Carborundum Universal Limited — Q2 FY26 earnings call

Call held 31 Oct 2025

Management summary

Carborundum Universal reported a mixed Q2 FY26, with consolidated sales growing 6.4% YoY and PBIT showing strong sequential recovery. While Abrasives and Ceramics segments demonstrated healthy growth, Electrominerals faced slight degrowth due to VAW sanctions. The company is on track with its capex plans, investing in strategic growth areas like semiconductor and defence, and maintains its full-year guidance despite ongoing geopolitical challenges affecting VAW.

Highlights

  • Consolidated sales in Q2 FY26 reached INR1,287 crores, marking a 6.4% year-over-year growth.

  • Consolidated PBIT for Q2 FY26 was INR111 crores, a 37% sequential increase from Q1 FY26, though down from INR154 crores in Q2 FY25.

  • The Abrasives segment grew 7.4% YoY to INR584 crores in Q2 FY26, driven by international subsidiaries and CUMI America.

  • Ceramics segment sales increased 7.8% YoY to INR301 crores in Q2 FY26, primarily due to the Australian subsidiary.

  • Electrominerals experienced a marginal 0.9% YoY degrowth to INR399 crores in Q2 FY26, mainly impacted by VAW.

  • H1 FY26 consolidated capex was INR162 crores, on track for the full-year plan of INR350 crores, focusing on new growth areas.

  • RHODIUS incurred a loss of EUR2.2 million in H1 FY26, with a full-year loss after tax expected between EUR3.5 million and EUR4 million.

Concerns

  • Geopolitical situation and sanctions on VAW

Key financials

  1. Consolidated Sales ₹1,287 Cr +6.4%YoY
  2. Consolidated PBIT ₹111 Cr -27.8%YoY
  3. Consolidated H1 Sales ₹2,493 Cr +4.2%YoY
  4. Consolidated H1 PBIT ₹192 Cr -36.8%YoY
  5. Consolidated Debt ₹210 Cr +103.9%YoY
  6. Debt-to-Equity Ratio 0.06

What they filed

Q1 FY27: revenue up 17.1%, net profit up 33.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,224 1,255 1,217 1,219 1,298 +6%1,291 +3%1,398 +15%1,427 +17%
EBITDA195 177 146 121 156 −20%157 −11%144 −1%135 +12%
Net profit116 38 30 60 74 −36%73 +92%-40 −233%80 +33%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentSales H1 FY26Sales Q2 FY26
Abrasives (Consolidated)₹1,091 Cr₹584 Cr
Ceramics (Consolidated)₹601 Cr₹301 Cr
Electrominerals (Consolidated)₹804 Cr₹399 Cr
RHODIUS Abrasives——
VAW₹364 Cr—

Order book

low confidence
Management noted that order books for Ceramics were built, contributing to expectations of a strong H2, and that the H2 pickup in Ceramics is based on order backlog and project execution time.

Source: Inferred

Capital allocation

high confidence
  • Capex ₹350 Cr
    • Semiconductor facilities
    • Aerospace and defence
    • HP SiC facility
    • Thin wheel relocation
    During the H1 FY '26, our capex investment was INR162 crores against INR124 crores in H1 FY '25. This is against our full year plan of INR350 crores as we communicated during the last call. So we are progressing as per the plan.
  • Debt Gross ₹210 Cr · Net ₹0 Cr
    Total debt at consolidated basis was INR210 crores at the end of Q2 FY '26 compared to INR172 crores at the end of Q1 FY '26 and INR103 crores at the same period last year. The debt-to-equity ratio is 0.06 at consolidated level. Cash and cash equivalent at the consolidated without cash in VAW is about INR215 crores, which means debt net of cash is 0.
  • Liquidity Cash ₹215 Cr Cash and cash equivalent at the consolidated without cash in VAW is about INR215 crores, effectively making net debt zero.
    Cash and cash equivalent at the consolidated without cash in VAW is about INR215 crores, which means debt net of cash is 0.

Guidance & targets

Revenue

  • Consolidated Sales Growth Revenue · full year FY26 · High confidence 5.5% to 6.5%
    Consolidated sales growth could be 5.5% to 6.5%.

    — Sridharan Rangarajan

  • Consolidated Ceramics Growth Revenue · full year FY26 · High confidence 16% to 18%
    Consolidated Ceramics growth could be 16% to 18%, same as earlier communicated.

    — Sridharan Rangarajan

  • EMD Growth Revenue · full year FY26 · High confidence 1% to 2%
    EMD growth guidance is about 1% to 2%, same as last time communicated.

    — Sridharan Rangarajan

  • Abrasives Sales Growth Revenue · full year FY26 · High confidence 4% to 5%
    Abrasives sales in our last call, we communicated 4% to 5% growth for the year.

    — Sridharan Rangarajan

  • AWUKO Sales Growth Revenue · full year FY26 · Medium confidence about 20%
    At the full year, we expect the sales growth to grow by about 20%.

    — Sridharan Rangarajan

  • AWUKO Net Sales Revenue · full year FY26 · High confidence EUR12 million to EUR14 million
    As far as AWUKO is concerned, we feel that getting to about roughly about EUR12 million to EUR14 million top line for this year is the first milestone that we should hit.

    — Sridharan Rangarajan

Margin

  • Consolidated Ceramics Margin Margin · full year FY26 · High confidence 23.5% to 23.7%
    Margins at consolidated level, Ceramics section, we communicated 23.5% to 23.7% on a full year basis, maintained the same.

    — Sridharan Rangarajan

  • EMD Margin Margin · full year FY26 · High confidence 4.5% to 5.5%
    EMD in the last call we said 4.5% to 5.5%.

    — Sridharan Rangarajan

  • Abrasives PBIT Margin Margin · full year FY26 · High confidence 6% to 6.5%
    Abrasives last time we said PBIT margin could be 6% to 6.5% on a full year basis.

    — Sridharan Rangarajan

Profitability

  • Overall PBIT Margin Profitability · full year FY26 · High confidence 8.2% to 8.5%
    We said that last time the overall PBIT margin could be 8.2% to 8.5%, we maintained the same.

    — Sridharan Rangarajan

  • RHODIUS Loss after tax Profitability · full year FY26 · High confidence EUR3.5 million to EUR4 million
    We expect the loss after tax to be about EUR3.5 million to EUR4 million this year.

    — Sridharan Rangarajan

Capex

  • Total Capex Capex · full year FY26 · High confidence INR350 crores
    Capex side, we would spend about INR350 crores. We have spent about INR162 crores in H1. So we think we will meet the capex plan.

    — Sridharan Rangarajan

Volume

  • VAW Volume Drop Volume · full year FY26 · High confidence about 25%
    With respect to the full year performance at VAW, we had earlier committed a drop in volume by about 25%. We maintain the same guidance now.

    — Sridharan Rangarajan

Capacity

  • Semiconductor Contribution Capacity · next year onwards · High confidence start contributing
    So as far as the semiconductor, we expect that it would start contributing from next year and then aerospace and defence, partly next year, but mostly year after.

    — Sridharan Rangarajan

  • Aerospace and Defence Contribution Capacity · FY27-FY28 · High confidence partly next year, mostly year after

    — Sridharan Rangarajan

  • HP SiC Contribution Capacity · 2 years · High confidence start contributing
    And then as far as the HP SiC, we said 2 years, we need to wait because these are all seeding time, which is what we are currently doing.

    — Sridharan Rangarajan

Other

  • Overall Company Growth Other · next 5 years · Medium confidence 2 times
    I think we broadly guided at the overall company level, 2 times in this period of the next 5 years.

    — Sridharan Rangarajan

What to watch in Q3 FY26

RHODIUS profitability recovery

Soon (after PPA)
Current H1 FY26 loss of EUR2.2 million
Target Return to profitability

Why it matters

RHODIUS significantly impacted H1 Abrasives PBIT; its recovery is key for segment margins and overall profitability.

As I said that we continue to look at RHODIUS as a good company, would get back to the profitability even after PPA soon.

Risks & concerns

  • Geopolitical situation and sanctions on VAW

    high

    VAW sales degrew significantly (37.2% YoY in Q2 RUB) due to sanctions, impacting consolidated PBIT, and management avoids speculating on resolution.

    Management acknowledged

  • Operational challenges relating to logistics for RHODIUS

    medium

    Caused a significant drop in RHODIUS sales in Q1 FY26, impacting H1 profitability, but management states it was a 'one-off event' and is resolved.

    Management acknowledged

  • Chinese competition in aluminium oxide (Electrominerals)

    low

    Management states the competitive landscape is 'maintaining and no difference that we see at this point', suggesting it is manageable.

    Analyst acknowledged

Q&A highlights

6 direct, 1 evasive
Standalone Ceramics & Refractories growth and sub-category performance Direct
Metallized Cylinders and Engineered Ceramics have performed over 20%. And I think there were challenges basically on the Wear Ceramics side. Both Wear and some of the Refractory side, the project-based dependence, there's a delay, which should pick up in the next quarter and we should see overall growth.

Clarifies specific areas of strength (Metallized Cylinders, Engineered Ceramics) and weakness (Wear Ceramics, Refractories project delays) within the Ceramics segment.

Asked by Ravi Swaminathan

Standalone Abrasives retail vs industrial performance and H2 outlook Direct
industrial and precision are doing fine. Retail is a bit subdued, but the encouraging thing is that the inventories at the dealer level have really come down, which sees that Q3 and Q4, we should see a pickup. The lot of festival pickup helped to move their inventory level.

Provides insight into demand drivers for Abrasives, indicating potential improvement in H2 due to inventory normalization and festive demand.

Asked by Ravi Swaminathan

Electrominerals business and Chinese competition in aluminium oxide Direct
It is maintaining and no difference that we see at this point.

Reassures that competitive pressure in the Electrominerals segment has not worsened, indicating stability in this aspect.

Asked by Ravi Swaminathan

Standalone Ceramics margins and sales growth, product mix impact Partial
I think product mix and the other one is the top line. There's base level fixed cost absorption needs to happen. So since there's a top line is a bit soft. So that's why we expect the H2, we could pick up. I mean, we will bounce back better in the H2 and that should start showing the margin pickup.

Explains current margin pressure in Ceramics due to soft top line and product mix, with an expectation of H2 recovery and margin improvement.

Asked by Harshit Patel

Subsidiary Electrominerals sales improvement despite VAW sanctions Direct
sanction does affect. It is not that it is not affected. So it's told that at H1 level, we have an INR83 crores of impact on the Electrominerals business. So it does affect. But what helps us is the standalone growth, growth in Foskor is helping us to a large extent to offset this.

Clarifies that sanctions on VAW do have an impact, but the overall Electrominerals segment is being supported by growth in standalone business and Foskor Zirconia.

Asked by Harshit Patel

VAW sanctions, future strategy, and hope for lifting sanctions Evasive
Look, I think this is a very tough area to guess because this is a geopolitical question. I would like to stay away from that. I think you are as good as mine or more than mine in terms of knowing the geopolitical situation as everyone reads instantaneously, as everyone treats.

Management avoids speculating on the geopolitical situation and the lifting of sanctions, highlighting the inherent uncertainty around VAW's long-term prospects.

Asked by Amit Anwani

AWUKO and RHODIUS breakeven timeline and demand drivers Direct
RHODIUS drop in Q1 is a one-off event largely driven by the way the logistics was handled, but they are out of that and they are back to normal and the demand, I would say, it is good and it is continuing the way we are planning as far as RHODIUS is concerned. As I said that we continue to look at RHODIUS as a good company, would get back to the profitability even after PPA soon.

Provides an update on the recovery of RHODIUS from Q1 operational issues and reiterates the expectation for the subsidiary to return to profitability soon.

Asked by Amit Anwani

New product development, semiconductor, and defence program updates Direct
So as far as the semiconductor, we expect that it would start contributing from next year and then aerospace and defence, partly next year, but mostly year after. And then as far as the HP SiC, we said 2 years, we need to wait because these are all seeding time, which is what we are currently doing.

Outlines the timelines for new revenue streams from strategic investments in semiconductor, aerospace, defence, and HP SiC, indicating future growth drivers.

Asked by Amit Anwani

2 min read 5 chapters

Detailed narrative

Q2 FY26 Consolidated Performance and H1 Overview

Carborundum Universal reported consolidated sales of INR1,287 crores in Q2 FY26, reflecting a 6.4% year-over-year growth compared to INR1,209 crores in Q2 FY25, and a 6.6% sequential growth from INR1,207 crores in Q1 FY26. Consolidated PBIT for Q2 FY26 was INR111 crores, a notable 37% increase from INR81 crores in Q1 FY26, though it was lower than INR154 crores in Q2 FY25. For the first half of FY26, consolidated sales grew 4.2% to INR2,493 crores, while PBIT stood at INR192 crores, a decline from INR304 crores in H1 FY25, primarily due to impacts from VAW, RHODIUS, and standalone operations.

Segmental Sales and Profitability Analysis

The Abrasives segment recorded a 7.4% YoY growth in Q2 FY26, reaching INR584 crores, with a strong 15% sequential increase, supported by AWUKO, RHODIUS, and CUMI America. Ceramics sales grew 7.8% YoY to INR301 crores in Q2 FY26, mainly driven by the Australian subsidiary. The Electrominerals segment experienced a marginal 0.9% YoY degrowth to INR399 crores in Q2 FY26, largely due to VAW. Consolidated Abrasives PBIT for H1 FY26 was INR45 crores, a 50% reduction from H1 FY25, while Ceramics PBIT for H1 FY26 was INR137 crores, a 4.9% decline from H1 FY25.

International Subsidiaries: Mixed Performance and Geopolitical Impact

RHODIUS Abrasives saw H1 FY26 net sales of EUR30.6 million, a 9% degrowth YoY, and incurred a loss of EUR2.2 million, with a full-year loss after tax projected at EUR3.5-4 million, partly due to Q1 logistics issues. AWUKO achieved H1 FY26 sales of EUR5.5 million, growing 5.3% YoY, and is on track to meet its full-year sales target of EUR12-14 million. VAW's sales in local currency degrew 37.2% YoY in Q2 FY26 and 31% in H1 FY26, with management maintaining its guidance for a 25% volume drop for the full year due to sanctions. Foskor Zirconia's Q2 FY26 sales were ZAR114 million, but it reported a loss after tax of ZAR24 million.

Capital Expenditure and Debt Management

The company's H1 FY26 capex spend was INR162 crores, aligning with its full-year plan of INR350 crores. These investments are strategically directed towards new growth areas including semiconductor facilities, aerospace and defence, HP SiC, and thin wheel relocation. Consolidated total debt stood at INR210 crores at the end of Q2 FY26, with a healthy debt-to-equity ratio of 0.06. Management highlighted that cash and cash equivalents, excluding VAW, amount to INR215 crores, effectively making the consolidated net debt zero.

Outlook and Strategic Growth Initiatives

Management reiterated its full-year FY26 guidance for consolidated sales growth (5.5-6.5%), Ceramics growth (16-18%), EMD growth (1-2%), and Abrasives growth (4-5%). Profitability targets include consolidated Ceramics margin of 23.5-23.7% and overall PBIT margin of 8.2-8.5%. The company anticipates a strong H2 for Abrasives and Ceramics, driven by sequential recovery, inventory normalization, and project execution. New initiatives in semiconductor ceramics are expected to contribute from FY27, with aerospace and defence programs following suit in FY27-FY28, aiming to double the company's size in the next five years.

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