After stable Q4, cement firms feel the grind over West Asia conflict

Rising fuel and packaging costs linked to the conflict may weigh on the sector's margins

Top Indian cement makers closed the March quarter of financial year 2026 (Q4FY26) on a stable footing, aided by demand, price recovery and operating leverage benefits, though input cost pressures linked to the West Asia conflict began weighing on them.

 

The sector reported volume growth of around 8 per cent year-on-year (Y-o-Y) in Q4 on a high base, taking overall FY26 expansion to 7 per cent, according to Anand Kulkarni, director at Crisil Ratings. Demand was supported by housing, which accounts for 55-60 per cent of the total cement consumption, and infrastructure activity.

 

UltraTech Cement and Shree Cement outperformed the industry with volume growth of 9 per cent and 11 per cent, respectively. Analysts attributed UltraTech’s performance to premium products, improved regional execution and supply-side optimisation. Shree Cement gained from a strategic pivot toward volume growth after earlier prioritising price discipline.

 

Dalmia Bharat and Ambuja Cements underperformed their peers, noted analysts. Dalmia Bharat’s volumes were impacted by an unexpected shutdown in the eastern region, while Ambuja’s performance was affected by a slower ramp-up of acquired assets.

 

“Realisation trends in Q4FY26 were modestly positive but uneven across players, indicating that the recovery in demand has yet to translate into a broad-based pricing upcycle,” said Akshay Shetty, research analyst at Mirae Asset Sharekhan.

 

Raghav Maheshwari, research analyst at Equirus Securities, said the sector’s Y-o-Y profitability was marginally lower due to flattish realisation growth and higher packaging costs. Overall realisations declined 1 per cent Y-o-Y due to a higher base last year following steep price hikes.

 

The sector profitability improved sequentially, aided by better realisations and lower operating costs. Kulkarni said earnings before interest, tax, depreciation and amortisation (ebitda) per tonne stood at around ₹1,060 in Q4FY26, largely unchanged from the previous year. However, for FY26, ebitda per tonne improved by ₹150-175 to exceed ₹1,000, led by a recovery in average realisations.

 

Kulkarni noted that cement prices fell sharply following the rationalisation of goods and services tax rates in September 2025, making Y-o-Y comparison pointless. Sequentially, however, cement prices recovered by 2-2.5 per cent in the March quarter compared to December 2025 levels and after weakness in the second and third quarters.

 

Analysts said the cement industry’s biggest concern is the impact of the West Asia conflict on input costs.

 

Maheshwari said coal and petcoke prices have increased 30–35 per cent from average Q3FY26 levels after the Iran war began in late February. However, most companies did not witness an immediate spike in operating costs because they were consuming lower-cost fuel inventory accumulated earlier.

 

Kulkarni said the sector was largely unaffected in Q4FY26 because companies used low-cost inventory, which typically lasts for two to three months. Fuel costs account for 15-20 per cent of total production costs for cement manufacturers, he added.

 

Packaging costs increased by around ₹20–30 per tonne in March. Overall pressure on the sector is expected to intensify from Q1FY27 onwards as low-cost inventories deplete.

 

According to Crisil, the sector’s total cost per tonne of cement production was around ₹4,450 in Q4FY26 . Maheshwari estimated the overall cost impact from higher fuel and packaging prices at around ₹300–350 per tonne at current raw material price levels. Of this, fuel costs could rise by ₹150-200 per tonne, while higher packaging material costs, including polypropylene bags, may impact profitability by around ₹150 per tonne. The recent 5-6 per cent increase in diesel prices is expected to have a limited impact of roughly ₹13 per tonne.

 

Around ₹200 per tonne of the cost increase is likely to reflect in Q1FY27, while the full impact could be felt by Q2FY27 compared to average Q4FY26 cost levels.

 

To offset rising costs, cement makers hiked prices by around 4–5 per cent in April 2026. Kulkarni said the industry retains the flexibility to pass on higher input costs to customers, which should help cushion the impact on profitability.

 

Overall, the sector outlook remains structurally positive, with medium-term demand expected to grow at a 7–8 per cent compound annual growth rate, supported by sustained government and private capital expenditure. However, the near-term margin trajectory will depend on the sector’s ability to pass on cost pressures while maintaining demand momentum, Shetty added.