Fuel, input costs squeeze cement companies' margins despite healthy volume growth

Leading cement manufacturers have reported a divergent set of earnings in the June quarter of FY27, as capacity additions, market share gains and improved demand across key regions helped healthy volume growth, while elevated fuel and raw material costs weighed on profitability for several players.

Listed cement makers have reported sales volume growth of up to 27 per cent, except second-largest maker Ambuja Cement, which reported a 14 per cent decline.

Most of the companies reported double-digit sales growth, while profits came under pressure due to rising energy costs, subdued realisations and the lingering impact of geopolitical disruptions in West Asia.

Moreover, cement makers reported a rise in premium portfolio, and improved their trade mix to enhance realisations, protect margins and offset rising fuel, freight and raw material costs.

Besides, they are also optimistic about FY27, with 7-8 per cent volume growth.

Leading cement maker UltraTech Cement and fifth-largest player Nuvoco Vistas posted healthy profit growth, while Ambuja Cements, Shree Cement, Dalmia Bharat, JK Lakshmi Cement and Birla Corporation reported a decline in net profit even as their revenues grew in double digits.

UltraTech Cement reported a 17.23 per cent rise in consolidated net profit to Rs 2,603.72 crore for the June quarter, on revenue from operations that grew 15.85 per cent to Rs 24,648.20 crore. Its domestic sales volumes rose 13.1 per cent to 39.2 million tonnes.

In contrast, Adani Group firm Ambuja Cements reported a 36.6 per cent decline in profit after tax to Rs 660 crore, as revenue fell 7.51 per cent to Rs 9,474 crore. Its total sales volume dropped 14 per cent to 17.1 million tonnes during the quarter.

"The quarter was characterized by stable cement demand, supported by infrastructure, housing, and construction activity, while profitability across the industry remained under pressure from the higher imported fuel prices, elevated freight costs, and geopolitical developments in West Asia," said Ambuja Cements CEO Vinod Bahety in the earnings call.

Decline in volumes was attributed to a calibrated reduction in exposure to the non-trade segment, an exit from some low-profitability regions in the South and East and delay in ramping up newly-acquired assets.

Its Director Karan Adani said the company is not chasing low-return volume. “The variable cost of producing the cement at a lower EBITDA or at a marginal EBITDA generally doesn’t make sense,” he said.

Shree Cement, the country's third-largest cement group by capacity, reported a 17.48 per cent decline in consolidated net profit to Rs 531.12 crore, even as revenue from operations rose 18.03 per cent to Rs 6,233.13 crore.

Its cement sales volume grew 17 per cent year-on-year to 10.23 million tonnes, from 8.74 MT a year earlier, while total sales volume, including clinker, rose 17.2 per cent to 10.49 MT.

"In Q1 FY2027, average prices increased by 4 per cent quarter-on-quarter (QoQ) to Rs 350/bag, however, it remained 2 per cent lower than Q1 FY2026," according to an ICRA report.

Dalmia Bharat's consolidated net profit fell 51.4 per cent to Rs 192 crore, largely on account of exceptional items, even as revenue from operations rose 7 per cent to Rs 3,890 crore. Its sales volume grew 9 per cent to 7.6 million tonnes.

Nuvoco Vistas Corp, the building materials arm of the Nirma Group, bucked the trend with a 19.87 per cent rise in consolidated profit to Rs 159.63 crore, on the back of an 8.9 per cent rise in revenue to Rs 3,128.71 crore. Its consolidated cement sales volume rose 5 per cent year-on-year to 5.3 million tonnes.

On the demand trend, its CFO Maneesh Agrawal said: "I am looking at a demand anywhere between 7 and 8 per cent in the next three quarters."

JK Lakshmi Cement reported a 27.9 per cent decline in consolidated net profit to Rs 108.07 crore, even as revenue rose 9.4 per cent to Rs 1,904.78 crore. Its sales volume grew 8.17 per cent to 3.59 million tonnes.

M P Birla Group firm Birla Corporation posted a 3.2 per cent decline in consolidated net profit to Rs 115.73 crore, while revenue from operations rose 7.8 per cent to Rs 2,646.45 crore.

JSW Cement reported a 22 per cent year-on-year rise in consolidated revenue to Rs 1,896 crore, even as operating EBITDA fell 7.5 per cent to Rs 299 crore on the back of elevated fuel, packing and marketing costs. Its cement sales volume rose 27 per cent to 2.34 million tonnes.