Though they issued the addendum attaching the company's response to their recommendation, they did not change their recommendation. And you would be surprised that even the reelection of the [ President ] and Director, Mr. Shukla was recommended to be negatively voted by some international proxy advisers. Fortunately, for us, as I mentioned, very many mutual funds and FIIs took a pragmatic view and casted the vote in favor of these resolutions. And all these resolutions were passed with overwhelming majority and whatever majority was required to be passed to get these resolutions through. So we expect our investors to take a pragmatic view in the matters, discuss the matter with the company and take a conscious view rather than just basing it on the recommendations of the proxy advisers. That is the opening comment I wanted to make. And we can now throw the floor open for question and answers, please.

[Operator Instructions] We take the first question from the line of Sanjeev Kumar Singh from Motilal Oswal Financial Services.

My first question is on realization. So as you mentioned that trade prices did not move up materially, there was some improvement in non-trade prices. But overall, your realization seems to be up by around 9% on a sequential basis. So what is this related to? Is this related to some sort of market mix, some sort of product mix? Can you throw some light on this?

Yes. So non-trade prices went up in some markets and even trade prices also went up in a few markets, not all markets, but major increase was there in nontrade. So that has helped us. But the major impact has come about through our focus in geo mix, the material where we are going to sell and that has impacted our realization a bit. So one, of course, non-trade because we are a little heavy on non-trade, you know that, even last quarter also 41% is our nontrade, right? So nontrade price increase in markets like Gujarat and Mumbai area, even East also it went up and North as well. Trade was kind of stable in North, went up a bit in West and also in East. So that has helped us to improve our realization. So geo mix and the price increases which we had. And of course, I think other levers which we keep on working on. So for instance, like if you really look at our lead, lead has gone down by 20 kilometers last quarter. So all these -- combination of all these parameters have helped us to improve our realization.

So sir, would it be possible to share some more color on the geo mix change, like, in which markets you have seen some improvement in your volumes or where have you reduced your volume?

No. So I think that is evident, because if my lead is moving down by 20 kilometers. So my sales have increased in nearby area. And I do not have that breakup geography-wise as to where we have sell or how much. But yes, of course, I think far off market, we have reduced quite a bit in last quarter.

Okay. And second question is on your variable cost. Is this also looks higher than what the peers have reported. So can you share some -- can you give some information on per KKL cost in terms of fuel in this quarter versus what was in 4Q and currently what is it as of now?

Yes. So last quarter, fuel cost was 1.65, which went up from 1.54 preceding quarter. So there is an increase of 11 paisa. So that is one of the major element I think. Fuel per kilo can increase is one of the major contributor to this.

And what is it currently, sir, in this quarter, in 2Q?

So quarter 2 I think we are just close one quarter, so it is going up for sure. I think it's more than 1.65.

[Operator Instructions] We take the next question from the line of Amit Murarka from Axis Capital.

Could you share the number of other operating income which you had in the quarter?

Other operating income here -- not much. Other operating income is basically other income which we have shown separately, other income, not the other operating income. It is income from the [ Treasury ]. Yes.

Yes. No, other income, I know, it's there in the results. But there are other kind of nonoperating nonrevenue related operating incomes also, right, which was booked in revenue.

Other trading free income, we don't have any other nonoperating income.

Okay. Sure. So then on this price improvement of like 8%, 9%. So I understand that you say that it is geo mix optimization. But could you still explain like what are the markets where, let's say, you sold more because there is really a meaningful increase as you would also agree. So just wanted to understand.

Yes. Major, I think we have 4 major markets where we sell. So Gujarat, Rajasthan, Chhattisgarh and Haryana and part of Western UP. So just to give you a sense, we have sold about close to 90% sales in these markets.

Okay. And last quarter, what was the number for that?

Sorry?

Last quarter, was that number lower as in for Q4?

Yes, of course lower, of course lower. And much about -- at least 10% lower than this. And that has impacted our lead always. If you look at our lead, it has gone down from 388 to 368.

Okay. Understood. And how much CapEx has been spent on the Durg expansion so far?

Total in this quarter, we have spent about INR 300 crores in this 3 months period. And if you want to know separately on how much has been spent on Durg only, for that expansion is about INR 400 crores.

INR 400 crores in aggregate so far, you mean?

Yes, INR 400 crores is aggregated so far, including what has been spent in the previous year. Total for FY '27 in 12 months period, we expect the total CapEx of about INR 1,500 crores and thereafter next year, slightly higher at INR 2,000 crores and then again INR 1,500 crores. This is without taking into account the expenditure to be incurred on land acquisitions for Kutch and Nagore which is slightly going slow. So that is what guidance for as of now.

Right. So this guidance includes the Northeast expansion also?

Yes. Northeast, this does include Northeast also of INR 1,500 crores.

Understood. Also could you share the number for the non-cement revenue in the quarter?

Non-cement revenue in this quarter was INR 185 crores, yes, INR 185 crores. Included RMC of INR 93 crores and other products, ASE INR 67 crores, POP INR 26 crores, that is what was made up of INR 185 crores.

Got it. And while fuel cost you said will increase a bit in Q2. Like, is there any other area of cost inflation which will be there? I believe packaging would be moderating now.

No, no. Packaging cost also the recent trend is now the granule prices have gone up. I was just kind of looking at it. It went down a little bit, 134 or something. Now it has gone up to INR. So that is also going up. And the impact of that to my calculation, initial calculation is about on bag itself is about INR 3.5 to INR 4 per bag.

Over and above Q1 you mean?

Yes, yes. Because this is the reason. So this cost has gone up, packing cost is going up. Now pet coke was kind of softening a bit, a little bit in between, but it has gone up, shot up once again. It has gone up more than $140, $145 now. And same goes with imported coal also, about $130, $135 per tonne. But it is constant. It has not gone up with respect to last quarter, but fuel costs, packing cost, this is definitely, I think, is in increasing trend now. So if something happens, something positive externally, then, I think things may improve, but this is what it is as of today.

Sure. So would you be able to share a number, let's say, for cost inflation for Q2 then in aggregate as in per tonne basis?

I think, see, major contributor is going to be fuel cost. So from 1.65 to maybe it can touch even about 1.8 plus or even 1.85 times.

Understood. Got it. And then just a last data question also. On the non-cement business, what would be the EBITDA margin in the quarter?

5%.

[Operator Instructions] We take the next question from the line of Rajesh Ravi from HDFC Securities.

Sir, first, starting with what was the clinker sales volume in Q1 out of this 35.98 lakhs?

Yes, just hold on.

1.63 lakh.

1.6 lakh tonnes, right?

1.63.

1.63 lakh tonnes.

1.63 lakhs, okay. So there is a fall in the clinker sales volume quarter-on-quarter. Is this understanding correct?

Yes, yes, absolutely.

Okay. And second, the reported cement realization, which you shared, that number is up by almost INR 20 per bag quarter-on-quarter. You mentioned that trade sales, trade realization barely moved and non-trade would have improved. So there is a sharp INR 20 increase.

Yes, go ahead.

Yes. So on a like-to-like basis, what was the price improvement seen in the trade and non-trade segment? So I just want to split the benefit on account of price movement and on account of geo mix optimization.

I do not have granular figure, but I'll just let you know. So based on geo mix, the reduction is about 20 kilometers, that translates to about INR 60, INR 70 per tonne, right? And rest is your price increase. And see, if you really look at West prices like Gujarat and even Mumbai, where we sell a little bit and our non-trade proportion is very high. Their prices went up and that has helped us. Trade prices went up in the East, so that has helped us. North was almost kind of constant, a little bit here and there, not much, but non-trade even North also has gone up.

Understood. So if I look at -- you have mentioned in the presentation that your lead distance has come off. But the -- if I look at the freight cost, that number has inched up by INR 30 per tonne. Obviously, there would be some impact of diesel price increase for a month. But we haven't seen the benefit of the lead distance in the freight cost.

Yes. So we kind of hold on to freight for some time. But in certain routes, certain lanes, we had to increase this because of diesel prices went up, right? But the reduction has been much more than what inflation we gave in terms of freight.

Sorry, I didn't understand the last part.

So the reduction which we have taken 20 kilometers. We said, per the cost inflation of the freight increase which we had given to our transporters, that is what I'm trying to tell you.

Okay. So you're saying that your freight operators have taken a larger increase, but that impact is moderated because of the lead distance reduction which you have seen. And was there any maintenance shutdowns across plant, which would have inflated the other expense numbers in this quarter because even that is at very high, at INR 770 per tonne?

Yes. No, no, no. We took maintenance also in some of the terms. So there were some maintenance part, not major because major maintenance is happening annual shutdown this quarter. But packing cost is one cost which has gone up, right? And some of the plants, I think we had some shorter shutdown also to kind of work on a few things.

Understood. So now between Q1 and Q2, you're looking at your fuel cost going up by 20 paisa, which would be like INR 100 per tonne. And even packaging, you're implying INR 3 to INR 4 per bag, means around INR 80 increase in packaging cost. So even if I take it for the -- at least, yes, INR 50 to INR 60 impact. So we are talking about INR 150 plus variable cost increase. Additionally, there will be an op loss sequentially and also maintenance-related expenditure piling up in Q2. So -- and obviously, cement prices haven't moved up, rather they would have a negative bias versus Q1. So are we looking at margins tapering off significantly in Q2 versus Q1, basis current cement prices?

See, typically, July-September is cyclical -- cyclicity, demand relativity, yeah. So all of us take maintenance during this time. So that definitely impacts our margin, right? Now, as I said before that on energy front, fuel front, there is an uncertainty. If things improve, then I think it's going to be good. And also this is impacting across industry, then pass-through also definitely will happen. That is what I believe. So that is going to kind of hit our margin. We'll try to pass it on to our customers because absorbing this much cost is not possible. I think we'll have to pass it on. The only challenge would be that this is falling or coinciding with demand cyclicity. So how much pass-through that is going to happen, that is a kind of big question mark. How much we'll be able to pass it on? So that is what the cutscene. Otherwise, definitely pass on will happen and cyclicity will impact. So that is something which is kind of every year phenomenon.

Understood. But so far in July and early August, what has been the pricing trend versus average of Q1?

So July, August, if you compare, I think I have not seen much upward trend, but prices have not gone down even, right? So this affects in all markets till now because we are just 6th of the month of August and July has just passed. So prices have not gone down. Maybe I think, if you know that, July has been a little better than July previous year, right? So I think demand will improve or maybe I think a little bit upward in demand will definitely help us to take up some price increase also.

Understood. And sir, lastly, on the CapEx, what is the equipment ordering status on the Eastern and Central expansions and on the railway siding Phase 2 as well as on the conveyor belt in the Durg?

So on our ongoing projects, major equipment ordering we have already done. For instance, like Durg, our second clinker 9 plus grinding facility plus grinding at Patratu and Madhubani. So that major equipment ordering we had already done. And this railway project, which I said before also that, that is contingent to the kind of collaboration with the Steel Authority of India and other state builders, right? And even since we are just passing through some road also, PWD road. So I think that has to kind of a collaborative approach with all those stakeholders also to take it forward. But that is no way impacting our operations because we are operating our railway line full phase, no issue. And whenever that kind of collaboration happens, then we'll take this project forward, whatever is remainder.

And the overhead conveyor belt project?

Overhead conveyor belt, so as I said that this approval was pending with Steel Authority of India Limited, has been approved. But now this proposed agreement is now lined with Steel Authority of India Limited. And they have to kind of go ahead to do this agreement and contracting. So we have reached to that level till now.

[Operator Instructions] We take the next question from the line of Girija Ray from Nirmal Bang Securities.

I have few questions. One number related question, that is first. What is our total formal capacity and if you can provide me RE component installed capacity as of today? And what is our progress towards increase of RE capacity and power and fuel cost savings purpose? This is my first question.

Okay. So you are right. Last quarter, we have renewable energy 49%, right? So whatever energy we consume, 49% is our renewable energy and that includes solar, wind, and WHR, right? So this is in terms of our renewable energy, 49%. And of course I told you that our plan is to take it up. We are working on some other projects also. And going forward, maybe 6 months, 8 months down the line, we will further improve this percentage. So this is part 1 of your question, right? Part 2 was what? Just I'm missing...

No, no, thermal capacity and renewable component capacity like solar, wind and WHR, installed capacity?

Yes. So I think I can give you that breakup. So the solar is 129 megawatt, WHR is 45 megawatt and wind is 4 megawatt.

And the thermal capacity?

74 megawatt.

Okay. Coming back to my second question. See, so you talk about regional pricing. Right now if we see north and east, generally, these prices are very high cement prices and trades as compared to other regions. So if in case there is a price hike across geography, so do you think that we still have some kind of potential of the price hike? In fact, you may have the same way [indiscernible] if there is a price correction, there might be chances that the North and East can impact much rather than other regional price hikes. So how do you see, already we are in a very high price in North and East region. So if I'm -- please correct me if I'm wrong or just give me some view of yours.

I have a different view. I don't know, from where you're coming prices are high, because North Coast is also the highest. And as I told you, in -- one of our investors, they were asking impact of this geopolitical situation. I explained in my opening remarks also that North has been impacted the most because we were importing coal and pet coke, right? Yes. So to my mind, I think pass-through has not happened in North. So North has a better headroom to increase prices than other geographies. So which is what my take is, which is a little different than your understanding. So if you look at the lowest price perhaps which is existing in entire India is Eastern part of India and particularly in Chhattisgarh, okay? So perhaps prices have not really gone to the level by which cost has gone up, right? And this industry is so capital intensive, right? And you know that kind of ROC or ROI different players are getting. So I don't think that prices have gone to that level that there is no headroom. I feel other way that there is a headroom because cost has gone up a bit drastically.

Last question, if I may. So our nontrade segment share is 41%, right? So a few years before most of the players, they were trying to increase their trade segment, right? So now do you see for next 2 years, nontrade segment is going to work out more rather than trade?

So in general, I think it's very difficult to really see non-trade or trade because this segmentation is also based on the margins to my mind and other segmentation, of course, B2C and B2B. But when you really focus on margin part of it, you have different landscape in different states. So in general, I think if you ask me, then yes, of course, trade is better than nontrade on 2 things. One, of course, overall margin is better. And second, in trade, you sell mostly blended cement. So that is anyway benefit there. But if you go to that regional nuances, then I think you have a different kind of thing. So a player like us, I think we'll have a different strategy in different market with respect to trade and nontrade, right? But overall, if you ask me, yes, of course, I think effort is going to be there on trade even going forward more so because mostly blended cement get sold in trade segment. And that gives you a better equivalent realization than selling other products, right? Maybe I think absolute price for the margin if you look at, then maybe other product will look little less. If you really look at equivalent concrete or equivalent contribution considering clinker factor, then blended is always better. So overall I think trade is going to kind of focus area in coming future also. I don't see that is going tilt maybe in a couple of years.

[Operator Instructions] We take the next question from the line of [ Aditi ] from Abacus.

Could you share some more color on the SPV that you guys have done for the solar power projects?