BIRLACORPN - Birla Corporation Ltd. Share Price

Management of Birla Corporation Limited provided an optimistic outlook despite recent performance challenges. In the Q1 FY '26 earnings call, Managing Director Sandip Ghose announced priorities focused on stabilizing production and increasing market share through strategic shifts rather than immediate capacity expansion.

Key forward-looking points include:

1. EBITDA Expectations: Management indicated that the EBITDA per ton, which had dropped to Rs.715 due to unforeseen clinker shortages and increased purchasing costs, is expected to recover. Ghose asserted that the company is now self-sufficient in clinker, implying no need for external purchases in the coming quarters.

2. Market Dynamics: Ghose described the market as having stable pricing in Central India, with beneficial trends in both the North and East. The company aims to leverage its premium products, especially in markets with burgeoning demand, noting changes in regional sales mix: 50% Central, 21% East, 16% North, and 13% West.

3. Growth Plans: The company reiterated its commitment to grow its clinker production capacity through ongoing projects, with a stated goal of achieving greater production efficiencies and market penetration by 2027.

4. Financial Targets: Birla Corporation anticipates maintaining a 6% to 7% volume growth trajectory and an enduring high proportion of blended cement sales, which rose to 89% in Q1 from 82% sequentially.

5. Capex Plans: Total capital expenditure for FY '26 is projected at around Rs.1,000 crore, with Rs.100 crore allocated in Q1 for various projects.

6. Net Debt: The current net debt stands at approximately Rs.2,300 crore, with expectations to keep it below Rs.3,000 crore by year-end.

Overall, management expressed confidence in their operational efficiency, brand strength, and ability to navigate market challenges, positioning Birla Corporation for future growth.

Question 1: "Given the transition from an EBITDA per ton of INR 1,000 to INR 715, how should we view profitability in Q2 and for the full year based on pricing and cost perspective?"

Answer: The decrease to INR 715 resulted from an abnormal loss primarily due to clinker shortages, leading to higher purchase costs. We don't expect this shortage to continue, as we have become self-sufficient. Pricing in Central India remains stable without drastic changes anticipated. Our aim is to improve our value share in the market, focusing on optimized sales through a higher blended cement mix which should support profitability going forward.

Question 2: "In terms of volume growth for the remainder of the year, what trajectory do you foresee after the recent quarter's performance?"

Answer: We maintain our annual growth guidance of 6% to 7%. We are introducing incremental improvements in our current capacities and debottlenecking processes, which will help us optimize sales within our existing operations. Unfortunately, we don't expect any major capacity expansions to alleviate this in the near term, so maximum efficiency is our present goal.

Question 3: "Regarding employee costs, what led to the increase in Q1? Was it annual increments or other factors?"

Answer: The increase is mainly due to fixed costs without a proportionate increase in volume, leading to lower absorption rates. While there might be minor increments, the primary factor is the reduced volume affecting the overall cost structure. This dynamic can change as volumes stabilize.

Question 4: "What is the current net debt level, and what is your forecast for the end of this fiscal year?"

Answer: Currently, our net debt stands at approximately INR 2,300 crores. We expect to conclude this fiscal year with net debt under INR 3,000 crores. This is in line with our financial management strategy to maintain a robust balance sheet while investing in growth.

Question 5: "Can you provide insights on the jute segment and strategies to enhance profitability amidst rising raw jute prices?"

Answer: Our goal is to become best in class within the jute sector, leveraging our long-standing experience. We're modernizing our facilities, improving efficiencies, and reducing reliance on government orders. This approach, along with enhanced commercial practices, should help us mitigate the impacts of rising raw jute prices while expanding our export capabilities.