Synopsis: Indian cement companies, including UltraTech Cement Limited and Ambuja Cements Limited, face margin pressure from rising costs and weak demand, with growth slowing to 5–7% and input inflation impacting profitability despite price hikes.
The cement industry is witnessing a challenging phase as demand growth moderates due to slower infrastructure activity, seasonal factors, and ongoing geopolitical uncertainties. This has led to a more cautious near-term outlook for overall consumption and expansion plans.
At the same time, companies are facing sustained cost pressures from higher fuel, logistics, packaging, and imported raw material expenses. Although price hikes and efficiency measures are being implemented, profitability continues to remain under pressure in the current environment.
Muted Demand and Growth Outlook
The industry is tempering its growth expectations for the current fiscal year. Producers now anticipate demand to increase by only 5–7%, a notable decline from the 8–9% growth recorded in FY26. Industry leaders, including Neeraj Akhoury of Shree Cement, suggest that a moderate monsoon forecast and the ongoing West Asia crisis are significant headwinds that could stall momentum in the short term.
Rising Operational Costs
Rising operational costs are putting significant pressure on profitability across the cement sector, with companies indicating a potential 15–20% impact on operating profit per tonne. This perfect storm of inflation is being driven by higher logistics and fuel expenses, including rising diesel prices used in transportation and manufacturing.
In addition, packaging costs have surged due to a shortage of cement bags and increased prices of polypropylene (PP) granules. A weaker Indian rupee against the US dollar is further adding to cost pressures by making imported inputs more expensive. According to executives at Nuvoco Vistas Corporation, overall cost inflation could rise by nearly Rs. 200 per tonne, further weighing on margins across the industry.
Price Hikes and Profitability Gap
While major players like UltraTech Cement and Dalmia Bharat have implemented price increases of approximately Rs. 20 per bag in April and another Rs. 10–15 in May, these hikes may not be sufficient to offset the rising costs. There remains a gap between the net price increases and the actual cost of production, which is expected to dent the high operating profits achieved in the March quarter.
In response to the tightening economic environment, some major producers are recalibrating their long-term strategies. Adani Cement, the country’s second-largest producer, has officially pushed back its target of achieving a 155 million tonne production capacity. Originally slated for FY28, the company now indicates that this goal may move to FY30 as they focus on cost management over rapid scaling.
As of Q4FY26, Ambuja Cement’s sales volume saw a healthy growth of 10% YoY. The volume increased from 18.2 million tons (MnT) in March 2025 to 19.9 MnT in March 2026. This growth is attributed to a strategic focus on trade sales and premium cement products, supported by strong brand equity and a robust supply chain network. The company aims to maintain this trajectory by expanding its offerings in blended and green cement categories.
Financially, the Net Sales Realization (NSP) remained effectively flat at 0% YoY, moving from Rs. 255 per bag in March 2025 to Rs. 254 per bag in March 2026. However, profitability metrics faced downward pressure during this period. Total EBITDA (including Ready-Mix Concrete) dropped by 22%, falling from Rs. 1,868 Cr (19% margin) in March 2025 to Rs. 1,464 Cr (13% margin) in March 2026.
Similarly, the EBITDA per ton saw a significant decrease of 29%, declining from Rs. 1,028 per ton to Rs. 735 per ton. Despite these drops, it outlines a recovery strategy centered on operational efficiencies. The company plans to improve EBITDA and Per Metric Ton (PMT) values through a higher share of blended cement, a lower clinker factor, increased use of green power, better heat consumption, and improved asset reliability.
In conclusion, the outlook for UltraTech Cement, Ambuja Cements and the broader cement sector remains challenging as rising input costs, logistics pressures, and currency weakness continue to compress margins. While demand growth is expected to moderate and price hikes offer partial relief, they may not fully offset cost inflation. Going ahead, operational efficiency and cost optimisation will be key to sustaining profitability amid a subdued demand environment.
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