JSW Cement Limited (JSWCEMENT) Earnings Call Transcript & Summary

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

Yes. Thank you, Renju. Good morning, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to nQ1 FY '27 call for JSW Cement Limited. On the call from JSW Cement, we have with us Mr. Nilesh Narwekar, Chief Executive Officer; Mr. Narinder Singh Kahlon, Director of Finance and Commercial and Chief Financial Officer; Mr. Hitendra Jariwala, Chief Marketing Officer; and Mr. Kunal Mukherjee, Head, Investor Relations. I would like to mention on behalf of JSW 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 JSW Cement 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. JSW 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 any new business development, information or future event or otherwise. Also, participants on the call can download a copy of JSW Cement's Q1 FY '27 results presentation from the company website or Stock Exchanges. I will now hand over the floor to the management of JSW Cement for the opening remarks with followed Q&A. Thank you and over to you, sir.

Thank you, Vaibhav. Good morning to all, and we welcome you to the quarter 1 FY '27 earnings call of JSW Cement. I hope all of you have had the chance to review our results and investor presentation. With this, I will hand over the call to Mr. Nilesh Narwekar for his opening remarks. Over to you, sir.

Thank you, Kunal, and good morning to all. has started off on a strong note for the company despite the ongoing uncertainty around the West Asia crisis and the impact of state election held early in the quarter. As per our reading, cement demand in South, West and East regions grew approximately 6% Y-o-Y in quarter 1 FY '27. The North region where we started sales in this quarter saw substantially higher demand growth of approximately 11% Y-o-Y. Government CapEx did much of the heavy lifting in the quarter. Central CapEx grew by 24% Y-o-Y and data indicate that 28% of the FY '27 CapEx budget has already been utilized in quarter 1. Similarly, state CapEx and infra construction goods output continued to improve Y-o-Y. We are seeing very strong demand outlook on the intra and large project side for the rest of the year, which will support our nontrade cement and the GGBS business. Just to give a few examples of large projects in our regions. In MMR, we see pace picking up in the bullet train project, the Maharashtra packages and the Western [indiscernible] project at Mumbai will also gather pace, both monsoons, road-related works are expected to pick up speed to. In Pune, I would like to highlight the Pune ringroad project in various new elevated road projects, there are also new metro projects planned in Pune. In South region, Amravati new capital development project at AP is gaining speed, the NPCR, nuclear power plant expansion in North Karnataka and several large road packages in Chennai and Kerala expected to generate substantial demand. On the residential front, we're seeing strong residential activity in Pune, Hyderabad and Bangalore, and most of you will be aware of the substantial residential redevelopment happening in Mumbai and suburbs. Finally, on the macro front. We continue to monitor the external environment, which remains volatile. As fuel prices remain elevated, we are increasing our share of domestic fuel for the rest of the year. Moving to the key operational highlights, for quarter 1 FY '27. Firstly, on volumes. Our total sales volume in quarter 1 FY '27 increased by 15% Y-o-Y to 3.81 million tonnes. Taking this product-wise, cement volumes sold was 2.34 million tonnes increased 27% Y-o-Y. For ease of comparison, if we exclude the North operations, the volume increase was 8% Y-o-Y. As we had flat in our quarter 4 call, Demand in April and early part of May was affected due to labor migration and state election, but we saw a strong rebound in the month of June. We'd also like to touch upon the contribution from the North region. The market perception has been very positive so far with an average utilization level of 55% in quarter 1. The utilization rate touched almost 68% in June '26. GGBS volume growth was relatively muted at 2.6% Y-o-Y. However, we are optimistic on the prospect for GGBS for the rest of the year. We have received approvals for over 29 large infra projects in Q1 and moreover, the project pipeline is also robust, as mentioned earlier. Moving to product ASP. Cement realization for quarter 1 FY '27 was INR 4,951 per tonne, increase of 6% Q-o-Q with the highest increase in East region followed by South and West, GGBS realization in quarter 1 FY '27 was INR 3,807 per tonne increase of 3.4% quarter-on-quarter. Within demand, trade mix remained stable at 51%, our clinker-to-cement factor increased to 55% with the launch of north operations, but remains one of the lowest in the industry. I believes this remain stable in the quarter 2. I would also like to brief on the capacity expansion program. Substantial progress has been made on installation on the waste recovery system, the OLBC in the AFR coprocessing system that at the Nagaur integrated unit and these are expected to commission in the next few weeks, which is going to bring down our costs significantly. The additional 1 million tonne grinding capacity in Nagaur is also on track and is expected to be commissioned by end of Q2. We added 56-megawatt of wind capacity in Q1 at Dolvi and Vijayanagar and this took our RE share to 30% in Q1. Let me now hand over to Narinder to take you through the key financial highlights.

Thank you, Nilesh. Good morning to all. I will summarize the performance of Q1 '27. At company level, consolidated revenue was INR 1,896 crores. That's an increase of 22% year-on-year and flat quarter-on-quarter. Consolidated operating EBITDA was INR 299 crores. That's lower by 7.5% year-on-year. Despite improvement in realization, EBITDA declined mainly due to cost pressures in fuel and parking, plus the substantial marketing investment of about INR 33 crores. made in North region during quarter 1. Consolidated operating EBITDA per tonne was INR 784 a tonne for the quarter. As already mentioned, we started sales in the North region. And this quarter was the first full quarter for us. Excluding the North operations. Revenue grew by approximately 10% in the quarter, while operating EBITDA increased by 4% to INR 336 crores, that's INR 979 a tonne. Total EBITDA, including other income was INR 372 crores. EBIT was INR 190 crores during the quarter, including positive contribution of about INR 13 crores from the Fajar operations. PAT for the quarter was INR 153 crores. In terms of the trend in main cost elements in Q1 Raw material and power and fuel increased on a quarter-on-quarter basis, primarily due to higher fuel cost and in part of Nagar operations. Blended fuel costs for the quarter increased to INR 180 per MPL versus INR 1.49 per ML in the previous quarter. We are working towards increasing our share of domestic fuel to optimize our costs in the coming quarters. Logistics cost per tonne reduced by 2% quarter-on-quarter with a slight reduction in lead of 4 kilometers as well as from efficiency measures. Other expenses have also increased by 4.5% quarter-on-quarter in absolute terms. And this is largely related to the heavy marketing investment in the North region and higher packing costs during the quarter. In terms of balance sheet, Net debt was INR 3,856 crores at the end of June. Net debt-to-EBITDA stood at 2.9x. Average cost of debt for the quarter was stable quarter-on-quarter at 7.63%. During the quarter, the company incurred CapEx of INR 337 crores. We will now be happy to address your questions. Thank you.

[Operator Instructions] The first question comes from the line of Prateek Kumar with Jefferies.

My first question is on the North operation. operating loss of INR 40 crores in this quarter includes a INR 3 crore of marketing. Can you discuss what kind of marketing investments are these? Also this INR 40 crore loss in line with what you expected maybe last year during IPO? And what kind of full year EBITDA you can expect from North operation in first year?

So this expenditure in terms of marketing of INR 33 crores was primarily around the new campaign launch, which was undertaken on the back of the launch in the North, which was launched. And that was one. And of course, there were a lot of activation activity, which is done on the ground level, like there was a khel we've done where we connected all the 10,000 villages -- 10,000 teams participated in the cricket tournament in Rajasthan. Similar Dangal and Haryana, plus all the activation work at a down level. So it's a combined effect of all of this, which is contributing towards this to the INR 33 crores of marketing expenditure. And as compared to the BP plant is our BP, we are tracking ourselves against that.

And what kind of performance you're looking for the full year for North going to come profitable?

Yes, we should be -- I mean, as we had mentioned in the first quarter, we were -- I think we were close to 60 -- 55% of capacity utilization. And we are holding ourselves of that. In fact, we should be closer to 60% plus by the end of the year in terms of north operations. And the real pickup for us that's going to -- that's going to happen now in terms of cost is once the clinker costs start to come down with the commencement of the OBC, the alternate fuel, the waste heat recovery is kicking in the move from imported coal to lignite in [Audio Gap].

Ladies and gentlemen, the management line has been disconnected. Please be on hold. while we quickly get them reconnected. Ladies and gentlemen, the management line has been reconnected.

Sorry, guys, the line dropped. But I was talking about how our costs are likely to come down, specifically the clinker costs are likely come down in quarter 2 with the implementation of the overland welconveer, the alternate fuel handling systems, the waste set recovery, which has already been commissioned. It's going to get fully in flow. And of course, the rotation towards more of domestic coal and increase in lignite in our operations. So all that is being planned for quarter 2, and we expect the benefits to start to kick in thereafter.

My other question is on GGBS. Growth has been far slower in this quarter. You said we've got significant contracts in like 1Q later part what kind of growth which you are looking at in the segment going forward?

Sure. So first is see in Q1 FY '27, the bond was affected by an ambitopical even let explain that. There were RC closures in the West. The aggregate availability issues in the south and the low OPT mix cost was a combination effects. Now guidance for quarter 2 FY '27, despite Q being a monsoon season, we are expecting it to be better than Q1 and signs [indiscernible] Now as I already mentioned in the opening remarks, we have received approval for over 29 large infra projects in quarter 1. Moreover, the project pipeline is also fairly robust. And we are also applying for additional approvals across the central bodies. And we expect the EPS to be again the high single digits in terms of growth for the year.

[Operator Instructions] Next question comes from the line of Raashi with Citi.

Continuing question on the north. So I think the marketing spend was INR 33 crores in this quarter. I remember I were INR 23 crores in the prior quarter. What are you expecting in terms of marketing spend going forward to -- that's one. And second is on the overall cement volume 8% was not growth for this quarter. How are you expecting to do overall forward?

So the marketing spend in last quarter that was close INR 17 crores. So the investments for -- in terms of marketing have already been done, and we expect to be close to that in the following quarters. What is the second part of the question, Raashi. Sorry, I missed that.

The overall so the ex North volume growth, like you mentioned, was about 8% for cement. How are you seeing that track?

How do you -- okay, how does that track? Okay. So I mean, the industry growth that you -- I think you're already aware, excluding North, we're talking about the industry grew around 6%. And we've done -- excluding North, we've done it at 8%. Now what we've seen is in the East and the West, -- we've done significantly better than the duty. And in the South is where we had a bit of a headwind. That is behind us and again, primarily because topical reasons. And overall, in terms of growth at a company level, we expect to deliver high-teens growth at an overall company basis, if I to include not also as a part of this.

And just on realization what is your pricing strategy. You've obviously done very well on realization. So how are you -- you needed to market so how?

This is specifically for cement or GGBS you're asking or both because both of them are very different.

Both.

So on cement, there are concerted efforts, which is being made. So all the investments that we're doing primarily in terms of building up our brand, the ground connect with the decision-making influencer, the ground connected the network. All that is fundamentally playing out for us in terms of being able to increase our price or reduce the price gap in the A category band itself. So that's one which is playing out. And the second thing, of course, is there is an effort which is constantly on to try and keep reducing our, what you call the discount structure in the realization number. So these are 2 aspects which are working out on the cement side. And on the GGBS side, I mean, the numbers that you see is primarily a dispersion effect, -- there's been no change in our pricing strategy overall. We continue to maintain our stands. And basically, the geographic mix is what is reflecting in the numbers that you're currently seeing for quarter 1.

[Operator Instructions] Next question comes from the line of Shravan Shah with Dolat Capital.

A couple of things to get understanding. So for cement, we say that we are looking at a high teens growth including north. Hello?

Ladies and gentlemen, the management line has been disconnected. Please be on hold while we reconnec. Ladies and gentlemen, the management line has been reconnected. Please go ahead.

Sir, can you hear me now?

Yes, we can hear you loud and clear. Apologies for the drop.

Yes. No issue, sir. Sir, just wanted to get a clarity. You said that we are looking at on the cement front, high teens volume growth for FY '27, including North.

Yes.

So I was just doing a math, let's say, for FY '26, we have done 7.73 million on the cement front, if I per take 18% growth, it comes 9.1 million. And for North, if we take a 60% utilization, which is 1.5 million tonnes. So if I minus that, then it comes to 7.6 million, that means we are looking at a degrowth on the core fund, excluding the North. So just wanted to get more clarity on that.

Yes, Shravan, I mean, what we've given you is an overall guidance, including North and GGBS, we will deliver a high-teens growth on an overall company basis. So that's what we hold ourselves to. And I mean, while you've done the math, we've also done ours. So I think let's see to the high teen growth in the overall company base as the guidance from our side.

Because I just wanted to get because on the GGBS, we are seeing a high single-digit growth. So -- and then we are in on the overall high teens. So that means on the cement front, including north, it has to be a 25%, 30% kind of growth that we should be looking at. So that's where some clarification I wanted.

Okay. Can we take this offline? You can connect with Kunal Mukherjee on this?

No issues.

Mr. Shravan, please rejoin the queue for more questions. [Operator Instructions] Our next question comes from the line of Sanjeev Kumar Singh with Motilal Oswal Financial Services Limited.

My first question is on the profitability of North plant. So can you give some sense on the profitability difference between North and South plants for cement. So why I'm coming -- asking this is because some sort of marketing is paid will not be one-off in nature. It will continue over the next few quarters or few years also when you continue the operation. So that's why I wanted to understand some -- I want to get some sense on the profitability difference between north and south plant we are seeing as of now.

Yes. So we all know North and South are completely different when it comes to profitability. And I'm sure you all have the not performance data available for the competition. Now for us, it's early days, by the end of September or I would say in September is when we take even and then we grow in the positive out. March is the month probably when we can be with more conviction tell you that what is going to be the profitability for the coming months. South is subdued, we saw the results for South companies. South is a bit subdued at the moment. But there is a big difference, the difference can be in the range of probably 600 to 700 per tonne.

Okay. And second question is in terms of CapEx plans over the next 2, 3 years, so when do we want to start the central lease plant? And what is the ideal net debt to EBITDA, which you would like to maintain in FY '28, '29?

See for this year, this financial year, we are going to spend about INR 2,300 crores and about INR 2,000 crores in the next year. See, as we had indicated earlier, our intention is to move from 24.1 million currently capacity to about 43.5 over the next few years. Now that requires about INR 7,500 crores, INR 7,600 crores CapEx. So we continue on that journey. But yes, this year, INR 2,300-odd next year, INR 2,000 crores and the following year. probably some of the balance numbers would be spent. So answering your question on the central Central also is on our priority list. We hope to make some announcements in the coming quarters.

And net debt to EBITDA, sir?

Net debt to EBITDA, see the internal guidance for us from the Board is to keep it below 3. And always the endeavor will be to keep it below 3.

[Operator Instructions] Next question comes from the line of Navin Sahadeo with ICICI Securities.

And congratulations on the much faster volume ramp-up in the North region. I had 2 questions. One is on the RMC business. Like if you could talk more about the outlook of this particular business, given it is so integral to the cement as well as the that we offer. So how are we looking at how many plants do we have? What is the vision there? Are we planning to enter in the North region as well with this or in other regions? That would be my first question.

So yes, we are -- in terms of RMC plans, currently, we've got 15. We plan to take it up to 35. We're adding 35 more and our current approach towards the RMC business has largely been -- it needs to be [indiscernible] to wherever we have our footprint. So wherever we can supply cement and/or cement [indiscernible] in terms of GGBS. That's where we set up the RMT plants. And in the RMC setup, it's largely either commercial, dedicated or captive, captive with largely protests. That's how it gets -- it gets divided. And in terms of what are the next part of the question? Yes, in terms of revenue for quarter 1, we were around INR 180 crores in terms of RFC revenues, and we have plans to see be scaling this up going ahead. We also turn to operations in the North as well as to -- wherever we have our cement operations.

Sure. So of the 15 RMC units, is it safe to assume that most of these are currently in the West and South region, which are close to our GGB sourcing units?

Yes, It's safe to assume. In the 15, there are 2 units in north as well.

And incrementally, when you say the target is 35, would it be again in West region only or they would be now more in the north and other regions that we are planning?

No, it is scattered across. So for example, I mentioned to you, our commercial and dedicated operations are primarily mirroring wherever we have synergies or sematic arrangements with our cement operations, right? And whenever it comes to captive which is group companies setting up expansion or retain expansion. Then we try and evaluate whether it makes sense for us to provide CDBs a trend at least. So the North markets are currently not in true as a part of it. but all the other geography, be it the north now having entered in the north, the West, the south or the eastern part of India, we had significant captive operations, which is primarily mesoring the expansion that these group is undertaking.

Sir, my second question was about the long-term capacity expansion plans. And I thank you for including a vision there in terms of scaling the capacity to 68 million tonnes. My question was, if you have any milestones benchmark to these expansions because we are talking about like a couple of lines in North, additional lines, I'm saying in North and Central, also some new sites altogether in the Northeast region. So my question was, if there are milestones if we can talk about and within the various locations that you have mentioned, are there any priorities or a priority pipeline that, let's say, for example, Northeast would supersede or come up earlier than the Line 2 in North or Central, that kind of a clarification will help us.

So Navin, we are evaluating all the options between our Central and Northeast and North expansion. We understand all 3 acquired importance. So all 3 cars are on the pale for us. But we will sequence them maybe in a couple of months, we will be in a better position to take that decision. But here, the plans, the long-term plans are we finish off with the 43 million first and then go for the balance 25 or maybe in the next 3, 4 years following the completion of others.

[Operator Instructions] Next question comes from the line of Amit Murarka with Axis Capital.

So on North operations, I just wanted to check if you are booking incentive in Q1. So could you confirm that once?

No, it's not booked yet.

And like when do you expect or what is taking from booking it?

No. So as a process, we have submitted the document. We have -- we are awaiting the eligibility certificate. We should be there very soon. The file has already moved a couple of levels. And once we have that, we will start recognizing the incentive. So we expect this to come within maybe 2 months max.

It's INR 50 crores per annum, right? I mean in the first 5 years. So if you get a...

No. So the major thing is 23% capital subsidy on the eligible capital investment. So that and plus something, something will add up to about INR 50-odd crores, which we can receive over 10 years. It's not annual, it's not annualized.

No, not annual, INR 50 crores per annum for INR 5 years and INR 65 crores for the next 5 years is what I had in mind from the earlier discussions.

No, it's INR 50 crores for 4 years. than INR 65 crores and then INR 80 crores.

Yes, So. right INR 50 crores for first years 4. So that's what I'm asking you book for the -- I mean in, let's say, Q3 itself, if you get the improvement? Or will it have to start from Q3 then in the start of the Q3.

So when it is about the this is linked to how much of the CapEx I completed. Whatever gets capitalized is what I can with conviction say is done. So wait for another this quarter, because we are finishing with the[indiscernible] , the RMC as the LDC, the AFR, et cetera, and once that's capitalized, probably I can answer this much better with the INR 50 Crores or something less would be recognized in the current year.

Sure. And on GGBS, the slower growth, just wanted to understand, like you said that timing strategy has not changed, that you are not raising pricing basically. But also, you said that the central CapEx was strong in the quarter. So I'm just getting a bit confused that pricing was not raised and CapEx was strong, then why was the volume peak?

See, as I mentioned, Amit, there were a lot of RMC closures in the West because of all the challenges there. aggregate availability issues in the south, and the OPC flash mix cost is also becoming, how do you say, unviable. So the those kind of data because of election, there was a lot of labor migration from the geographies that we operate in. So in terms of GGBS sales, I mean, there's a significant volume that we get from the south as compared to, I think the 60-40 spread between South and West. And hence, the numbers were muted overall. And the growth that we received was primarily in the West. South is impacted. And all that has been corrected for now, and we can only start to see the numbers stack up for the guidance that I've given earlier on the call.

Sure. Understood. And last question, if I may. So fuel costs rose very sharply in the quarter. What would be your expectations for the second quarter now or at the medium term?

So we are switching to domestic coal. In fact, we have already started buying domestic code. And we don't see any escalation beyond the numbers that we achieved in -- in fact, in the coming quarters, we expect see second quarter will be alone as the first quarter. But going into the third quarter, we expect the cost to come down for us.

Sure. And just a very last question on the cost savings program, you had only guided for a number. Where are you in that journey and how much is left?

Amit, almost I think every quarter that becomes a bit difficult to quantify I think every 2 quarters, it would make sense, we did guide the Street in May itself where we are. So hold on for the next quarter's numbers. probably we can give you a better guidance on this. Yes, we are making substantial progress on the renewable power. And once the entire thing is up and running in September probably we'll have an answer to that.

[Operator Instructions] Next question comes from the line of Siddharth Mehrotra from Kotak Securities.

Sir, you mentioned that we expect to grow somewhere in the high single digits for the GGBS segment. Now if I recall, we had earlier guided that we expect to grow in perhaps mid-teens in this segment. So perhaps, is there a change in our overall outlook for GGBS to a slightly lower level?

Yes. See, the Q1 was impacted because of what I explained to you earlier. And with Q2, Q3 and Q4 starting up favorably, yes, the price would be what I shared with you, which is the high single digits for GGBS.

And in, say, FY '28, '29, do we expect similar numbers? Or do we expect to go back to double-digit guidance?

Honestly, it's strongly correlated with be the CapEx spend on the intra code. And if that continues, this will definitely be there. And I think the investment that we currently made in this specifically in quarter 1 in terms of getting approvals and getting these large infra projects listed and registered. I, at least, see, as a company, we see a very positive outlook going forward. which will pay out not only in this year, which is FY '27 also in FY '28 onwards.

Understood, sir. Sir, secondly, we just highlighted that we expect to end the year with around 60% capacity utilization in our Rajasthan plant. So just wanted to understand, even 1Q exit, our capacity utilization is more than 60%, 65% as per our PPT. So why are the subdued sort of expectations for full year utilizations?

No, it's not subdued. See, today, we are operating 2.5 million capacity and another 1 million is going to come up in September end, early October. So then we are looking at 3.5 million capacity. So this number, 60% plus though, yes, you are right, we did mention that we exited June with a 68% utilization. But it's just that the capacity is going to go up by another 1, 2 years.