Export revenue was expected to decline 2 per cent Y-o-Y after a sharp 15 per cent drop in FY25. This was despite exports growing 8 per cent in H1FY26, tariffs imposed by the US (which accounted for 15 per cent of overall ceramic tile exports) would be a drag. Manufacturers were exploring Vietnam, Israel, Russia and Saudi Arabia to compensate for the US shock. For 9MFY26, tile exports increased 10.3 per cent Y-o-Y to 426 million square metres (MSM). Exports to the US in December 2025 rose by 12.9 per cent Y-o-Y, despite higher tariffs since September.
Overall operating profit margins were expected to be in the range of 10.5 per cent. But the attack on Iran led to a huge shock. Gas is a critical input. The conflict has hit gas supply, since India receives 75 per cent of LNG through the Strait of Hormuz — currently a war zone — and key supplier Qatar has suspended operations due to force majeure. Gujarat’s Morbi is a key location for the industry, and LNG and Propane account for 70 per cent of fuel to Morbi.
The tile industry could see drops in production and drastic margin compression, as energy costs — which are usually 20-25 per cent of net sales — could spike enormously. A 5 per cent rise in fuel cost could reduce earnings per share (EPS) by 5-7 per cent, and gas prices have zoomed. Moreover, kaolin (raw material), which accounts for 25 per cent of total costs, are also higher. Indian ceramic exports to West Asia, which contribute a notable share, are also likely to dip.
Demand for ceramic tiles is usually lagged from the time a real estate project is launched to around the time of completion. The current domestic demand is being driven by projects that were launched in FY21-FY22.
Power and fuel costs constitute 22-25 per cent of total production costs and coal and natural gas account for the lion’s share which indicates the impact of high fuel prices and shortages. This will probably force some shutdowns among smaller players, while larger players may have enough inventory to carry on for the next two to three months. The revenues and operating margins of all players will be negatively impacted.
The Q3FY26 saw relatively muted performance by the tile industry, which saw low single digits growth. Among the majors, Kajaria’s volumes declined 1 per cent Y-o-Y, as it pursued a channel unification strategy, which also hurt realisations due to discounting to liquidate inventory. Somany also reported low volume growth.
Kajaria’s management said demand was weak and realisations dipped 1.3 per cent due to discounts. Cost control measures may have expanded margins by up to 400 basis points Y-o-Y. The company expected stabilisation of the channel and dealer unification strategy by end of Q4FY26. It guided for a margin of 17-18 per cent.
Somany had indicated that volumes grew 2 per cent Y-o-Y and realisations rose 1 per cent. Operating profit margin rose 80 basis points. The company’s guidance (before the attack) was for single-digit revenue growth for FY26, and operating profit margin improvement of 1-1.5 per cent in Q4FY26. Orient Bell saw margins improve 150 basis points Y-o-Y to 6.4 per cent on cost control measures. The company had guided that it would outgrow the industry by 20 per cent before the attack started.
All those projections are now subject to drastic review. Where Q4FY26 is concerned, around 10 days of gas price volatility and supply constraint may have already impacted performance, and potentially up to a month could be lost in Q4FY26. The future is opaque, and valuations may be a shot in the dark until there is clarity about gas supply and prices.
 "Ceramic tiles")