UltraTech Cement Q2 profit misses analyst estimate on lower volumes and higher costs

Aditya Birla Group’s cement arm has reported consolidated net profit so far: ₹1,238 crore for the quarter, a decline of almost 45% compared to the first quarter of FY26, according to the company’s stock exchange filings. It was below Bloomberg’s forecast ₹1,456 crore, according to a survey of 19 analysts.

Higher fixed costs such as material cost and employee costs combined with lower sales volumes hurt profitability and sequentially dragged down EBITDA per tonne.

“Maintenance, advertising and personnel costs were slightly higher this quarter, contributing to a delta effect of approximately 200 thousand. ₹200 per tonne. But some of these costs will come down in the next quarter,” UltraTech’s chief financial officer Atul Daga said in a post-earnings call with analysts, adding that lower sales volumes on a quarterly basis affected operating leverage.

‘Below expectations’

Satyadeep Jain, Principal Analyst – Cement, Metals, Mining and Utilities, Ambit Capital, said: “Actual figures came in below expectations. The decline in profits was due to a combination of factors including pricing pressure, higher raw material, energy and fuel costs, lower volumes increasing fixed cost per tonne, higher maintenance costs and the usual July wage increases and bonus payments at UltraTech.”

“On the other hand, the company’s annual profit growth was supported by the recovery in cement prices from last year’s lows and gains from acquisitions.”

Compared to the previous quarter, the company’s raw material costs increased by almost 1% and employee costs increased by almost 10% in the second quarter of the fiscal year. Revenue from operations fell almost 8% sequentially ₹19,607 crore in the September quarter.

However, revenue from operations increased 20% year over year due to higher pricing and acquisition gains compared to last year. This growth is due in part to UltraTech’s consolidation moves.

The company has restated its previous results following the merger of the cement division of Kesoram Industries with effect from April 1, 2024. During the year, it also acquired 75.6% of The India Cements and completed the acquisition of Birla White Wallcare Pvt Ltd. ₹234 crore, according to notes accompanying its financial statements. Therefore, these results cannot be directly compared with the previous period.

New capacities

The cement producer also announced a new investment. ₹10,255 crore to increase cement production capacity, including that of its subsidiary India Cements Limited, by 22.8 million tonnes per annum, the company said.

This expansion will be achieved through a mix of brownfield and greenfield projects. Commercial production from these new capacities will commence in a phased manner from FY28, taking the company’s total global cement capacity to 240.76 mtpa.

“Our expansion plans are continuing at full speed and we expect to complete this fiscal year with a capacity of 200 million tonnes,” Daga said. He added that major projects like Vadhavan Port, Amravati, new Mumbai airport development project, upcoming data centres, urban real estate projects and Google’s $15 billion artificial intelligence center in Andhra Pradesh have all created steady growth and demand in the cement industry.

GST tailwinds

Daga also highlighted that GST 2.0 is expected to increase the demand for premium cement as more customers will be able to purchase the brands they desire. The company has aimed to strengthen its presence in the southern markets in FY25 and is currently focusing on further expansion in the northern and western regions.

“To further strengthen our position in these markets, we are embarking on the next phase of our growth with increased capacity of 22.8 million tonnes, which is largely a mix of brownfield and some greenfield expansion. Of this 22.8 million tonnes, 18 million tonnes are focused on northern markets and 4.8 million tonnes are focused on western markets,” Daga said.

In August, Aditya Birla Group and UltraTech Cement chairman Kumar Mangalam Birla said at the company’s annual general meeting that it would end FY26 with an annual capacity of 200 million tonnes, a year ahead of its original guidance in FY27. In his message to shareholders in his annual report, Managing Director KC Jhanwar said that he plans to invest. ₹Capex in FY26 is 9,000-10,000 crore.

UltraTech’s domestic gray cement capacity is 186.86 mt/year and its international capacity is 5.4 mt/year, making its total capacity 192.26 mt/year.

Daga said he expects rural markets to be a key driver of demand in the second half of 2025. Jhawar added that the housing sector, especially rural housing, is seeing strong demand, supported by a good monsoon season and revised minimum support prices for farmers. On the urban side, changes in personal income tax rates and favorable interest rates are expected to accelerate demand.