The cement industry delivered strong volume growth in Q4FY26, with cement volumes growing 8% year-on-year supported by housing and infrastructure demand. However, blended Ebitda per tonne declined 2% year-on-year, even as it improved sequentially, reflecting a rebound from seasonal weakness seen in Q3FY26. According to Business Standard, the aggregate earnings before interest, taxes, depreciation and amortisation (Ebitda) of companies accounting for around 75% of industry capacity rose 6% year-on-year and 37% quarter-on-quarter in Q4FY26. Realisations rose by an estimated 2.5% both quarter-on-quarter and year-on-year, with average increases in net sales realisation (NSR) of ₹137 per tonne following price hikes in January and February.
JK Cement led volume growth with a 13.9% year-on-year increase, followed by Shree Cement (up 9.5%) and Ambuja Cements (up 9.3%). UltraTech Cement reported healthy growth of 9% on a high base, while ACC and Nuvoco Vistas recorded growth of 7.2% and 5.3% respectively. However, Dalmia Bharat and The Ramco Cements posted lower growth of 2.3% and 2.1% respectively. Among profitability leaders, UltraTech Cement reported an 11.3% year-on-year increase in Ebitda per tonne to ₹1,253, the highest in the industry, while Dalmia Bharat recorded an 11% increase to ₹1,025. However, Shree Cement reported a 16% year-on-year decline in Ebitda per tonne to ₹1,179, with Ambuja Cements and ACC seeing sharp contractions of 28.3% and 28.2% respectively.
The recent surge in Brent crude oil to nearly $94 per barrel is creating additional pressure on cement companies' margins, as reported by Nomura. Higher crude prices directly impact the sector through increased diesel and freight costs, which are major expense components for cement manufacturers. According to Business Standard, packaging costs have risen by ₹80-100 per tonne, while increases in pet coke and coal prices are expected to add ₹150-200 per tonne to cement production costs. The average cement price increase of around ₹5 per bag that dealers are reporting for June may not be sufficient to offset the full impact of rising fuel costs. Companies are increasing the share of green energy in their operations and exploring alternative fuels to generate structural cost savings, but near-term inflation could exceed ₹350 per tonne.
For Q1FY27, companies have indicated price hikes of ₹15-20 per bag in the trade segment and ₹20-25 per bag in the non-trade segment to offset sharp cost inflation arising from the conflict in West Asia. Most companies are targeting volume growth of around 8% in FY27, with Ambuja Cements adopting a more cautious stance, projecting 5% growth due to concerns over demand moderation. Industry capacity crossed 700 million tonnes per annum in FY26, up 6.8% year-on-year, with combined industry capacity additions expected to add around 130 million tonnes by FY29. However, the ongoing Q1FY27 quarter has been challenging with higher costs for fuel, packaging and transportation, while demand in Q2 is typically weaker due to monsoon season which could lead to sharp deterioration in margins.
Based on its assessment of pricing trends, demand conditions and earnings outlook, Nomura's preferred picks in the sector are UltraTech Cement, Dalmia Bharat, ACC, Ambuja Cements, Shree Cement, Ramco Cements and Nuvoco Vistas. Among large-cap cement companies, Bloomberg analyst recommendation data shows strong buy-side support for UltraTech Cement and Ambuja Cement, while Shree Cement has a relatively more balanced mix of buy, hold and sell recommendations. However, the recent crude oil surge and geopolitical risks may impact these recommendations, as companies with higher fuel exposure face increased margin pressure from rising input costs.
