Shree Cement Q1 profit falls as West Asia disruptions drive up fuel costs
Shree Cement Ltd's June-quarter profit fell as higher fuel and raw material costs triggered by the West Asia conflict more than offset strong double-digit volume
Shree Cement Ltd's June-quarter profit fell as higher fuel and raw material costs triggered by the West Asia conflict more than offset strong double-digit volume growth. India's third-largest cement maker said those cost pressures have likely peaked and profitability should improve from the current quarter if geopolitical conditions remain stable. The Kolkata-based cement maker reported a consolidated net profit of ₹529 crore for the three months ended 30 June (Q1FY27), down 18% from ₹643 crore a year earlier, according to exchange filings. Revenue from operations rose 18% to ₹6,233 crore, while operating profit (Ebitda) fell 4.6% to ₹1,272 crore. Ebitda margin contracted to 20.4% from 25.2% a year earlier. Also Read | Cement prices hit one-year high as West Asia war lifts costs The company attributed the earnings decline to supply disruptions caused by the conflict in West Asia, which delayed shipments of contracted petroleum coke and gypsum from Oman. It was forced to replace them with costlier imported coal and domestic gypsum.
“The fuel cost has almost peaked out,” chief financial officer Ashok Bhandari said during the post-earnings call. “If nothing untoward happens in the Middle East (West Asia), this cost should more or less stabilize or rather go down because raw material cost should also come down.” Bhandari described the June quarter as an “abnormal” one and urged investors not to extrapolate the performance. “Please consider Q1 as an abnormal quarter. I expect to do better Q2 onwards if nothing untoward happens on the Middle Eastern front,” he said. Strong demand, weaker margins The disruption forced Shree Cement to overhaul its fuel mix. Petcoke usage fell to 9% from 54% a year earlier, while coal usage rose to 74% from 26%, increasing production costs. Greater reliance on lower-quality coal also reduced the amount of blended cement the company could produce. That forced the company to sell more ordinary Portland cement through the lower-margin non-trade channel.
The shift weighed on the company's sales mix. Trade sales accounted for 62% of volumes, down from 71% a year earlier, while the blended cement ratio declined to 50% from 70%. Even so, demand remained robust. Cement sales in India rose 17% year-on-year to 10.23 million tonnes, while total sales, including clinker, increased 17.2% to 10.49 million tonnes. Premium products accounted for 23.3% of trade volumes, up from 17.7% a year earlier, reflecting the company's continued push towards premiumization. Bhandari said Shree Cement remained focused on profitability rather than volumes. “We are never volume focused. We are profit focused. We have never changed our focus,” he said, while maintaining the company's guidance of producing 40 million tonnes during FY27. He said the company had already sold around 10.5 million tonnes in the first quarter and expects to achieve about 20 million tonnes by the end of the first half, keeping it on track to meet its annual target.
The BriefWire