Shree Cement Ltd (SHREECEM) Q1 FY27 Earnings Call: Maintains 40 MT Volume Guidance, Fuel Cost Peaked in Q1

Shree Cement Ltd held its Q1 FY27 earnings call on July 31, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

An Abnormal Quarter, Margins Under Pressure

• Consolidated volume of 11.45 MT — up 15% YoY from 9.96 MT in Q1 FY25-26, driven by 17% growth in India operations.
• Consolidated EBITDA fell to Rs.1,272 Cr — down from Rs.1,333 Cr YoY; EBITDA per ton declined to Rs.1,111 from Rs.1,339 in Q1 FY25-26.
• India cement realisation at Rs.4,919/ton — up from Rs.4,854 YoY in Q1 FY25-26, despite a sharp increase in lower-margin non-trade sales.
• Management called Q1 an "absolutely abnormal" quarter — citing ~9% PAT, high non-trade volumes, coal quality disruption, and a derailed premiumisation strategy; they requested leeway until H1 FY26-27 for a more meaningful read.
• Standalone share of consolidated turnover fell to 88-89% — in Q1 FY26-27, overseas subsidiaries (primarily UAE) contributed ~10% of revenue, with the share expected to decline to 75-80% as UAE capacity expands.

Peak Behind, Recovery Underway

• Fuel cost per kilocalorie peaked at Rs.1.95 in Q1 FY26-27 — up from Rs.1.82, but management now believes costs peaked in Q1 itself, earlier than the previously guided Q2 FY26-27, barring further Gulf disruption.
• Middle East conflict forced a dramatic fuel-mix shift — pet coke collapsed from 54% to 9% of the mix, while coal surged from 26% to 74% in Q1 FY26-27; contracted gypsum from Oman also became unavailable, raising raw material costs.
• Lower-quality coal reduced the clinker conversion factor — forcing higher OPC production and more non-trade sales, which negatively impacted realisations; management cited a peer (NuVista) achieving a 1.7 conversion factor with better coal quality.
• Renewable energy share improved to 65% of total energy — in Q1 FY26-27, up from 61% previously; management also commissioned 100 electric commercial vehicles during FY26-27 to reduce fuel costs.
• Management expects costs to stabilise or decline from Q2 FY26-27 — with only a 2-3 paisa increase in fuel cost as a risk scenario; gypsum costs are also forecast to decline in H2 FY26-27.

Dislocation and the Path to Restoration

• Trade sales dropped to 62% of total in Q1 FY26-27 — from 71% YoY; the blending ratio (mixed cement share) fell to 50% from 70%, as coal quality forced higher OPC clinker production.
• Management attributed the entire trade-non-trade dislocation to weaker coal quality — not gypsum availability, and described the shift as temporary unless Middle East tensions escalate again.
• Target sustainable mix of ~50% trade and ~30% non-trade — management expects normalisation from Q2 FY26-27 onward, expressing "hope of regaining supremacy in our trade sales" in coming quarters.
• Clinker factor stood at 1.5 in Q1 FY26-27 — versus 1.58 YoY; the consolidated clinker factor was 1.55, consistent with the preceding quarter.
• Premiumisation strategy was disrupted by the forced shift to OPC — management flagged that non-trade sales and lower blending hurt both margins and brand positioning in Q1.

Volume Ambition Meets Capacity Build

• India volume guidance for FY26-27 maintained at 40 MT — Q1 India volume ~10.5 MT, with H1 FY26-27 target of 19.5-20 MT and H2 expected to reach 40-41 MT run rate.
• South sales surged 50% YoY to 16.9 lakh tonnes in Q1 FY26-27 — driven by the new plant and West India market penetration; North grew 20%; East was flat YoY due to coal quality constraints.
• Capacity utilisation at 61.62% in Q1 FY26-27 — with regional utilisation of North 66%, East 60%, and South 57% on an expanded base.
• Capex guidance for FY26-27 maintained at ~Rs.1,500 Cr (India only) — Rs.450-500 Cr spent in Q1; FY27-28 capex guidance deferred to the next quarterly call.
• UAE capacity doubling at Ras Al Khaimah to 7 MT — expected on stream by Q4 FY26-27, fully funded from UAE cash flows with no remittance from India; consolidated capex guidance (India + UAE) promised by 4-5 August.
• Northeast plant approvals secured as of 31 Jul 2026 — target commissioning of April 2028 at ~Rs.18,000/ton capital cost for the first 1 MT, with infrastructure built for 4-5 MT to eventually achieve ~$5/ton EBITDA at ~$110/ton capex.

Cash-Rich, Selectively Expanding

• Net cash strengthened to Rs.8,348 Cr as of Q1 FY26-27 — up from Rs.7,733 Cr YoY, underscoring the company's robust balance sheet.
• Management reiterated no interest in inorganic growth — citing unwillingness to acquire capacity with low EBITDA (~$5/ton) at high valuations (~$110/ton).
• Depreciation guided at Rs.2,400-Rs.2,500 Cr for FY26-27 — with an effective tax rate of 25-30% for the full year.
• Lead distance improved sequentially to 445 km in Q1 FY26-27 — from 459 km, reflecting logistics optimisation.
• RMC revenue reached Rs.109 Cr in Q1 FY26-27 — versus Rs.90 Cr in Q4 FY25-26 and Rs.40 Cr in Q1 FY25-26; however, RMC is not yet EBITDA-positive, with management targeting 5% EBITDA margins as volumes scale.
• Management declined to disclose UAE business EBITDA/ton or revenue — citing sensitivity and noting it is the first consolidated reporting period.

Cautious Optimism from Q2 FY26-27

• Management expects performance to improve from Q2 FY26-27 onward — subject to no adverse geopolitical developments, calling Q1 an "abnormal" base that should not be annualised.
• Industry cement demand expected to grow 7-8% in FY26-27 — with Shree Cement targeting 10% volume growth for the full fiscal year.
• July (Q2 FY26-27) volume at 3.1 MT — and trade sales normalisation expected in Q2, which should support pricing and EBITDA recovery.
• H2 FY26-27 operating costs expected to be lower than H1 — assuming stable energy prices and continued Middle East calm; gypsum costs are also forecast to decline in H2.
• Management explicitly declined to provide any pricing outlook for future quarters — stating they "never take a call on selling prices" as pricing is market-driven.
• Consolidated capex guidance (India + UAE) not yet available — management promised to share the figure by 4-5 August after returning to Calcutta.