Cement companies' profitability to moderate in FY27 on rising fuel, logistics costs: ICRA

The operating profitability of Indian cement companies is expected to decline by 10 -15 per cent in FY27 due to elevated power, fuel and selling costs triggered by ongoing geopolitical tensions in West Asia, according to a report from rating agency ICRA.

However, part of the impact is likely to be mitigated by an increase in cement prices, as selling costs go up by 6-8 per cent compared to a 10-12 per cent rise in power and fuel costs due to crude-linked cost pressure.

The operating profitability ''per tonne for ICRA's sample set of cement companies is projected to decline by 10-15 per cent to Rs 820-870/MT in 2026-27, compared to estimates of Rs 950-980/MT in 2025-26,'' it said.

Power and fuel, and selling costs constitute 50-55 per cent of the total operating costs for cement companies.

''The ongoing West Asia conflict has raised global crude oil prices, increasing costs of key inputs such as petcoke, diesel and polypropylene for cement companies, which is likely to weigh on their operating profitability,'' it said. The cement sector remains highly energy-intensive, relying heavily on coal and petcoke for clinkerisation and the operation of captive thermal power plants.

Cement companies also largely rely on road transport for dispatching cement to customers and moving raw materials to manufacturing facilities.

''Crude oil prices have surged owing to the West Asia conflict and closure of the Strait of Hormuz. The prices are likely to stay elevated if the war prolongs,'' it said.

ICRA expects crude prices to average USD 95/bbl (a barrel of crude oil) in 2026-27, in the baseline scenario, compared to USD 72/bbl in 2025-26.

''Petcoke prices have already risen sharply, with a 19 per cent MoM increase in April 2026, and diesel prices have gone up by Rs. 3.9/litre in May 2026,'' it said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)