Cement firms do well amid strain, but face capacity test

ET Intelligence Group: Cement companies delivered strong volume growth in the March 2026 quarter, driven by construction, real estate activity, and government spending. While rising fuel and input costs weighed on margins, companies largely delivered earnings either in line with or ahead of analysts’ expectations. For FY27, demand growth is expected to moderate to mid-single digit from high single digit in the previous year, while aggressive capacity additions are likely to keep utilisation levels subdued thereby constraining pricing power. Companies are prioritising cost efficiencies, calibrated expansion, and premiumisation to protect margins as near-term earnings remain sensitive to input cost volatility.

On the revenue front, Ultratech Cement and Shree Cement reported double-digit growth in the March quarter followed by Ambuja Cement and JK Cement, which recorded high-single digit growth. Dalmia Bharat, on the other hand, reported low-single digit growth in the quarter. Most companies reported decline in operating profit before depreciation and amortisation (EBITDA) as well as margin contraction due to sector-wide cost pressure particularly from fuel, logistics, and packaging. Ambuja Cement, Shree Cement and JK Cement‘s margin contracted on a year-on-year basis, while Ultratech Cement and Dalmia Bharat‘s margins expanded due to price increase, premiumisation and efficiency measures which offset the war impact.

The companies reported healthy volume growth, largely in the mid- to high-single digit range, driven by strong demand from housing and infrastructure. JK Cement delivered relatively stronger, double-digit growth while Ambuja Cements, Shree Cement and Ultratech Cements witnessed mid-single digit growth. Dalmia Bharat recorded lowest volume growth in low-single digit. In the coming quarters, Ultratech and JK Cement expect demand momentum to sustain and are targeting to outpace industry growth.

Companies are focused on premiumisation and cost reduction to protect margins. Ultratech Cement achieved cumulative cost reduction of ₹185 per tonne. This is likely to increase to ₹300 per tonne after its capital expenditure is complete by FY28. Ambuja Cements has targeted a reduction of ₹500 per tonne over FY27-28 through efficiency gains and better utilisation. JK Cements has implemented major cost-saving initiatives, it expects further savings of ₹50 per tonne in FY27, driven by the use of higher alternative fuels and raw materials across plants. Shree Cements’ premium products now account for 22% of the mix from 9%, two years ago, reflecting its ongoing premiumisation push.

The top cement companies are also pursuing aggressive capacity expansion backed by sizeable capex plans. Ultratech aims to expand capacity to over 240 million tonnes per annum (MTPA) by FY28 from around 200 MTPA currently, along with guided capex of ₹8,000-10,000 crore per year. Ambuja Cement’s capacity is set to increase to 119 MTPA by FY27 from 109 MTPA, with a calibrated capex plan of ₹6,000-6,500 crore. Dalmia Bharat’s ongoing projects are expected to ramp up capacity towards 72-75 MTPA by FY28 from around 50 MTPA currently with a capex outlook for FY27 in the range of ₹3,200-3,400 crore.