UltraTech flags prolonged cost pressure as West Asia crisis keeps fuel prices volatile
Headwinds from West Asia continue to buffet India's corporate sector, with the country's largest cementmaker UltraTech Cement Ltd navigating unpredictable cost pressures due to rising fuel prices. Even as it expects higher cement prices and robust demand to support margins in future, UltraTech's experience bodes ill for smaller rivals, as the cement industry struggles to absorb prolonged input cost increases.
Prices of petcoke, a key fuel used in cement kilns to generate the high temperatures required for manufacturing, have surged alongside other fuel costs. Transport expenses have also risen as industrial diesel prices climb, adding to the uncertainty over the company’s overall cost outlook.
“Predicting a roll of a dice is easier than what will be the outcome on the West Asia crisis,” chief financial officer Atul Daga said during the post-earnings interaction with analysts. His remarks come after the company had expected the conflict to de-escalate last quarter.
Daga said petcoke prices had “shot through the roof”, while industrial diesel prices had been “continuously increased by the government” and were at “an all-time high”. Higher diesel prices raise mining and transport costs, piling pressure on cementmakers. Cost pressures may continue for longer as the West Asia conflict drags along, Daga said.
UltraTech missed September-quarter profit estimates as higher fuel, freight and raw material costs, worsened by the war, weighed on profitability despite robust sales volume growth. The company's shares closed 2.36% lower at ₹10,650 on Monday, while the benchmark Nifty index fell 1.11%.
The Aditya Birla Group cement arm's consolidated net profit attributable to shareholders rose 21.3% year-on-year to ₹1,493.77 crore in the second quarter of FY27, from ₹1,231.58 crore a year earlier. However, it fell short of the Bloomberg consensus estimate of ₹1,604.1 crore based on a poll of 23 analysts.
“The September quarter is always the one where monsoon writes part of the script. This year, it brought a different twist,” chief financial officer Atul Daga said during the post-earnings interaction with analysts, pointing to a weak monsoon that kept construction activity even as the West Asia conflict pushed fuel costs higher.
UltraTech had expected crude prices to ease and conditions to normalize after the previous quarter. However, uncertainty over the conflict has made cost projections difficult, Daga said.
The cautious commentary is a signal for other cementmakers like Ambuja Cements and Shree Cement, which report second-quarter results in the coming weeks.
“Ultratech reported strong volume growth during the quarter, supporting earnings, but rising costs amid the West Asia crisis weighed on profitability. The impact could be more pronounced for other cement makers, which have fewer cost-saving levers than Ultratech. Its scale could allow it to negotiate forward fuel contracts and better manage input costs, giving it an advantage over smaller peers. Cost pressures are expected to persist through the second half of the fiscal year, weighing on industry profitability,” said Ritesh Shah, joint head of research, analyst - materials, Investec India.
“Cement prices may need to rise by around ₹200 per tonne, or ₹10 per bag, to offset the increase. UltraTech’s results could offer an indication of the challenges facing other cement companies, with rising costs likely to eat into profitability across the sector,” said Shah.
Nishant Bagrecha, a research analyst at InCred Equities, said that West Asia remains a key near-term risk, with uncertainty over petcoke, coal and diesel prices. The full impact of higher input costs is expected to be felt with a lag, even as the company continues to focus on cost discipline across fuel sourcing, power and logistics. To offset the full cost escalation, cement prices would need to rise by another ₹10-15 per bag, he said. “Demand, however, is expected to remain robust, supported by housing, infrastructure, private capex and emerging opportunities in data centres and industrial parks,” said Bagrecha.
UltraTech's revenue from operations increased 18.8% to ₹23,295.07 crore from ₹19,606.93 crore in the year-ago quarter. Ebitda rose 17.2% to ₹3,832 crore in Q2FY27.
However, rising input costs weighed on earnings. Power and fuel expenses climbed 24% to ₹5,511.06 crore, while freight and forwarding costs rose 16.5% to ₹4,809.65 crore. The cost of materials consumed increased 24.4% to ₹4,208.23 crore.
The company has not seen a direct impact on demand so far, with its sales volumes reflecting continued construction activity. Domestic grey cement sales volumes rose 13.8% to 35.94 million tonnes from 31.58 million tonnes in the second quarter of FY26, supported by a wider market footprint, cost optimization and a focus on premium products, the company said.
Ultratech is responding through price discipline, a shift towards premium products and continued efforts to lower costs across fuel sourcing, power and logistics, UltraTech's Daga said.
Cement prices also strengthened towards the end of the quarter, offering some relief from rising input costs.
“Prices turned firmly upwards in the second half of September,” Daga said, adding that trade prices rose by about ₹7-10 per bag month-on-month, while non-trade prices increased even more.
Aditya Birla Group also entered the wires and cables segment with an ₹1,800-crore investment, with production starting on 3 September. The new business, named UltraVolt, aims to become one of India’s top two wires and cables players within five years. UltraVolt is banking on differentiated products rather than price cuts to gain market share, Daga said.
“Our positioning is at market parity. Differentiation is being driven by our product proposition and not any undercutting of prices,” Daga said, adding that entry-level products, including heat-resistant and fire-resistant wires and cables, are priced in line with competing offerings.
Dipali Banka is a Mumbai-based journalist who treats corporate reporting less like a beat and more like a puzzle to be solved. This invariably means she has to read through annual reports and speak with leaders and analysts. She tracks policies, deals, and the pulse of industries spanning metals, mining, paints, and cement, alongside aviation. She started out as an intern at The Statesman and then completed her postgraduate diploma in journalism from Asian College of Journalism, Chennai, in 2025. Relentlessly curious at heart, Dipali is driven by the simple urge to understand how things work and who they impact. Armed with an enduring fascination for steel and aeroplanes, she moves through the churn of daily news with focus, turning complexity into clarity without losing the story. She is particularly committed to shaping numbers into objective narratives, having little appetite for vagueness that gets in her way.<br><br>Outside the newsroom, Dipali is an unapologetically loud presence who values long conversations and longer walks to unwind. She devours books of all kinds and can often be found indulging in the lyrical sway of contemporary ghazals. She ardently believes that her relationship with her bylines is more sacred than it would ever be with anyone across the human race.
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