Carborundum Universal FY26 Annual Earnings Summary

AUKO and FOSCAR continue to incur losses, with AUKO's loss before tax widening to €2.7 million in Q3 FY26. Management is evaluating options, including potential divestment.

VAW sales dropped 46% YoY due to US sanctions imposed in January 2025, with no clear timeline for resolution.

VAW Russia continues to face sanctions, with sales down 35% in ruble terms. Management has no alternative strategy and is waiting for sanctions to lift.

Opex ratio increased to 3.7% due to investments in MSME sales and collection teams; if credit costs do not decline as expected, profitability could be pressured.

Credit cost in the intermediate retail segment was elevated due to prudent provisioning; analyst questioned sustainability, management cited management overlays.

MFI credit cost improved but remains elevated at 5.1%; reliance on CGFMU guarantee may not fully offset underlying asset quality risks.

Ceramics growth is impacted by project delays in the US due to tariff uncertainty, leading to muted 9-month standalone growth of 1.7%.

FOSCAR faces significant price pressure from Chinese competitors, with realizations down 13% despite volume growth of 22%.

New facilities for semiconductor ceramics and thin wheels may take longer to achieve full utilization, delaying revenue contribution.

Despite China removing export rebates, Chinese competition remains intense. Management noted that inventory in the system may delay benefits.

Ceramic segment missed FY26 guidance due to deferred projects; similar delays could impact FY27 growth targets.

Fee income was subdued at 6% of AUM due to cautious underwriting and slow credit demand; management expects improvement in H2 but risk of delayed recovery.