**Cement Sector Faces Volume Challenges Amidst Rising Realisations**
India’s cement industry is projected to experience modest volume growth in the second quarter of Financial Year 2026 (Q2FY26) due to seasonal fluctuations, according to a report by Nuvama. Despite this anticipated slowdown, improving realisations present a positive aspect for the sector. The report indicates that while operating deleverage and increased expenses may exert pressure on profit margins, declining fuel prices and ongoing cost-efficiency initiatives by industry players are expected to mitigate some of these challenges.
The report states, “We believe Q2FY26 will witness subdued volume growth due to the seasonally weak quarter; however, improving realisations have brought optimism to the industry. The sequential decline in realisation and higher expenses from operating deleverage will be somewhat offset by softening fuel prices (with a lag effect) and various cost efficiency measures implemented by companies.”
In the first quarter of FY26, the cement industry showed signs of recovery, with 15 major companies reporting approximately 7% growth in sales volumes compared to the previous year, although this represented an 11% decline from the preceding quarter. This growth was primarily fueled by increased government investment in infrastructure projects. Notably, Ambuja Cement (including its recent acquisitions) and JK Cement led the sector with over 14% year-on-year volume growth.
Price improvements were observed in the southern and eastern regions, resulting in an average selling price increase of about 5% compared to the previous quarter, although it was slightly lower than the same period last year. Additionally, raw material costs decreased by 5% quarter-on-quarter and 15% year-on-year, largely due to enhanced inventory management. Consequently, the industry’s profit per tonne (EBITDA/t) rose by 10% quarter-on-quarter and 26% year-on-year, reaching ₹1,140 per tonne.
Looking ahead, the report notes that the monsoon season (Q2FY26) typically brings a slowdown in construction activities, which may lead to a decline in sales. However, falling fuel costs are anticipated to support profitability. In August of the current year, cement prices remained stable compared to the previous month but showed strength on a year-on-year basis. The monsoon season has hindered construction, particularly in rural areas and infrastructure projects, resulting in weaker demand and limiting companies’ pricing power.
Regionally, demand in the eastern market has sharply declined due to early rains, although prices have remained steady at ₹353 per bag. In contrast, the southern region saw a price increase of ₹10 per bag despite the ongoing monsoon.
**FAQ**
**What factors are influencing the cement sector’s performance in Q2FY26?**
The cement sector’s performance in Q2FY26 is influenced by seasonal weakness, operating deleverage, and higher expenses, but is supported by improving realisations, declining fuel prices, and cost-efficiency measures.
