Cement returned to profitability after price increases, but can it continue absorbing lower volumes?

In the first quarter, the cement business posted sales of ¥39,462 million, up 7.7% year on year, and operating profit of ¥1,573 million. The year-earlier period recorded an operating loss of ¥70 million, so earnings improved by ¥1.64 billion. However, full-year FY2026 results had already improved to sales of ¥158,799 million and operating profit of ¥5,495 million in the cement business. The next first-half results will therefore show whether the improvement from the ¥37 million operating profit recorded in the first half of FY2026 can be extended further.

The factors behind the first-quarter change in operating profit were a ¥2.2 billion positive impact from selling prices, offset by negative impacts of ¥0.1 billion from sales and production volumes and ¥0.5 billion from electricity and raw-material prices. Coal and oil prices contributed ¥0.2 billion, while recycling and rationalization contributed ¥0.4 billion. These benefits were partly offset by negative impacts of ¥0.2 billion from foreign exchange and ¥0.1 billion from other factors. The return to profitability therefore depended more on price revisions and selected cost improvements than on volume growth, making earnings resilience if the pricing benefit runs its course in the first half an important issue.

First-quarter domestic cement demand was 7.21 million tonnes, while domestic sales were 1.671 million tonnes and exports were 0.378 million tonnes. Domestic demand in FY2026 fell 6.5% year on year to 30,532 thousand tonnes, while exports increased 7.1%, so exports have continued to partially offset the contraction in domestic demand. Domestic sales volumes themselves, however, remain a drag even after the price revisions, and the next results will need to distinguish between domestic and export volumes.

The FY2027 cement operating profit forecast is ¥5.0 billion, slightly below the previous year's ¥5.495 billion. The first-quarter result of ¥1,573 million is not sufficient to determine whether the full-year forecast will be achieved. The key issues will be how much of the pricing benefit remains in the first half and whether coal and oil prices remain close to the assumed levels of US$140/t and US$100/bbl. Sales volumes and demand have been disclosed, but not the sales unit price itself or detailed per-unit effects from price revisions. It will therefore also be important to see whether the first-half FY2027 disclosure continues to break down the effects of prices, volumes and fuel and raw-material costs by amount.