UltraTech faces Q2 margin hit as fuel costs rise, cables project advances

UltraTech Cement is bracing for a squeeze in profitability this quarter. The full impact of elevated fuel costs linked to the West Asia conflict is filtering through its supply chain. This threatens to erode margins just as seasonal demand weakens.

The Indian cement manufacturer reported an EBITDA margin of 20.9% for the June quarter. This represented a contraction of 110 basis points sequentially and 70 basis points year-on-year. The decline was driven directly by higher expenses for fuel and packaging materials.

The September quarter presents a dual challenge for the company. Seasonal weakness tied to the monsoon traditionally suppresses construction activity and volume growth. Compounding this, UltraTech must now consume costlier fuel inventory purchased amid ongoing Middle Eastern tensions.

As a result, per-tonne earnings are expected to deteriorate further. Management forecasts EBITDA per tonne will fall by ₹130 to ₹140 from the ₹1,214 recorded in the June quarter. That June figure was down sequentially from ₹1,253 but up slightly from ₹1,198 a year earlier.

Pricing dynamics offer a partial buffer against these cost pressures. Cement prices firmed up through June, with noticeable improvements in the East and South regions. The company expects these prices to hold broadly stable during the monsoon, preventing a deeper margin collapse.

Beyond the immediate cyclical headwinds, UltraTech is executing a strategic diversification. The company is advancing an ₹1,800-crore cables and wires venture. It is positioning this adjacent business as a key growth engine for fiscal year 2027.

The project's construction is proceeding on schedule. UltraTech has already deployed ₹888 crore into the initiative and secured key regulatory approvals. Trial runs are currently underway at the facility.