Refractory products, systems and solutions supplier RHI Magnesita India posted a 16.5% dip in profits after tax year on year in Q2, FY26, despite a 19.4% growth in revenues to Rs 1035.36 crore. In an interaction with Fortune India, Parmod Sagar, MD & CEO, RHI Magnesita India, says several factors such as low capacity utilisation in the cement and steel sectors, are affecting the refractory margins. But the company is betting big on innovation, automation and digitisation of the kilns and acquisitions for future growth.   

Q: RHI Magnesita India recently announced the quarterly results. Margin pressure is visible. What explains this and could you share an overview on the performance of the last quarter?

A: The last quarter has been one of our best in terms of revenue and shipments. We reached about Rs 1,035 crore in revenue for Q2 FY 2026, along with 9% quarter-on-quarter (QoQ) volume growth. Absolute margins also increased by around 7%, although margin percentage stayed similar to the previous quarter at about 10.7%.

Our aspiration has always been to maintain EBITDA margins in the 14–15% range. We were achieving that earlier, but margins have been under pressure, due to several factors. Last year, alumina raw material prices went up significantly. At the same time, the Indian currency depreciated sharply (the Euro moved up from around 93 to 103). Also, about 25% to 30% finished goods are coming from abroad, impacting our margins when we invoice long term contracts in Indian currency. The price increases were offset by the forex.

Since almost 90% of our raw materials come from China & Europe, this has had a direct impact on our bottom line. If you look at the performance of the steel and cement sectors, there is volume growth, but their EBITDA is under pressure, having dropped by 2 to 3%. For instance, of the 550-odd mini steel mills, about 150 operate for 12 hours, accounting for about half the production. You would understand that mini steel mills are running at reduced hours and lower utilisation.

It is also to be noted that the actual steel consumption growth is closer to 5% to 6%, which is capacity enhancement and not capacity utilization. The cement sector reflects a similar story. All of this puts pressure on the refractory industry's margins, and it is trying to overcome it.

Two things have a medium- to long-term impact on the refractory industry. One is the overcapacity of the Indian refractories industry. RHI Magnesita globally, in the last few years, has never put up a greenfield project. We always believe in consolidation. We try to acquire plants that fit into our long-term strategy. The second is the dumping of commoditised refractories. That puts pressure on the margins.

The focus of RHI Magnesita India is to differentiate ourselves from the competition to sustain 14–15% margins.

Q: Given these pressures, how are you planning to improve the margins and move forward?

A: Our focus is on a framework we call 4Pro. It stands for Performance, Partnership, People, and Planet. It is essentially an all-encompassing solution that addresses the evolving challenges of industry and society.

The company believes in pushing innovation beyond boundaries and upholding responsibility to its workforce (People). Our commitment to the Planet drives the development of low-carbon emission materials and a circular economy, while our focus on Partnership transforms customer relationships into collaborative, mutual successes. Customer satisfaction is critically important and is central to the entire business model. We view customer engagement as a strategic partnership, not just a transaction.

We are working to increase recycling and minimise waste or landfill. For example, with major steel players, we have per tonne of steel contracts in which we operate their furnaces, casters, and ladles. We handle equipment, installation, predictive wear-and-tear analysis using scanners and advanced tools, and take back used refractory for reprocessing and use as raw material in other applications.

Magnesita-based refractory is carbon-intensive. One ton of refractory produces roughly one ton of CO₂. So, if we recycle even 20%, we cut emissions by the same amount and also conserve resources, reducing the need for fresh mining.

We also made history recently with first ever commissioning of complete Robotic Solution in Caster Operation for the Indian Steel Industry at JSW Vijayanagar Metallics Limited (JVML), in the Steel Melting Shop (SMS) 4 caster. The technology removes direct human exposure to molten metal, extreme heat and hazardous fumes, setting new safety benchmarks in the industry. It operates continuously without fatigue, optimizes cycle times, and ensures consistent quality with minimal defects and reduced material wastage. This solution helps us move away from being seen as a commodity supplier to becoming a solutions partner.

For the cement industry, we offer and use digital scanning to inspect kilns while they are running. Earlier, the kilns needed to cool before people could go inside, which meant significant downtime. Now, weak points can be identified online and repaired by gunning while the kiln is still hot, increasing efficiency and productivity. Automation and digitalisation are now central to our technology focus.

Q: Despite margin pressures, revenue growth has been quite strong. What are the revenue drivers?

A: Three years ago, our presence was mainly in the steel and cement sectors, and our market share in cement was around 9%. After acquiring the Indian refractory business of Dalmia Bharat Refractories in 2023, we now have a share of approximately 44–45% in that segment.

RHI Magnesita also took forward merger & acquisition over the last three years, in India, Europe and the US. These include the refractory businesses of the Preiss-Daimler Group (“P-D Refractories”) and Resco Group. This has significantly expanded our product portfolio.

Earlier in India, we had a minimal presence in areas such as iron-making, blast furnaces, coke ovens, pellet plants, and Direct Reduced Iron (DRI). From a virtually 1–2% share, we have grown to about 13% today. By 2026, we expect this to be above 20%. This has led to revenue and volume growth.

We are also undertaking the first 12 Ton per Day (TPD) large rotary kiln project. We have completed one pelletisation project for a major customer and are currently executing another. These new areas are adding to revenue and volume, and over time, they will also help grow margins.

Q: Could you outline your medium and long-term expansion plans?

A: After our recent acquisitions, including the Dalmia Bharat Refractories Limited Indian refractory business and the refractory business of Hi-Tech Chemicals Ltd, our focus for the next year is consolidation. We want to build synergies, modernise, and improve efficiency. We have an installed capacity of about 530,000 tons in India, and we are currently operating close to 400,000 tons. This gives us enough headroom for the next two years.

There are potential acquisition targets in our funnel, but we are proceeding slowly. We may start pursuing them more actively around 2027. In August 2025, we completed a small acquisition of Ashwath Technologies, which specialises in slide gate systems and components for the steel industry, especially mini steel mills. Earlier, we also acquired Intermetal Engineers (India) Private Limited, which is located only four kilometres away. Together, they now hold about 85% of the market share in those mechanical mechanisms, strengthening our market position.

Q: The conversation around critical minerals, particularly magnesite, has gained attention. How does this affect your business?

A: Magnesite is the most critical mineral for the refractory industry. For the refractory industry to continue as an enabler for industries such as steel, cement, non-ferrous metals, glass, to name a few, importance of Magnesite is significant due to its critical nature.  Having it included in the Critical Minerals List will benefit the refractory industry and the overall infrastructure sector.

It is important to note that magnesite is a raw material that is required for refractory industry to facilitate high-temperature production and process. It is a key source for magnesium oxide, a key refractory material for the steel industry, and raw material for applications in technologies such as green steel, electric vehicle batteries, energy storage and more.

India does have magnesia-based mines, but their quality does not match that of the material available in China or that which we obtain through our own backward integration. If the government works to improve the quality of Indian magnesite through beneficiation, it will help the refractory industry immensely.

Magnesite production is globally distributed with key players in China, Turkey, Brazil, and Austria. Although, 70%-80% of global magnesite reserves still lie in China,today, we are in a stronger position because we own magnesite mines and sourcing capabilities across Brazil, Austria, and Turkey, During COVID and during supply concerns, we were well positioned to help meet customer requirements—ensuring stable and resilient supply chains for critical sectors like steel and cement.

Q: The Budget process has already begun. What policy interventions would you recommend for steel and other core sectors?

A: Refractory is a critical enabler for steel, cement, glass and several other industries, yet it is not treated as critical sector. During the COVID-19 pandemic, steel plants were allowed to run but refractory plants were not, which could have had adversely impacted steel production. I, in my capacity as the Chairman of the Indian Refractory Makers Association (IRMA), presented our case and secured a crucial waiver to operate the refractory units.

Second, import duties on raw materials should be reconsidered. If we want to encourage Indian manufacturing, the industry needs access to competitively priced inputs. Even a 5% duty has a significant effect on small and medium-sized refractory companies.

There must also be stronger scrutiny of unfair importsthat have minimal value addition in India but are then shown as having been manufactured there. This kind of practice needs closer monitoring. Only then can the vision of a stronger domestic refractories manufacturing ecosystem be achieved.