The Indian cement industry expects 8.5% volume growth in Q2 FY27, but rising operational costs are weighing on profits. While cement prices ticked up slightly in September, they remain insufficient to cover a sequential rise of roughly Rs 115 per tonne in operating expenses. Investors should watch for the impact on profit margins per tonne, which are projected to face pressure this quarter.
The Indian cement industry is entering the second quarter of the 2026-27 financial year with a tug-of-war between demand and profitability. While the sector is showing resilience in sales volume, analysts project that the bottom line for many companies will come under pressure due to a mismatch between rising input costs and modest product price increases.
Projected volume growth for the quarter stands at 8.5% compared to the same period last year. This demand has been supported by a delayed monsoon, which allowed construction activity to continue for longer than typically seen during this season. However, these volume gains are being offset by regional challenges, including heavy rains and flooding in parts of Eastern India, which disrupted local supply chains and delayed construction projects.
The Price vs. Cost Gap
The central challenge for cement manufacturers this quarter is a struggle to protect profit margins. While all-India cement prices saw a minor increase of approximately Rs 11 per bag in September, and a small gain quarter-on-quarter, these price adjustments have not been enough to keep pace with the rising costs of production.
Operational expenses are expected to rise by about Rs 115 per tonne on a sequential basis. This increase is largely driven by elevated energy costs, such as higher prices for pet coke and coal, alongside rising logistics and packaging expenses. As a result, the profit generated for every tonne of cement sold—a key metric known as Ebitda per tonne—is estimated to decline, with projections falling below Rs 880. This represents a potential drop of roughly 4.9% from the previous quarter, indicating that cost management will be a crucial factor for companies to watch when they announce their results.
What Investors Should Track
Despite the pressure on margins, the long-term demand outlook remains steady for many players. Brokerage reports have highlighted companies like Ambuja Cements, Nuvoco Vistas, Birla Corporation, and JK Lakshmi Cement as firms that investors are closely evaluating for their ability to manage these costs.
However, the ultimate performance of these companies will depend on several variables beyond just volume growth. Investors may want to monitor whether companies can successfully pass on more of these costs to consumers in the coming months, or if they continue to absorb the expenses to maintain market share. Additionally, fluctuations in global energy prices, particularly for thermal coal and pet coke, will remain a critical monitorable, as these inputs significantly impact the cost of manufacturing cement.
Another point of focus is the regional variation in performance. While national demand is stable, companies with a higher presence in flood-affected regions may show different margin trends compared to those with a more diverse geographic footprint. The upcoming earnings calls will be important for understanding how management teams plan to control costs and whether they expect energy prices to moderate in the second half of the fiscal year.