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Sagar Cements Q1 FY27: Volume growth, but margins under pressure

Sagar Cements opened FY27 with a quarter that highlighted the difference between selling more and earning more. In Q1 FY27, the company reported consolidated revenue from operations of INR 706.07 crore, up 5% year on year, driven by a 13% increase in sales volumes to 16.06 lakh tonnes. But operating profitability weakened sharply. Consolidated EBITDA declined 40% YoY to INR 72.42 crore and the quarter ended with a consolidated loss after tax of INR 28.10 crore.

Management attributed the margin pressure to elevated input costs across energy, fuel and packaging, linking the spike to geopolitical tensions in West Asia. Price hikes in early Q1 helped offset part of the inflation, but competitive intensity and softer pricing momentum towards the end of the quarter limited the benefit.

The quarter in numbers: realisation fell, costs rose

The company’s per-ton data explains the earnings outcome. Consolidated net realisation declined 6% YoY to INR 4,396 per tonne, while total expenditure per tonne increased 3% YoY to INR 3,945. EBITDA per tonne dropped to INR 451 compared with INR 851 in Q1 FY26. The EBITDA margin fell to 10% from 18%.

Capacity utilisation improved to 63% during the quarter, up 660 basis points, and volumes grew despite temporary disruptions from heatwaves and election-related labour shortages in parts of eastern and southern India. However, the operating leverage benefit of higher volumes was overwhelmed by higher cost lines, notably power and fuel.

Operations and cost structure: focus on energy and efficiency

Power and fuel cost rose to INR 1,484 per tonne in Q1 FY27 from INR 1,450 per tonne in Q1 FY26. Freight costs were stable at INR 858 per tonne versus INR 860 per tonne in the year-ago quarter. Other expenses per tonne increased meaningfully to INR 580 from INR 495, which also contributed to the compression in EBITDA.

On the call, management said the company is factoring an annual cost inflation of around INR 100 per tonne from fuel, raw materials and other expenses, but expects to counter this through internal efficiency initiatives, including waste heat recovery, higher green energy use and plant efficiency actions.

The presentation also highlighted progress on green power usage. Green power accounted for 22% of the company’s power mix in Q1 FY27, compared with 16% in Q1 FY26. Management’s intent is to raise green power capacity through new solar installations and future WHR projects.

Capex progress: WHRS and grinding expansion, with more commissioning ahead

Two key execution milestones were completed during the quarter. The company commissioned the remaining 1.55 MW of WHRS capacity at Gudipadu, taking total WHRS installed capacity there to 4.35 MW. It also commissioned a 0.50 MTPA grinding capacity expansion at the Jeerabad unit on June 10, 2026.

The capex update section laid out additional projects. The company proposes to expand cement capacity at Gudipadu by 0.25 MnT by FY28 with an estimated capex of about INR 45 crore. It also plans to add solar capacity of 4 MW each at Mattampally and Jeerabad in FY27, with INR 18 crore capex for each project, and a 9 MW WHR project at Dachepalli in FY29 with capex of INR 144 crore.

At Andhra Cements’ Dachepalli plant, the six-stage preheater construction was completed and commissioned on October 23, 2025, and the presentation states cement capacity expansion from 2.25 MTPA to 3.00 MTPA is expected to be commissioned by September 2026. Management reiterated on the call that the 0.75 million tonne cement capacity expansion is likely to be completed before the end of the current quarter.

Guidance and priorities: volume target, margin recovery, and debt reduction

Management reiterated FY27 sales volume guidance of about 7 million tonnes, and clarified this excludes clinker sales. It also guided for full-year EBITDA per tonne of INR 500 to INR 550, assuming prices remain stable.

The earnings call also discussed the seasonal impact expected in Q2. Management indicated maintenance shutdowns at multiple plants and inventory cost adjustments could weigh on Q2 operational metrics, but expects to make up in Q3 and Q4 as WHRS benefits and capacity additions begin contributing.

On leverage, the debt profile remains a major focus area. As of June 30, 2026, consolidated gross debt stood at INR 1,703.60 crore and net debt at INR 1,598.87 crore, with cash and bank balance of INR 104.73 crore. Finance cost in Q1 FY27 was INR 52.23 crore, which is significant relative to EBITDA in a weak quarter.

A key lever for deleveraging is land monetisation at Vizag. Management said it is awaiting final Government approval, and reiterated that realisation of about INR 150 crore in FY27 remains doable. It also indicated a further INR 200 crore could come in FY28. Management also stated that apart from ongoing capex already planned and annual maintenance capex of around INR 30 crore to INR 40 crore, it does not have major new capex plans up to the end of FY28, and intends to focus on debt reduction.

Takeaways

Sagar Cements delivered healthy volume growth and improved utilisation in Q1 FY27, but the quarter was dominated by a sharp decline in profitability driven by lower realisations and higher input costs. The near-term narrative now depends on whether cost pressures ease, whether planned efficiency gains from WHRS and capacity expansions flow through the P&L, and whether pricing remains stable.

Management has offered measurable direction: FY27 volume guidance of about 7 million tonnes and EBITDA per tonne guidance of INR 500 to INR 550, with an explicit focus on debt reduction supported by expected Vizag land monetisation. The next few quarters will test the pace of margin recovery as commissioning benefits start to accrue and seasonal maintenance impacts play out.

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