Sagar Cements Ltd. has reported a 19% decline in revenue for the second quarter of FY25, amounting to ₹475 crore, down from ₹587 crore in the same period last year. The dip highlights the ongoing challenges faced by the cement industry, particularly due to adverse weather conditions and sluggish project completions impacting demand. Sales volume also saw a 12% reduction, coming in at 1.16 million tonnes (MnT), compared to 1.31 MnT in Q2 FY24.

Decline in Profitability and Operational Metrics

Sagar Cements’ EBITDA for the quarter fell significantly by 67% year-on-year, standing at ₹20 crore with an EBITDA margin of 4%, compared to 10% in Q2 FY24. The company’s EBITDA per tonne dropped to ₹172, reflecting the pressures of reduced utilization and lower revenue.

Despite stable input costs, margins were squeezed due to lower volumes and competitive pricing within key markets. The company noted that its plants operated at 43% capacity during the quarter.

Expert Insight: Managing Director’s Commentary

According to Joint Managing Director Mr. Sreekanth Reddy, the ongoing subdued demand and intense price competition have negatively affected performance. He indicated that the extended monsoon season and delays in project completions were major contributors to the dip in volume growth during Q2 FY25.

He further highlighted that while the company remains committed to reducing costs and improving operational efficiencies, the industry landscape continues to present significant hurdles. Mr. Reddy expressed optimism about long-term goals, emphasizing the company’s strategy to increase its reliance on renewable energy sources and improve plant efficiencies, which is expected to boost profitability in the coming years.

Financial Analysis and Share Price Update

As of October 23, 2024, Sagar Cements’ share price closed at ₹208 on the NSE. The stock has experienced volatility, with a 52-week high of ₹305 in January 2024 and a low of ₹194 in June 2024. The company’s market capitalization currently stands at approximately ₹27,233 million.

Future Outlook: Strategic Expansion Plans

Sagar Cements continues to focus on its expansion strategy, with a planned increase in capacity at its Dachepalli plant. The clinker capacity is expected to rise from 1.85 MnT to 2.31 MnT, while cement capacity will expand from 2.25 MnT to 3.00 MnT by FY26. The capital expenditure for this project is projected at ₹470 crore, with a significant portion of ₹255 crore allocated for FY25.

Environmental, Social, and Governance (ESG) Initiatives

Aligned with its sustainability goals, the company is enhancing its green power capacity, targeting 50% green power by 2030. It has also made strides in water conservation and waste management. Sagar Cements is implementing a 30 KLD sewage treatment plant at its Dachepalli facility and plans to further integrate renewable energy sources, such as solar and waste heat recovery systems, across its sites.

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