Orient Cement Q1 FY27 earnings call

Ambuja Cements reported a strong Q1 FY27 with revenue of INR9,500 crores and operating EBITDA of INR1,589 crores, leading to an EBITDA margin of 16.7%, a 331 basis point improvement. Despite a challenging operating environment marked by geopolitical tensions and elevated fuel costs, the company achieved a PAT of INR660 crores. However, total volumes declined 7% YoY, with trade volumes down 2% and non-trade volumes down 21%, reflecting a strategic shift towards value over volume.

The company demonstrated significant cost control, reducing net operating cost by INR206 PMT sequentially to INR4,241 per metric ton, aligning with its FY27 target of INR4,250 PMT. This was driven by a 3% improvement in clinker factor to 64%, efficient fly ash sourcing, increased renewable energy utilization, and fixed cost optimization. Management aims for further INR250 PMT reduction by FY28, targeting INR4,000 PMT or below, reinforcing its commitment to structural cost leadership.

Ambuja Cements is on track to expand its installed capacity to 119 million tons by the end of FY27, with several projects nearing completion or commissioned. Dahej (1.2 MT), Salai Banwa (2.4 MT), Bhatinda (1.2 MT), and Jodhpur (2 MT) capacities have been added or are in trial runs. Kalamboli (1 MT) and Warisaliganj (2.4 MT) are expected in Q2 FY27, while the Maratha clinker line is slated for commissioning in FY28. The company plans annual capacity additions of 8-10 million tons in subsequent years.

The company significantly ramped up its renewable energy (RE) capacity, adding almost 500 megawatts in the past year to reach 973 megawatts. This has reduced the unit power cost from INR5.9/kWH to INR4.9/kWH. While some RE power is currently sold externally due to grid connectivity issues, the ultimate goal is 100% internal consumption, with a target of 60% green power share by FY28. Investments in WHRS and other efficiency measures are ongoing to enhance sustainability and reduce costs.

In Q1 FY27, the company consciously reduced lower-margin volumes, particularly in non-trade segments, leading to a 21% YoY decline in non-trade volumes. The focus shifted to higher-margin trade sales, which saw its share increase from 74% to 78% of overall sales. Management reported an 8% improvement in trade volumes in July, expressing confidence in achieving an 8% overall volume growth for FY27 by prioritizing value creation and strengthening its channel network.

The North and Central clusters showed strong performance with higher EBITDA margins, while the West was balanced. The South saw a conscious reduction in lower-margin volumes as part of the value-over-volume strategy. Management is investing in channel development and product improvisation in the South to improve profitability. The overall capacity utilization stood at 65%, with a targeted utilization of 70-75% as the company balances value and volume across its key markets.