Ambuja Cements Q1 FY27 earnings call

Ambuja Cements reported a robust Q1 FY27 with a revenue of ₹9,500 crores and operating EBITDA of ₹1,589 crores. The EBITDA margin significantly expanded by 331 basis points to 16.7%, with EBITDA per ton reaching ₹931. This performance was achieved despite a challenging operating environment and a strategic decision to prioritize value over volume, resulting in a 2% YoY negative growth in trade volumes and a 21% YoY negative growth in non-trade volumes. The company's net operating cost reduced sequentially by ₹206 PMT to ₹4,241 per metric ton, aligning with its full-year target of ₹4,250 per ton.

The company continues to execute its structural cost leadership strategy, focusing on operational excellence. Key initiatives include improving the clinker factor by approximately 3% to 64% and increasing the share of blended cement to 85%. Logistics costs were optimized by reducing the primary lead distance by 20 kilometers, saving ₹10 per metric ton. The company anticipates further savings of ₹130-150 per ton from ongoing structural efficiency measures, including better raw material logistics, increased green power consumption, and improved kiln efficiency, reinforcing confidence in achieving the ₹4,250 PMT cost target for FY27.

Ambuja Cements is on track to expand its installed capacity to 119 million tons by the end of FY27. Several projects are progressing, with Dahej (1.2 million tons) having commenced trial runs, and Salai Banwa (2.4 million tons), Jodhpur (2 million tons), and Bhatinda (1.2 million tons) already commissioned. Kalamboli (1 million tons) and Warisaliganj (2.4 million tons) are expected to be commissioned in Q2 FY27. The Maratha clinker line is anticipated for commissioning in FY28, and the company plans for annual capacity additions of 8-10 million tons in FY28 and FY29.

The company's green energy pivot is accelerating, with RE power capacity now at 973 megawatts, an increase of almost 500 megawatts over the past year. This has reduced the unit power cost from ₹5.9 to ₹4.9 per kWH. The green power share, currently at 48% (including sold units), is targeted to reach 60% by FY28. While some green power is currently sold, the company aims to consume 50% of these sold units internally in Q2 FY27, with the ultimate goal of 100% self-consumption. Additionally, AFR utilization, currently around 7%, is targeted to increase to 12-15% in FY27 and 25% long-term.

Regionally, North and West clusters demonstrated strong performance with positive growth in trade volumes and healthy EBITDA margins. The Central cluster also showed strength with a higher proportion of premium cement. In the South, the company strategically reduced lower-margin volumes, which impacted overall regional volumes but improved profitability. The overall focus remains on increasing trade sales, which improved from 74% to 78% of total sales, and leveraging brand equity to drive an 8% volume growth target for FY27, with trade volumes already showing an 8% improvement in July.

Ambuja Cements has earmarked approximately ₹6,500 crores for capex in FY27 and FY28, with ₹1,500-1,600 crores already invested in Q1 FY27, balancing growth and efficiency. The company maintains a debt-free status at the Ambuja level. Integration of acquired assets like Penna and Sanghi is progressing, with Penna's Jodhpur plant already commissioned. Sanghi is seeing an investment of ₹600 crores for jetty expansion to enhance clinker utilization. The strategy for acquired assets focuses on improving channel networks and trade sales to enhance profitability and utilization.