JK Lakshmi Cement boosts Q1 FY27 sales mix despite rising costs and margin pressure

JK Lakshmi Cement’s first quarter of FY27 saw a 9% rise in cement realisation driven by strategic sales mix and efficiency improvements, but higher input costs threaten profit margins ahead.

JK Lakshmi Cement said its first-quarter performance for FY27 was helped by a sharper sales mix and better pricing in some non-trade channels, even as the company warned that higher input costs are likely to weigh on margins in the near term.

At an earnings call reported by GuruFocus, the company said cement realisation rose about 9% sequentially, supported by price increases in non-trade sales and a shift towards core markets. Management also pointed to a 20 km reduction in average lead distance, which it said improved efficiency and boosted realisation. The company said clinker utilisation remained high at 95% and cement volumes rose 8% from a year earlier.

The operating backdrop, however, is becoming more difficult. Management said fuel costs rose to ₹1.65 per kilocalorie in the quarter and could climb further to ₹1.80-₹1.85 in the second quarter, while packaging costs are also increasing because of higher granule prices. Raw material costs were lifted by temporary fly ash sourcing from alternative suppliers, higher gypsum expenses and greater demand from the company’s non-cement business. A separate report by Sahi.com said JK Lakshmi expects production costs to rise by ₹150 to ₹200 per tonne in Q1 FY27, underscoring the pressure on margins.

The company said it is leaning on efficiency measures to offset some of the inflation. Renewable energy now accounts for 49% of total energy consumption, supported by 129 MW of solar, 45 MW of waste heat recovery and 4 MW of wind capacity. Management said a new 42 MW solar project, being developed through a special purpose vehicle, is expected to reduce costs by ₹1.65 per unit and pay back in less than two years. The company is also installing a 28 MW battery energy storage system for its recently acquired SCLC asset to store surplus captive solar power and avoid waste.

Beyond the quarter, JK Lakshmi is keeping to an ambitious expansion plan. The company said it spent ₹300 crore in the quarter and ₹400 crore so far on its Durg project, while maintaining full-year capex guidance of ₹1,500 crore for FY27, ₹2,000 crore for FY28 and ₹1,500 crore for FY29. It is targeting 30 million tonnes of capacity by FY30 and expects to keep net debt to EBITDA at around 2.5 times, with 2.75 times as the upper limit. Arthneeti said the company is also working to lift the trade sales mix, especially in markets where blended cement offers better margins, while the Northeast expansion has resumed after land, mining and environmental steps moved forward.

There was also a note of governance unease. GuruFocus said proxy advisory firms had recommended negative votes on some resolutions, although the resolutions still passed. Even so, management said its core strategy remains unchanged: focus on profitable geographies, strengthen the trade mix where possible and use energy savings and operational discipline to cushion a year that may be marked by seasonal weakness and higher costs.