Sagar Cements Q4 FY26: Volumes rise, profits return, and the playbook shifts to efficiency

Sagar Cements Limited closed Q4 FY26 with a cleaner operating story than it had a year ago. Demand held up through most of the quarter, pricing stayed stable, and the company delivered a sharp improvement in profitability. Consolidated profit after tax for the quarter came in at ₹100 crores, while EBITDA per tonne improved to ₹445 from ₹218 in Q4 FY25. Volumes grew 8 percent in the quarter and 11 percent for the year, taking FY26 shipments to 6.1 million tonnes, broadly in line with management’s expectations.

The quarter also showed the shape of the next leg. Management’s focus is shifting from turnaround execution to structural cost reduction. Waste heat recovery, higher renewable power mix, logistics optimisation, and plant upgrades are expected to raise profitability even if cement prices do not improve. At the same time, the group is preparing for a more diversified portfolio through a new Superfine Building Materials division, while also progressing on a potential amalgamation of Andhra Cements into Sagar Cements.

The operating quarter: steady demand, stable pricing, and a better EBITDA base

Management described Q4 demand as resilient in the first two months, driven by sustained construction activity. Momentum moderated later due to labour shortages around the festive season and unseasonal rains. Even so, Sagar ended the year strongly. Q4 revenue grew 20 percent, supported by higher volumes and favourable pricing trends in the non-trade segment, which lifted overall realisations.

Pricing in the company’s core southern markets improved in April and then held steady through mid-May. Management indicated a ₹25 per bag increase from late March to the end of April, with prices broadly flat after that. The company gave market snapshots for its product presence, citing retail prices around ₹295 in Hyderabad and Vizag, while also sharing indicative levels in other markets such as Bengaluru at ₹310 and Bhubaneswar at ₹300. The tone from management was realistic: south remained stable, while central and eastern markets showed a slightly negative bias and some attempted increases did not sustain.

The most visible operating improvement was in profitability per tonne. EBITDA per tonne was ₹445 in Q4 FY26 compared with ₹218 in Q4 FY25. Costs were not benign, but improvements in realisations and operational execution helped. Power and fuel cost was ₹1,422 per tonne versus ₹1,406 per tonne last year, while freight cost rose to ₹848 per tonne from ₹822 per tonne. The company also flagged that future cost pressure could build if the West Asia crisis keeps pet coke and coal prices elevated.

A key nuance was inventory cover. Management said fuel inventory was available until the middle of Q2, limiting near-term impact, but cautioned that if current pet coke trends persist, the eventual cost impact could be ₹100 to ₹150 per tonne at the cement level once fully reflected. It also noted potential additional pressure of around ₹100 per tonne from miscellaneous items such as bags, explosives, and diesel-linked mining costs, taking the total potential cost increase to roughly ₹225 to ₹250 per tonne over time if not offset.

Plants, utilisation, and what is changing inside the cost structure

Plant utilisation data showed a mixed footprint and, by extension, room to sweat assets as demand improves. In Q4, the Mattampally plant operated at 59 percent utilisation, while Gudipadu ran at 84 percent, Bayyavaram at 69 percent, Jeerabad at 95 percent, Jaipur at 44 percent, and Dachepalli at 38 percent. Jeerabad stood out as a consistently high-utilisation asset, which is why its grinding expansion is central to the FY27 volume plan.

The core operational narrative is that the heavier investment phase is beginning to convert into recurring savings.

First, waste heat recovery is moving from plan to delivery. The company commissioned 2.8 MW of WHRS related to the AQC boiler out of a total 4.35 MW on 12 May 2026. The remaining 1.55 MW linked to the preheater boiler is expected by end-June 2026. Management expects WHRS, along with rising solar share, to structurally reduce power costs.

Second, upgrades at Jeerabad and Andhra Cements are expected to lift the blended cost position. Management reiterated that Jeerabad’s upgrade should add about 0.5 million tonnes of additional capacity, and it expects completion before the end of the current quarter. It also indicated that Andhra Cements has already improved clinker efficiency, citing a reduction in heat consumption to around 700 kcal per tonne of clinker from earlier levels near 775 to 780. Further, a new VRM for cement grinding at Andhra is targeted for commissioning by September, which should improve energy efficiency.

Third, the company is trying to keep fuel flexibility as an advantage. With imported fuel prices rising, management said it is evaluating a switch toward domestic coal and expects to have better clarity by end of the current quarter.

An investor concern in the quarter was the rise in other expenses. The CFO clarified that Q4 included one-off expenses: mine bearing lands expense of about ₹7.5 crores and a District Mineral Foundation expense of about ₹3.24 crores, together roughly ₹11.5 crores.

Balance sheet, tax shift, and funding the next year

Sagar ended FY26 with gross debt of ₹1,672 crores, comprising ₹1,379 crores of long-term debt with the balance in working capital. Consolidated net worth stood at ₹1,861 crores, and the debt-equity ratio was 0.74:1. Cash and bank balances were ₹107 crores as of 31 March 2026.

Management addressed questions on why debt ended higher than a previously indicated level. It pointed to an unsecured loan from the promoter group used to support the Andhra project and noted that a planned rights issue did not proceed, while an OFS at the subsidiary level improved flexibility. The company also accelerated solar investments where payback periods were considered attractive.

Working capital moved up, and management tied this to the business scale-up and the cost of stocking fuel at elevated prices, along with extended credit days during tougher market conditions. A specific Q4 driver was also highlighted: the company secured about 76,000 tonnes of U.S. coal in March valued at around ₹80 crores, backed by a foreign LC with a 180-day credit period.

On taxes, the group opted to be taxed under Section 115BAA of the Income Tax Act, 1961, resulting in remeasurement of deferred tax assets and liabilities. It also recognised deferred tax assets on carryforward losses and unabsorbed depreciation in Andhra Cements based on projected future taxable income, which management said provides convincing evidence of utilisation.

For FY27 capital allocation, management indicated pending capex of about ₹140 crores for Andhra expansion, ₹17 crores for Gudipadu, and ₹33 crores for Jeerabad expansion. It also noted an ongoing maintenance capex level of about ₹50 crores across units. Importantly, management suggested it may use equipment finance or lease finance for certain energy-efficiency projects rather than fully relying on internal accruals.

Growth outlook: 7 million tonnes, profitability back toward sector levels

Management’s FY27 volume expectation is around 7 million tonnes. The plan is grounded in a combination of market growth and internal capacity improvements.

It expects demand growth to remain healthy in its core regions. For the coming year, management expects strong growth in Andhra Pradesh and Telangana, around 5 percent to 10 percent growth in Tamil Nadu, around 5 percent in Karnataka, around 5 percent in Odisha, and 5 percent to 7.5 percent in Madhya Pradesh markets. It also noted some near-term slowdown due to elections and labour availability, but expected conditions to stabilise by end-May.

The company also made a clear statement about how it pursues volume. Management said it does not chase market share at the cost of profitability and would rather conserve cash than sell unprofitably. That philosophy matters in a cyclical sector where weak pricing can destroy returns.

Profitability guidance was framed through internal levers. Management said it expects EBITDA per tonne to move closer to ₹600 in the current year, assuming cement prices do not deteriorate, driven mainly by cost savings from completed and near-completion investments.

On incentives, the company expects incentives of about ₹25 crores to ₹30 crores from its Madhya Pradesh asset in the coming year, including capital subsidy and electricity incentives. It also discussed outstanding incentives of around ₹23 crores to be received, with the company planning to submit the application process to the government and expecting receipt around mid-July.

Portfolio moves: Andhra amalgamation, land monetisation, and a new superfine materials bet

Two strategic initiatives stood out.

First is the proposed amalgamation of Andhra Cements into Sagar Cements. The board gave in-principle approval on 30 March 2026, subject to regulatory and statutory approvals under Sections 230 and 232 of the Companies Act, 2013. If executed, this could simplify structure and help align cash flows and reporting under one listed entity.

Second is the new Superfine Building Materials division, approved by the board on 13 May 2026. The company described the unit as a move into high-performance superfine materials derived primarily from GGBS and fly ash, targeted at applications such as ultra-high-performance concrete, structural repairs, interior finishing, and cladding solutions.

Management’s comments suggested that this is less about chasing volumes and more about value addition and technical selling. It said the company already produces GGBS at two facilities, Bayyavaram near Vizag and Jajpur in Odisha, and can separate ultra-fine fractions with minimal investment. It indicated target fineness ranges of roughly 10,000 to 20,000 Blaine for both fly ash and GGBS, along with micro silica. It also offered a stark pricing contrast: standard GGBS at sub-4,000 Blaine typically sells on export basis around ₹2,500 to ₹3,000 per tonne, while superfines can sell at above ₹30,000 per tonne, though at much lower volumes. For this business line, management indicated a margin expectation of around 30 percent as a minimum, but said it would share revenue and profit outlook in a later period.

Land monetisation at Vizag was another lever investors focused on, linked to Andhra Cements. Management said key approvals have been received from GVMC and the Urban Development Authority, but a government order is awaited. The state is reportedly considering a broader policy order for industrial land monetisation, which would cover such conversions. On valuation, management cited a reckoner rate of ₹4 crores per acre and estimated net proceeds of around ₹3.5 crores per acre after expenses. With about 100 acres, it expects around ₹350 crores of proceeds spread over two years, with around ₹150 crores in the first year once approvals allow execution.

Investor takeaways: the story is now about conversion, not promises

Sagar Cements exits FY26 with three signals that matter for investors. One, the company has returned to meaningful profitability at the consolidated level, with Q4 PAT at ₹100 crores and a visible improvement in EBITDA per tonne. Two, the next year’s plan is anchored in tangible milestones: WHRS commissioning, Jeerabad grinding upgrade completion, and Andhra grinding efficiency improvements by September. These are the kinds of projects that can lift margins even when pricing is flat.

Three, management is pairing efficiency with optionality. The superfine materials division is an attempt to build a higher-value stream using existing by-product capabilities, while the Vizag land monetisation and Andhra amalgamation could simplify the balance sheet and structure over time.

The next few quarters will test whether the improved cost base can hold against fuel volatility and whether the 7 million tonne volume target can be achieved without compromising pricing discipline. But the direction is clearer now: execute the remaining capex, convert savings into per-tonne profitability, and use monetisation and diversification to strengthen the cash profile.