Volume gains offset pricing pain for cement companies in Q3 FY26

Strong sales volumes and operating leverage drove profits of India’s top cement firms in the third quarter of the financial year 2026 (Q3 FY26). Profit improved even as prices and realisations remained under pressure due to rationalisation of GST rates and the absence of fresh price hikes. On the demand front, extended monsoons and festive and election-related disruptions weighed on sales in the first half of the quarter.

 

In Q3 FY26, the aggregate reported operating profit of JM Financial’s coverage universe (representing 75 per cent of industry capacity) increased 26 per cent Y-o-Y and 5 per cent Q-o-Q to Rs 8,300 crore.

   

According to Anand Kulkarni, director at Crisil Ratings, industry demand grew 7–8 per cent year on year (Y-o-Y) in Q3 FY26. The pick-up was driven by infrastructure and housing, which together account for over 85 per cent of cement consumption, particularly in mid-November and December.

 

Analysts at Centrum Research estimated aggregate industry volumes rose about 13 per cent Y-o-Y and 12 per cent sequentially, aided by a rebound in non-trade demand.

 

Volume growth for UltraTech Cement (22.5 per cent) and Ambuja Cements (14.8 per cent) was supported by inorganic expansion, whereas JK Cement (21.4 per cent) witnessed better growth on a lower base of last year. Dalmia Bharat’s volume grew by 9.5 per cent Y-o-Y, while that of Shree Cement declined by 0.4 per cent given its focus on profitability over volumes.

 

Adjusted for acquisitions, UltraTech’s volumes rose about 15 per cent, while Ambuja saw around 7 per cent growth, according to JM Financial Research.

 

Despite robust volumes, realisations were a drag mainly due to weak pricing and a higher contribution from the non-trade segment, which saw a sharper decline compared to the trade sales.

 

According to Raghav Maheshwari, sector analyst at Equirus Securities, non-trade prices corrected by Rs 15/bag during Q3 FY26, mainly due to weak demand in October. Trade prices during Q3 FY26 were also lower by Rs 5–7/bag. “We believe lower prices were mainly due to higher volume push by large players that are in the process of ramping up newly acquired assets,” he added.

 

Akshay Shetty, research analyst, Mirae Asset ShareKhan, noted that cement prices corrected in several regions, particularly in the South and East, and some companies reported a higher contribution from the non-trade segment due to strong institutional and infrastructure demand, which leads to lower realisation. Prices weakened during October–November, but demand improved in December, with cement prices beginning to recover toward the end of the quarter.

 

Average realisation of the coverage universe of Centrum Research increased 2 per cent Y-o-Y but declined by 3.4 per cent Q-o-Q. However, this was offset by strong volume operating leverage and cost efficiencies. Operating cost remained flat Y-o-Y but fell 3 per cent Q-o-Q. Thus, the industry’s average earnings before interest, taxes, depreciation, and amortisation (Ebitda)/tonne stood at Rs 865, up 13 per cent Y-o-Y but down 7 per cent Q-o-Q.

 

“Despite weak pricing, profitability improved due to effective cost control measures. Companies benefited from higher renewable energy usage, improved blended cement mix, logistics optimisation, and reduction in lead distances,” Shetty added.

 

In Q3 FY26, the total cost per tonne increased marginally by Rs 50–60 to Rs 4,500, primarily due to a slight uptick in raw material costs. Other key cost components such as power and fuel, and freight, remained largely flat, according to Crisil.

 

Q3 saw some pressure from rising pet coke prices; however, companies largely offset this through fuel mix optimisation, higher renewable energy usage, operating leverage benefits, and internal efficiency initiatives, analysts at Centrum Research noted.

 

“Looking ahead, management commentary suggests some upward pressure on costs due to rupee depreciation, rise in petcoke prices, and increase in labour expenses. However, companies expect to mitigate these pressures through greater use of alternative fuels and raw materials, along with passing on cost increases through price hikes supported by improving demand,” Shetty added.

 

Looking ahead, there are indications that prices are on the mend. Cement prices increased by Rs 10–20 per bag in January across segments, supported by stronger infrastructure activity and seasonally better construction demand. Analysts expect Q4 FY26 to see stronger earnings momentum, driven by sustained volume growth, partial price hike retention and operating leverage, setting a firmer tone for the sector after a pricing-challenged third quarter.