Ambuja Cements Stock Dips 4.6% on Weak Q3 Operating Results

Introduction

Shares of Ambuja Cements Ltd. declined by 4.6% on Friday following the announcement of its financial results for the quarter ended December 31, 2025. The stock fell to ₹511.35 after the company reported a weak operating performance that overshadowed record-high sales volumes. Investors reacted to a significant contraction in profitability, as rising input costs squeezed margins, leading to a sharp drop in earnings before interest, tax, depreciation, and amortisation (EBITDA).

Record Volumes Met with Margin Pressure

For the third quarter, Ambuja Cements posted a revenue of ₹10,277 crore, which was marginally ahead of analyst expectations. The company achieved its highest-ever quarterly sales volume, dispatching 18.9 million tonnes of cement, a 17% increase compared to the same period last year. This robust volume growth indicates strong market demand and successful market penetration strategies. However, the top-line performance did not translate into proportional operational profits, highlighting the severe impact of cost inflation on the company's bottom line.

Operating Performance Misses Estimates

The primary concern for the market was the company's operating metrics, which fell significantly short of expectations. EBITDA for the quarter stood at ₹1,353 crore, a steep 21% decline from the year-ago period. This figure was well below the CNBC-TV18 poll projection of ₹1,712 crore. Consequently, the EBITDA margin narrowed by 500 basis points, falling to 13.2% from 18.2% in the corresponding quarter of the previous year. Analyst polls had anticipated a healthier margin of 16.9%. The pressure on profitability was also evident in the EBITDA per tonne, which dropped to ₹718 from ₹1,059 a year earlier.

Rising Costs Erode Profitability

The erosion in margins was directly attributed to escalating operational expenditures. The company's financials revealed that power and fuel costs surged by 26% year-on-year, while freight and forwarding expenses increased by 16%. These two components are critical cost centers for cement manufacturers, and their sharp rise weighed heavily on the company's ability to convert higher sales into profits. The inability to fully pass on these increased costs to consumers in a competitive market environment led to the observed margin contraction.

Key Financial Metrics for Q3 FY26

Market Reaction and Stock Performance

The market's reaction to the earnings report was swift and negative. Ambuja Cements' stock price moved down by 4.6% from its previous close of ₹536.05 to trade at ₹511.35. The share price has shown limited significant movement over the past year, with a one-year return of approximately 4.46%. The latest quarterly results have introduced fresh concerns among investors regarding the company's near-term profitability and its ability to navigate the high-cost environment.

Strategic Updates and Capacity Expansion

Despite the operational challenges, Ambuja Cements continues to focus on its long-term growth strategy. The company announced the successful operationalization of its 2.4 MTPA Marwar Grinding Unit. This new facility has increased the company's total cement capacity to 109 MTPA. Looking ahead, Ambuja Cements has set a target to further expand its capacity to 115 MTPA by March 2026, signaling its confidence in the long-term demand outlook for the cement sector in India.

Broader Financial Health

From a broader financial perspective, Ambuja Cements maintains a strong balance sheet. The company is nearly debt-free, which provides significant financial flexibility. However, its consolidated financials show a 15.86% year-on-year decrease in cash used for investing activities, which stood at ₹7,531.1 crore. The operating cash flow was reported at ₹2,237.35 crore, which is 0.54 times the net profit of ₹4,167.43 crore, indicating a potential gap between reported profits and actual cash generation from core operations.

Conclusion

Ambuja Cements' third-quarter results present a mixed picture. While the company demonstrated strong demand for its products with record sales volumes, its profitability was significantly hampered by rising input costs. The negative market reaction underscores investor concerns about margin stability in the current inflationary environment. The company's ongoing capacity expansion and strong balance sheet remain key positives, but its ability to manage costs and improve operational efficiency will be critical for its performance in the upcoming quarters.