Detailed Narrative
Q1 FY27 Performance Overview and Consolidated Reporting Emphasis
Shree Cement reported a consolidated volume of 114.5 lakh tons in Q1 FY27, marking a 14.96% year-on-year growth from 99.6 lakh tons in Q1 FY26. However, consolidated EBITDA declined by 4.57% to INR 1,272 crores, resulting in a 17.02% drop in EBITDA per ton to INR 1,111. Management emphasized the importance of looking at consolidated numbers going forward⏳, as standalone operations are expected to constitute only 75-80% of total revenue in the not-too-distant future, with overseas and subsidiary contributions growing.
Impact of Middle East Conflict on Costs and Operations
The Middle East war significantly impacted Q1 FY27 performance. Disruptions in contracted Pet Coke and Omani gypsum supplies forced the company to shift to more expensive, lower-quality domestic coal. This increased fuel costs to 1.95 per kcal and reduced the clinker conversion factor to 1.50 from 1.58, leading to higher production costs and a shift towards non-trade sales (62% in Q1 FY27 vs 71% in June '25). Additionally, UAE operations experienced 'practically no sales' in April and May due to the conflict.
Cost Optimization and Outlook
Despite the Q1 challenges, management believes fuel costs have almost peaked at 1.95 per kcal and expects stabilization or a decline in Q2 FY27, barring further untoward events in the Middle East. Initiatives like the increasing renewable energy component (66% in Q1 FY27) and the planned commissioning of 100 commercial electric vehicles (ECVs) in FY27 are underway to optimize costs. Packing costs have also started reducing.
Capacity Utilization and Regional Growth
Overall capacity utilization stood at 62% in Q1 FY27, with regional breakdowns of 66% in North, 60% in East, and 57% in South. The South region saw the maximum growth, with sales increasing from 11 lakh tons to 16.9 lakh tons, driven by increased penetration in Maharashtra and Gujarat. The East region's growth was flat, attributed to constraints in increasing the conversion factor due to coal quality issues, which limited trade market penetration.
Capital Expenditure and Expansion Plans
The company maintains its FY27 India capex guidance at INR 1,500 crores, having spent INR 456 crores in Q1. The UAE capacity at Ras Al Khaimah is expected to double and reach 7 million tons by Q3 FY27, funded independently by UAE operations. The Northeast plant, a greenfield project, is slated for commissioning in Q4 2028, with management confident in its execution despite local challenges, emphasizing the long-term capacity potential of 4-5 million tons.
RMC Business and Other Financials
The Ready Mix Concrete (RMC) business, with 26 operational plants (up from 19 at the beginning of the year), is currently 'profit-neutral.' Management aims to achieve 5% EBITDA levels as operating efficiency improves and volumes increase. RMC revenue for Q1 FY27 was INR 109 crores. For FY27, the company projects depreciation between INR 2,400 to INR 2,500 crores and an effective tax rate of approximately 30%.