Cement companies report double-digit sales growth but shrinking profits as fuel and power costs, subdued realisations and West Asian supply disruption compress margins
17 Aug, 04:22 IST · Plays out over weeks · 1 source
Cement makers are selling plenty of cement but earning less on each bag, because the coal and diesel they burn to make it cost more while the price they can charge has not kept up.
Key facts
What the reporting establishes, before any reading of it.
- Most cement companies reported double-digit sales growth in the latest quarter while profits came under pressure
- The squeeze is on the cost side - rising energy costs, subdued per-bag realisations and the lingering effect of geopolitical disruption in West Asia on fuel and freight
- The graph's fuel price series is up 3.98% over one month at 4.11 USD/gallon; the thermal coal series has been frozen since 26 December 2025 and cannot corroborate the coal leg
- Volume growth is not the problem - this is a pure margin event, which is why it hits high-multiple names hardest
How the news spreads
Step by step — from the first companies it hits to whole sectors.
Who it hits first
- Every integrated cement producer sees profit per tonne fall as coal, petcoke, diesel and freight costs rise faster than the price of a bag of cement
- Dalmia Bharat carries a quantified 21.4% fuel cost weight, implying roughly 85 basis points of margin pressure from the 3.98% one-month rise in the fuel reference price
- Highly leveraged producers, notably JK Cement at D/E 0.88 against a sector median of 0.37, face fixed interest on top of a compressing operating margin
Who may gain
- Coal, petcoke and fuel suppliers into the cement chain, who capture the price increase the producers are absorbing
- Producers with captive power and the largest fuel-buying scale, principally UltraTech, which gain relative share of a shrinking profit pool
- Blended-cement and alternative-fuel operators, whose lower clinker factor and waste-derived fuels reduce exposure to the same cost line
Along the supply chain
Downstream
Infrastructure contractors and residential developers buy the cement, and producers have so far failed to raise per-bag realisations enough to pass the cost on. If they succeed over the next quarter, project costs rise for road, housing and industrial construction; if they do not, the margin stays lost at the cement plant.
Upstream
Coal, petcoke and diesel suppliers are capturing the cost increase, and West Asian supply disruption has extended freight routes and raised bunker costs for imported petcoke specifically. Limestone, the other main input, is captive and unaffected, which is why fuel is the whole story here.
Where demand moves
Business
Cement demand itself is intact - the article records double-digit sales growth - so this is not a demand event. What flows is cost: fuel suppliers capture margin that cement producers previously kept, and producers attempt to pass it to infrastructure and housing buyers through per-bag price increases that have so far been subdued. Until realisations rise, the cost sits with the producer.
Capital
Money rotates within construction materials from high-multiple producers towards those with the lowest fuel intensity and the strongest balance sheets, and out of the sector towards areas where input costs are falling. The precedent data is unambiguous about the direction: all eight ticker-episodes across the two past fuel-cost squeezes were negative at one month.
How it spreads across sectors
Cement
Profit per tonne compresses despite double-digit volume growth
Construction Materials
Same fuel and freight inflation reaches tiles, boards and allied building products
Infrastructure
Project input costs rise if and when cement realisations catch up, squeezing fixed-price contractors
Real Estate
Construction cost inflation reaches developers with a lag, pressuring margins on already-sold inventory
Commodity angle
Commodity
fuel
Commodity move unresolved reason
rank-affectedness reported the 'Thermal Coal' series stale (newest close 2025-12-26, 233 days old), so the coal leg of the cement fuel basket cannot be verified; the live 'fuel' series (+3.98% one month) is used as the priced proxy instead
Note
Only Dalmia Bharat carries a numeric cost weight (21.4%) on its fuel and coal edges, so it is the only company with a computable margin impact. Shree Cement, JK Cement and UltraTech have fuel and coal edges with null cost weights, so no bps figure is claimed for them rather than one being invented.
Price updated at
2026-08-14
Shock type
price
A pattern seen before
Cascade chain
- West Asian disruption and the Hormuz closure keep fuel and freight costs elevated
- Cement kiln fuel and power costs rise about 4% in a month
- Per-bag realisations stay subdued, so the cost is not passed on
- Profit per tonne compresses despite double-digit volume growth
- Construction and infrastructure input costs rise later if producers eventually reprice
Pattern name
Crude Oil Cascade
Sectors queried
- Cement
- Construction Materials
- Infrastructure
- Real Estate
When it plays out
Immediate
Reported margin compression is already visible in the quarter just published; the market response typically builds over weeks rather than on the day
Medium term
If West Asian fuel and freight disruption eases, the cost line reverses quickly; if not, the sector consolidates further towards operators with captive power and alternative fuels
Short term
Watch whether producers push through per-bag price increases - this is the single variable that decides whether the squeeze persists