Rhi Magnesita India Limited

RHI Magnesita India achieved its highest-ever quarterly revenue in Q2 FY26, reaching INR 1,035 crores. This represents an 8% sequential growth and a significant 19% year-on-year increase. The growth was underpinned by higher volumes, with shipment volume increasing by 9% QoQ and 18% YoY to 141 KT, and notable market share gains across all business segments. Despite this robust performance, the company acknowledged facing industry-wide margin pressures due to competitive environments in the Indian steel and cement sectors.

Operating EBITDA for Q2 FY26 stood at INR 111 crores, resulting in an EBITDA margin of 10.7%, which is a 7% sequential improvement. Profit after tax also saw a sequential increase of 9%, reaching INR 38 crores from INR 35 crores in Q1. However, year-on-year margins were impacted by elevated raw material costs and the absence of a one-time^📎 warranty provision reversal from the prior year. Management anticipates progressive margin improvement in the coming quarters^⏳ through focused cost optimization, product innovation, and an improved outlook on raw material pricing.

The acquired Dalmia plant demonstrated significant operational improvement, with its Q2 FY26 revenue increasing to INR 264 crores from INR 216 crores in Q2 FY25, and its EBITDA margin improving from 8.7% in Q1 FY26 to 11.4% in Q2 FY26. The company is actively transferring products like ANKRAL and Radex cement bricks from its global technology to Indian facilities, particularly the Rajgangpur and Dalmia plants, expecting further growth within the next six months. While the acquisition initially led to higher depreciation and lower PBT, management expects profitability to return closer to previous levels within two years due to anticipated tax credits.

RHI Magnesita budgeted INR 150 crores for capex in FY26, having spent INR 60 crores in H1, with the remainder planned for H2 and some spillover into the next fiscal year, estimated at INR 90-100 crores. Key investments include a SACMI press with a 14-month lead time and mixers with 8-month lead times, aimed at improving productivity, reducing labor costs, and enhancing product quality. The company plans to increase its capacity utilization from approximately 72% to 80-85% within the next two years, primarily through debottlenecking and incremental additions rather than new plant constructions.

The company faced challenges from raw material dynamics, where the expected advantage from lower alumina prices did not fully materialize in Q2 due to a high inventory pipeline. Conversely, magnesia prices increased, adversely impacting margins. Management is implementing product optimization and recipe adjustments to mitigate the impact of rising magnesia costs. Additionally, significant depreciation of the Euro weighed heavily on costs, as materials are purchased in USD and Euro, though FX rates have shown improvement in October, offering some relief.

The Indian steel sector, despite a 4% QoQ production increase, experienced margin contraction due to competitive imports and the removal of safeguard tariffs. The cement sector saw lower production and squeezed margins due to unseasonal monsoons, but is expected to improve with GST rationalization. The overall market is characterized by intense competition and overcapacity, with many small players offering unsustainable prices. Management is focusing on long-term contracts, diverse product portfolios, and end-to-end solutions to differentiate itself in this challenging environment.