Sagar Cements Limited (SAGCEM.BO) Earnings Call Transcript & Summary

Good morning. Good morning, everyone. Anand Rathi Institutional Equities welcomes you all to 3Q FY '26 Earnings Conference Call for Sagar Cement Limited. From the management team today, we have Mr. Sreekanth 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 Desa from CDR India for his opening remarks, post which we will then hand over the call to management. Over to you, Gavin.

Thank you, Prasheel. I'd just like to add that during this conference call, some of the remarks -- we will start it with opening remarks from the management, following which we will have the floor open for an interactive Q&A session. Before we begin, I'd 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 con call invite sent to you earlier. We trust you've had a chance to go through the communications that were emailed yesterday. I would now like to hand over to Mr. Reddy to make his opening remarks. Over to you, Sreekanth.

Thank you, Gavin. Good morning, everyone, and welcome to Sagar Cement's earnings call for the quarter ended December 31, 2025. Let me begin the discussions with a brief overview of the market, post which I will move on to the Sagar-specific developments. As we have indicated, overall demand during the quarter, especially the first half, was relatively subdued owing to extended monsoons and festive season. However, we did witness pick up towards the later stage. Yes, this trend is continuing as we speak, increasing our confidence of ending the fiscal on a positive note with the overall volumes of around 6 million tonnes, supported by pickup in demand and better pricing trends will result into improved financial performance. In Q3 FY '26, Sagar registered a volume growth of 8% year-on-year, while our revenue for the quarter stood at INR 591 crores compared to INR 564 crores in Q3 FY '25, an increase of around 5%. EBITDA for the quarter stood at INR 38 crores, which is same as previous year's Q3 numbers. EBITDA per tonne stood at INR 254. We continue to work towards improving efficiencies and profitability through various cost reduction initiatives, including WHRS and solar capacity additions, lead distance optimization, plant upgrades. Additionally, we expect improving cash flows and planned line monetization to support prudent growth going forward. Loss after quarter -- sorry, loss after tax during the quarter stood at INR 64 crores. Our projects at Andhra Cements and Jeerabad are progressing as per plan. The construction of the 6-stage preheater at Dachepalli plant of Andhra Cements has been successfully completed and was recently commissioned. 4.35 megawatt Waste Heat Recovery project at the Gudipadu unit is expected to be commissioned by end of FY '26. We also expect to commission the expansion of Jeerabad capacity from 1 million to 1.5 million tonne by early part of Q1 FY '27, and the cement capacity addition at Dachepalli by August 2026. Power and fuel costs stood at INR 1,408 per tonne as against INR 1,456 per tonne reported during Q3 FY '25. Freight cost for the quarter stood at INR 830 per tonne as against INR 835 per tonne during Q3 FY '25. From an operational point of view, Mattampally plant operated at 57% utilization, while Gudipadu, Bayyavaram, Jeerabad, Jajpur and Dachepalli plants operated at 82%, 66%, 95%, 40% and 39%, respectively, during the quarter. As far as the key balance sheet items are concerned, gross debt as on 31st December 2025 stood at INR 1,627 crore, out of which INR 1,320 crores as a long-term debt and the remaining constitutes the working capital. Net worth of the company on a consolidated basis as on 31st December 2025 stood at INR 1,694 crores. Debt equity ratio stands at 0.78:1. Cash and bank balances were at INR 83 crores as on 31st December 2025. In summary, we remain committed to delivering sustainable and profitable growth for strengthening the operational excellence, deepening our regional presence and increasing the use of renewable energy across our manufacturing footprint. That concludes my opening remarks. We would now be glad to take any questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Shravan Shah.

Shravan here from Dolat Capital. A couple of questions. So first, just on the demand front and will then come to the pricing part. So last time, whatever the number we have said in terms of the growth for individual state of the south and for FY '27 -- '26 and '27, will the number remain same? Or is there any change? So primarily, we were saying high single-digit growth for AP, Telangana for this year FY '26, flat to marginal positive for Tamil Nadu and 3% to 5% for Karnataka. And -- so just your thought on that front.

Yes, we -- I think the numbers what we have discussed during the last quarter call, they more or less hold good. We could be slightly better. But as we speak, the demand uptick has been extremely strong. So the numbers what we have committed, I think they are holding as discussed before, Mr. Shravan.

Okay. And for us now when we are saying 6 million tonne for this year FY '26 volume, if I just translate and I'm assuming this is only the sales volume and not the clinker, that means that the fourth quarter of this year, FY '26, we are looking at just 2.6% kind of growth. So -- and I hope that the fourth quarter growth definitely should be a kind of 7% in the range of that. So just wanted your thoughts. So is this the number on the lower side that we are seeing? And for FY '27, last time, we said 7 million tonne odd. So that number remains intact?

Now let us talk of the current financial year's outlook, it is 6 million. And we did indicate in the past that these are subject to some corrections basis the price. The price has been volatile. So basis that, from 5.8 million, we re-revised it to 6 million. So we are holding it to the 6 million now. it should roughly translate close to -- a year-on-year number of close to around 9%, Mr. Shravan. Going to the next year number, yes, we are holding at this point of time for a 7 million outlook for the coming financial year.

Yes. So now, sir, on pricing front, so I just want your clarity. So if you -- in terms of the state wise, if you can spell. So in this January, what we heard is that there is a decent hike of INR 15, INR 20 odd in the nontrade front. So your thought and if you can also specify in terms of the state level, how much till now from 1st January till now the hike is there in nontrade? And also at the same time, on the trade front, has there any hike, and if yes, how much?

From the middle to end of December, we started increasing the prices. From end of December to now, yes, we did get around INR 15 to INR 20 increase on nontrade. Though at the trade level, the price increase, we started increasing only during the first week of January. But in this part of the world, as you know, Pongal is an important festival. We tried increasing almost INR 15 to INR 20. But so far, we could only realize anywhere between INR 5 to INR 10 in trade, Mr. Shravan. And I'm speaking across the states that we operate, most of the trends are very similar across all the south states, sir. In Madhya Pradesh, the price increase happened slightly ahead of almost close to INR 10. That is at the end of November itself. Nontrade -- and it's mostly in the nontrade. Trade prices have been very flat again for our Madhya Pradesh plant, Mr. Shravan.

Okay. Got it. So given this scenario, so in terms of -- for us in terms of the profitability. So for 9 months, roughly around INR 478 EBITDA per tonne is there, and we were looking at INR 600-odd. So how one can -- and at the same time, do we now believe that even at the end of the, let's say, once the March starts and given the capacities which are slightly delayed and now will come up on the stream, this price increase can sustain? Is this the structural price hike or maybe roll back likely to happen in the March? And if that is the case, then how one can look at the profitability for us?

In our case, sir, what we are trying to factor is not a very steep price hike. The current price hike is -- we are as close as just before the GST revision has happened. So it's not that we have gone back to the Q1 pricing, which was extremely healthy. Given the scenario, what we have penciled in for the Q4 is around INR 550 EBITDA per tonne. In all, we should end up very close to INR 500 odd EBITDA per tonne to INR 525 EBITDA per tonne for the full financial year. That includes the incentives, Mr. Shravan.

We now have the next question from the line of Mr. Rajesh Ravi.

I'm Rajesh Ravi from HDFC Securities. My question pertains to -- am I audible?

Mr. Rajesh, yes, you are very much audible.

Great. So if I look at your -- the stand-alone versus Andhra performance, the cost structure is still starkingly different. We believe your clinker plant is already stabilized at Andhra Cements. So how should we look at? Your stand-alone operating cost per tonne hovers around close to INR 3,900, whereas it is for the Andhra Cement capacity, these numbers are still very high.

Yes, Mr. Rajesh, I think you should look at -- we only commissioned the new preheater at Andhra, sir. All in all, from a year-on-year kind of a number, you should expect around INR 250 per tonne kind of a reduction at Andhra. Now when you look at the cost, sir, it again adds up the freight. So it could be significantly different across the plants. And when you look at standalone, yes, it includes Jajpur. It also includes Gudipadu. So each of the unit has its own characteristic and proximity to the markets. But all in all, if you look at Andhra's performance, sir, it has been significantly better. We are trying to align it to with the other group companies, especially with the Mattampally because Mattampally plant happens to be one of the most cost efficient plants. The idea is to replicate the same cost here at Andhra. I would not say that we have reached there because Andhra doesn't have waste heat recovery compared to Mattampally. But if you look at specific consumptions and all, we are almost very, very close or better than Mattampally because obviously, this is a brand-new preheater. So given this situation, fortunately, in the last quarter itself, we are very close to the breakeven. I think in the current quarter itself, we expect Andhra to break even. With the better prices, we hope it should become profitable in the current quarter itself, Mr. Rajesh.

Understood. So for ex-factory operating cost because that number would be more comparable at your end, so how much Andhra would be still higher in terms of the cost structure versus Mattampally plant?

No, I think that's again, see, up to clinker, I think...

Yes, up to clinker at least...

There is a gap because the electrical power cost at Mattampally includes almost 90% of the power comes from green sources for Mattampally, sir. But whereas in Andhra, we still source from the grid, only 6-megawatt solar plant is operational. Except for that, on a specific power consumption, sir, Mattampally is almost at 725 to 730 Kcal per kg of clinker whereas Andhra is almost sub 720 Kcal per kg of clinker. Up to clinkerization, electrical units for Mattampally is around 52 units, whereas Andhra is at 51 units. On a specific consumption, Andhra is already below Mattampally. But the landed cost of fuels as well as the energy cost is slightly different. It would take some more time before we could, on a rupees, we could be very close to Mattampally. But again, the product mix for Mattampally to Andhra would be very, very different. So it needs to be compared. What I would say is that when we have embarked on this investment for CapEx for Andhra, the objective was primarily to be specific fuel consumption everything to be lower. From 850 to 880 Kcal, we could straight away reduce it to INR 720, Mr. Rajesh. So that's the translation. And from 60, 62 units up to clinker, we are already at 51 units. So we could -- with the CapEx and successful commissioning, yes, we could achieve much more than what we initially thought we would achieve from there.

Great. Understood. So gradually, this will narrow, and the difference will remain so because of the energy mix.

Yes, sir. Yes, sir. Again, I'm talking specific to Mattampally.

Mattampally, yes.

Yes, yes. Because each unit has its own cost structure because of the either raw material costs or the coal landed cost. But as it stands, we are not very far from the best in the business at Andhra.

Understood. And at company level, Q4, you're looking at INR 500 plus EBITDA per tonne. Is this understanding right?

Yes, sir. Yes, sir. We are looking at INR 500 to INR 550 because we did factor some amount of price hike, but not the full one, what probably is expected to because March is going to be end of the year, so there could be some kind of pricing pressure that has been penciled in internally, sir.

Okay. And majorly would also be coming from better profitability from Andhra Cements?

I think most of it is not only from better performance from Andhra, sir. Across the units, the operating leverage also is going to be better.

Yes. Okay. Understood. And sir, second, on the land sale, what is your progress over there? Can we see some disposal happening...

Yes, sir. I think we are happy to state that there is only one step left. Most of the other steps have already been covered. So we are waiting for the final government policy, very specific onto the Andhra. As indicated last time, I think over a year, 1.5 years, we should have totally monetized the Vizag land, Mr. Rajesh. So from a time line perspective, as indicated before, we are expecting over next 18 months for the entire thing to be monetized.

Okay. So nothing then -- [Foreign Language] for this financial year, there wouldn't be anything. Whatever we...

No, I don't think we did -- we expected for this financial year. It's only spread over next financial year, and we are -- I think bulk of the money we should have received over next 18 months.

Over next 18 months. Okay. Great, sir.

[Operator Instructions] We have a question from Jaspreet Singh.

I'm from Equentis PMS. I missed this noncore money that we could realize over 18 months. What's the total value attached to this, sir?

Mr. Jaspreet, what we are -- the government reckoner rate at this point of time is around INR 4 crores per acre, sir, which roughly translates to INR 400 crores. But there would be some expenditure, as you know, and also some capital gain. So we are assuming that we should receive around INR 350 crores net of the expenses that we might incur.

Okay. So net of expenses and net of tax, INR 350 crores?

Yes, sir.

And this would be received in one shot? Or would it be spread out in that 18-month period?

No, I think -- see, one of the advisers whose help we are taking for the monetization of this, their view is that Vizag is not such a big market for -- there are not many large real estate players around that place for them to absorb in a single lot. Probably it should be split into 5 to 6 convenient parts so that you could monetize in that time horizon, Mr. Jaspreet.

Okay. But ending in that 18-month window only?

Yes, sir. Yes, sir. Yes, sir.

Okay, okay. And sorry, if I'm asking if you've mentioned it multiple times in the past, but how do we plan to utilize these proceeds, CapEx, debt retiring or anything else?

Our plan is to have a balanced and optimized debt. So for the next 2 to 3 years, we do not have large CapEx plans. So most of the money should be utilized to retire the debt, Mr. Jaspreet.

Okay, which is at a consol level about INR 1,600 crores plus. Am I...

Yes, the net debt is around INR 1,450 crores. That's what we expect by end of this financial year.

Okay. So let's say we retire this and we have some cash flow, so about debt equity then should be -- should come closer to 0.5, let's say, in 18 to 24 months' time frame.