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Informist, Monday, May 4, 2026

 

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--Ambuja Cements: Will focus on streamlining ops, expanding margin in FY27 
--CONTEXT:Ambuja Cements mgmt's comments in post-earnings call with analysts 
--Ambuja Cements: See sales volumes up 8% YoY at 80 mln tn in FY27 
--Ambuja Cements: See FY27 capex at INR 60 bln-INR 65 bln 
--Ambuja Cements: Cost up INR 25/bag Mar, recalibrating cost for FY27 
--Ambuja Cements: Primary focus on organic, greenfield expansion 
--Ambuja Cements: For FY26, cost at INR 4,400/tn, 10% higher than our target 
--Ambuja Cements: Believe fixed costs have peaked, to go down hereon 
--Ambuja Cements: Demand in Apr-May remains soft, cost up INR 25/bag 
--Ambuja Cements: Looking to cut cost by INR 250/tn FY27, INR 250/tn FY28 
--Ambuja Cements: Spent INR 70/tn on branding, advertising in FY26 
 

 

By Ashutosh Pati and Sunil Raghu

 

MUMBAI/AHMEDABAD – Rising input costs and squeezed margins seem to push Ambuja Cements Ltd. towards becoming more cost-conscious as it plans to reduce costs by a total of INR 500 per tonne by 2027-28 (Apr-Mar), according to the company's management. The cement-maker will cut costs by INR 250 per tonne in FY27 and another INR 250 per tonne the following year, the management said Monday in a post-earnings conference call with analysts.

 

"...we really need to get our act in order in terms of making sure that we are able to reduce our cost," a senior company official said. "...and until the time we are not able to deliver on what we are promising, I don't think it makes sense to make more capital investment because you don't get the returns on those capital invested as well."

 

The company reported a consolidated net profit of INR 18.30 billion for the March quarter, up sharply from a year ago and much higher than expectations, primarily because of tax writebacks. Adjusting for a one-time cost and tax writeback, Ambuja Cements reported a net profit of INR 5.69 billion for the March quarter, in line with analysts' consensus forecast of INR 5.11 billion. The company's total expenses for the quarter rose over 19% on year to INR 105.25 billion, led by a sharp increase in other expenses, power and fuel costs, and depreciation and amortisation expenses.

 

Ambuja Cements is planning to spend around INR 60 billion to INR 65 billion as capital expenditure for FY27. The management believes fixed costs have peaked and will decrease from hereon. The company has acquired several companies in the last few years but the capacities are not performing to the "desired levels," the management said. In FY27, its primary focus will be streamlining these operations and expanding its margins, it added.

 

Ambuja Cements' earnings before interest, tax, depreciation, and amortisation fell nearly 22% on year to INR 14.64 billion for the March quarter. Its operating margin fell to 13.4% from 18.7% a year ago. The company's costs rose INR 25 per bag in March and a further INR 25 per bag in April, and it is currently recalibrating these costs for FY27. It incurred costs of INR 4,400 per tonne in FY26, which is 10% higher than its own target. It spent INR 70 per tonne on branding and advertisements in FY26.

 

Ambuja Cements' priority right now is organic development and greenfield expansion. The company's current clinker capacity is at 73 million tonnes per annum, and it plans to add another 4-million-tonne-per-annum clinker unit at the Maratha Cement Works in Chandrapur, Maharashtra, the management said. 

 

The company is also looking to add new capacities at places where it can reduce its logistics costs. It will also try to improve penetration in markets where it already has a high share and high recall value.

 

Ambuja Cements is revising its capacity enhancement plans as it has not been able to fulfil its earlier guidance. "...we're moving away from the timeline. That is to do with – we know that we are not delivering in terms of what we have – what we had committed. And so it definitely makes sense to step back, to look back and to see where we are going wrong and to post-correct," a top official said. The company had guided for its overall capacity to reach 118 million tonnes per annum in FY26. Currently, its cement capacity is 109 million tonnes per annum.

 

Further, the company plans to increase its sales volumes by around 8% on year to 80 million tonnes in FY27. It is also recalibrating some of the locations because of higher operating costs and logistics costs. "...one of the reasons for the logistics cost being so high compared to competition is because the distance travelled by the integrated units is quite higher than what it should be. So one of the things that we are working towards is shutting down the grinding units in a lot of these places and moving them closer to the market," the management said.

 

The company declared its March quarter results during market hours. Its shares closed slightly higher at INR 445.30 on the National Stock Exchange.  End

 

Edited by Tanima Banerjee

 

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