Global Surfaces (NSE:GSLSU) Q2 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to Global Surfaces Limited Q2 and H1 FY twenty twenty seven Earnings Conference Call hosted by Valderram Advisors. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Purangy Jain from Validum Advisors. Thank you, and over to you, Ms. Jain. Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Purangy Jain from Mariner Advisors. We represent the Investor Relations of Global Surfaces Limited.

0:48 On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half year ending of the financial year 2027. Before we begin, a quick cautionary statement. Some of the statements made in today's earnings call may be forward looking in nature. Such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward looking statements in making any investment decisions. The purpose of today's conference call is purely to educate and bring awareness about the company's fundamental business and financial performance for the period under review.

1:36 Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Mayank Shah, Chairman and Managing Director Mr. Ashish Agarwal, Chief Financial Officer and Mr. Haram Singh Rathore, Company's Secretary and Compliance Officer. Without any delay, I request Mr. Manansha to start with his opening remarks. Thank you, and over to you, sir. Thank you, Ramvi, and good afternoon to you all. We welcome you to the earnings call of Global Surfaces for the second quarter and half year ended September 30. For those joining us for the first time, Global Surface was established in 1991 and is headquartered in Jaipur, India. We are engaged in manufacturing and export of engineered surface of premium residential, commercial and architectural applications.

2:31 Our product portfolio comprises of six engineered quad series, which are Aurora, Kalmasa, Prismatic, Stratum, Quartzite and Mark Quartz, with applications across countertop, flooring, wall cladding, vanity, reception desk and other interior surfaces. We operate two state of the art engineered stone manufacturing facilities, one in Mahindra, World City, SCZ in Jaipur and the other wholly owned subsidiary, Global Surfaces, FZD at Jabirali Free Zone in Dubai. Together, these facilities have an annual production of approximately 1,140,000 square feet square meters. Our international distribution presence is supported by Global Surfaces INC and Superior Surfaces INC in United States. At present, our strategic focus on improving operating efficiencies and profitability, we continued operation we discontinued our at our natural stone unit in Baghurou with effect from 03/31/2026 following the Board decision. Since then, only limited activities have been undertaken to complete the existing orders and facilitate orderly closure.

3:39 This transition is reflected in our H1 revenue mix with engineered stone contributing approximately 98% of the revenue. Going forward, our focus remains on engineered quartz business, where we see opportunities to strengthen product diversification and improve utilization and build our more sustainable operating profile. Let me now turn to external environment. The key development for the engineered quads industry during the quarter has been implementation of The U. S. Safeguard Section two zero one measure on products for surface products. Effective August 1526, the measure will remain in place for four years through tariff quota. In the first year, the import of approximately 13,000,000 square meters will attract additional duty of 25%, while the volumes above the quota will attract a tariff of 50%.

4:34 The quota is scheduled to increase over the period with applicable rates tapering to 19 to 47%, respectively, by the fourth year. These duties are over and above normal duties and applicable antidumping countervailing duties. The measure provides for a single global quota rather than country specific allocation, meaning suppliers compete for the same permitted quota. While certain developing countries have been excluded, India has not received any exemption and neither has UAE received any exemption. The significance of Indian exporters is considerable. Industry estimates indicate that quartz surface products to U. S.

5:22 Were approximately $223,000,000 in 'twenty six and represented around 72% of India's total quartz exports. The Government of India has requested consultations with the World Trade Organizations, while Indian representatives and representations and discussions with The U. S. Continue. The broader U. S. Tariff environment has also evolved. The earlier 50% tariff imposed in 2025 is no longer in force. The following, the Supreme Court February 2026 ruling, the temporary 10% global tariff expired in July and 10% Section three zero one tariff is applied on Indian goods in July 24. The interim India U. S. Trade agreement framework announced in February remains unsigned.

6:13 Therefore, while the general tariff backdrop has eased from last year, the Quad's specific safeguard has emerged as more immediate concern for the industry. In this environment, we focus on reduced concentration risk with reduced concentration risk through a broader geographic and product mix. We continue to serve customers across North America, Middle East, Europe and other export markets while building our domestic presence in India under the Global Surface brand. Our revenue mix remains export oriented, while export contributing to approximately 96% and domestic market around 4%. Alongside market diversification, we are placing great emphasis on customized and high value engineered surface products, while design, quality, technology and service are important differentiators.

7:07 Our manufacturing footprint in India and UAE, together with our U. S. Distribution entities, provides flexibility as we respond to changing trade conditions and customer requirements. Turning to the operational and strategic development during this period, we provide we continue to focus on our engineered quartz product portfolio and on value added offerings, markwares developing using licensed technology enable us to manufacture premium engineered quartz surfaces that replicate the natural veining and appearance of marble and granite while retaining the practical benefits of engineered stone. The technology incorporates a proprietary vein patenting process and support the development of differentiated products of higher value applications.

7:59 We also make progress on proposed conversion of a further portion of the unsecured loan extended to Global Surfaces Limited into equity. The Board on the recommendation of the Audit Committee approved the conversion of on 08/10/2026, USD 3,000,083 million and USD 10.86 aggregating to approximately INR 110.44 crores as on the reference date, June 30, the conversion is based on value determined by the independent valuer. Pending completion of all the necessary ODI filing under the FEMA and regulatory informalities with Jabali Free Zone Authority, Dubai INR 111 crores has been reclassified as advanced towards equity share subscription under the noncurrent financial assets.

8:57 The transaction does not involve any cash outflow and represents a reclassification of existing financial exposure into equity investment. The operational environment during the quarter was also impacted by geopolitical development and higher input cost and logistic cost. Prices of certain raw materials increased by 25% to 50%, translating into estimated average impact of around 10% on selling prices. In addition, the freight cost on imported raw materials increased nearly fivefold. These external industry wide pressures as we continue to focus on cost discipline, operational efficiencies and other mitigation measures to manage the impact.

9:47 We have also strengthened domestic market presence in India through expanded marketing team and commencement of domestic dispatches from November 2026, supporting customer diversification and reducing dependence on export market. I will now take through you I will not take you through the financial performance. In Q2 twenty seven, revenue from operations stood at INR 60 crores, registering a year on year growth of 10.7%, although it was lower than 8.7% substantially subsequently. EBITDA stood at INR 1.3 crores compared with an EBITDA loss of INR 3.6 crores in the corresponding quarter year.

10:34 The EBITDA margin was 2.17 compared with a negative margin of INR 6.65 in Q2 'twenty six and twelve point six nine percent in Q1 'twenty seven. The substantial the subsequent modernization reflects the operating and cost pressure during the quarter. The profit and loss profit after tax stood at a loss of INR 5.4 crores compared with a loss of INR 4.6 crores in Q2 and a near breakthrough performance in the previous quarter. For the first half of 'twenty seven, revenue from operations stood at INR 125 crores, marginally lower by 2.6 on a year on year basis. EBITDA, however, more than doubled to INR percent INR 9.6 crores from INR 4.4 crores in H1 and EBITDA margin improving by four twenty four basis points to 7.66% from 3.42.

11:36 This reflects an improvement in the underlying operational performance. At the same time, the other income declined to INR 1.4 crores from INR 9.4 crores, while finance costs were lower at INR 7.1 crores compared to INR 7.3 crores. Consequently, the loss before tax stood at INR 4.9 crores against INR 2.6 crores in the corresponding half, and the loss after tax was INR 5.3 crores compared with INR 5.1 crores in H1 'twenty six. The reduction in other income was largely attributable to lower unrealized foreign exchange income. Accordingly, the movement is reported reported profitability should be viewed alongside the improvement in EBITDA and significant reduction in other income during the period.

12:28 Looking ahead, the near term operating environment is expected to remain challenging, particularly given the uncertainty around The U. S. Trade measures regional geopolitical situations related to inflated input and freight cost. Our priorities remain focused on strengthening our engineered quartz business, expanding our presence across geographies, building the domestic market, increasing the share of differentiated and value added products and maintaining disciplined cost management. We will continue to evaluate the operational and financial implications of evolving trade conditions and take appropriate steps to protect customer relations and long term competitiveness of the business.

13:15 We remain committed to improving operational performance, strengthening the business fundamentals and creating sustainable value for our stakeholders. With that, I would like to open the floor for question and answers. The first question comes from the line of Shyam Naik, an individual investor. I hope I'm audible. Yes.

14:02 All right. So my first question was your Q2 EBITDA margin was 2.2% against 12.7% in the previous quarter. So my question was what really caused the sharp drop? And is it likely to happen again in the third quarter? So there was a lot of spillover of inventories, which was there in the Q1, which was prior to the pre bought situation. And this was one of the reasons that the EBITDA margin was higher in the Q1. And the decrease in the EBITDA margin was principally because of the increased cost, which I have explained over my speech as well. And if we are able to improve the efficiencies and manage the cost, it will get back to normal. But if the situation remains to the present standard, it is difficult to say that whether it will get back to 12% or not.

15:04 Okay, Understood. Also another question that I had was, so your raw material and freight costs have risen sharply this quarter. So how much have you passed on to the customers? And is it expected to ease any moment now? See, we have overall, if you see the pricing, we have not been able to pass on much of the cost to the customer. Most of the cost at this point of time is already is being absorbed by the company. We have been able to pass on certain part of the cost in terms of FOB. But other than that, we have not really increased any selling prices. I mean the principal reason is because of the industry disruptions. There was a as I mentioned, there was a Section two zero one tariff, which was imposed in on August 15, and this was another reason why we have not been able to pass on any additional cost to the customers as of now.

15:54 Right, sir. But it is still adjusting to the new price parameters. And I hope once this adjustment is done, at that point of time, if there is a still if there is an increase on the raw material side and these global uncertainties continue, at that point of time, we should be able to work on the increased cost for the customers. Thank you so much for that. I'm done with my questions. Thank you. Next question comes from the line of Jay Dharival, an individual investor. Please go ahead. Good evening. So my question is how much is the price hike versus the product mix and currency? And can you raise the price again?

16:41 On the speech which I mentioned, as we mentioned that on the selling price, there is a mean, there is a cost increase of nearly 10%, which we have highlighted in the speech. So I mean, it is very difficult to give you an exact answer when this price hike can happen. It all depends on the geopolitical situation and the market acceptability. Based on that, we should be able to enhance pricing. But if the geopolitical thing stabilizes, then I believe the cost should go back to the regular levels in the span of Okay, one or two sir. So my next question is H1 volume is only about onethree of annual capacity.

17:27 What utilization do you need to reach the breakeven point? Can you please explain? Sir, we are already at cash breakeven. We are not making any cash losses in H1. And so if we are seeing the utilization level is already highlighted in this page. So once we once the geopolitical situation stabilizes and we are able to utilize our capacities in a better manner, we should we see the profitability increasing dramatically from here. Thank you. Next question comes from the line of Kavya Mistry, an individual investor. Please go ahead.

18:13 Yes. So I have a question. So basically, the UAE loss rose to about INR 57,000,000 from INR 31,000,000 in quarter one, even with flat revenue. So what are the factors behind this? And when can we expect the UAE business to achieve breakeven? So the UAE business is not making any cash losses. It is still in spite of all the regional challenges which we have and the low utilization, we are making a cash profit in the UAE business. Right. Does this answer your question? Yes, yes. Yes, that will do. So also, have one more question. So if we leave out the other income, the loss before our tax narrowed compared to the last year.

19:09 So what drove this exactly? And till when will this last? So if we compare the other income, there was a dramatic decrease in the other income from last year. And there was a marginal increase in the losses. So overall, we have really worked on operational efficiencies. We have tried to curtail a lot of internal cost, improve production efficiencies, remove all the additional costs which were there in the system and try to work towards efficiencies to reduce the margin to improve the margins. Right. Got it. Thank you. Also, we have changed a little bit of the product mix, which has helped us improve the better sale realization.

20:00 All right. That's great. That's great. Thank you. Next question comes from the line of Mehdi with Saphyr Capital. Please go ahead. Hello, Manav. Yes, please. Yes. So you did mention that we're facing a lot of issues due to cost increase and also the freight cost going up 5x. How is the situation right now in 3Q or November and October being? Is the prices been going up? Are we able to have conversations with our clients on price rise coming in 3Q as well? Just some clarity on how are we going to sort of plan out this issue that we are facing on the raw material side? See, on the raw material side, basically, strategically, we started trying to source a lot of material domestically to keep the cost I mean, at least keeping the freight cost curtailed.

20:59 And this was a strategy which we have been using specifically for The UAE facility. But overall, because of the petroleum being a very important product and a major component of cost for us because the major contribution of the cost is coming from the resin. And there is a I mean, as everybody is aware, there is a the resin pricing is over $110 So this has led to severe cost pressure I mean, cost increase in our production cost. So as of today, we have not been able to pass on any major increase to the customers. However, as I mentioned that we are working on new geography, which is India. We are planning to launch our brand through the dealer network during this quarter.

21:47 We believe with improved capacity utilizations and new geographies, we should be able to improve the overall situation. So when do you expect us to kind of reach the top line or revenue run rate of INR 70 crores, INR 80 crores quarterly, which will then help us kind of Hello? Figure out cost What is the revenue figure you mentioned the quarter? INR 70 crores to 80 crores per quarter. If we sort of hit that run rate, that can help us with kind of operating leverage and then that's going to our EBITDA. Yes. At this point of time, in the last in H1, in the last six months, we've had multiple disruptions of raw materials, which has led to breakdowns in production.

22:42 So we hope that if the geopolitical situation stabilizes and there is a little bit more certainties looking ahead, we should we think it is possible to achieve this, this quarter as well. But it all depends on the geopolitical situation, which is completely unpredictable at this point of time. But I mean, if we talk about more realistic terms, then let's put it as Q4. Next question comes from the line of Rahul Abilivada, an individual master of Discover. Hello. Am I audible?

23:29 Yes, please. Yes. So I have two questions. How important is Markowitz in your volumes today? And how much better are its prices and margin than your regular products? The average selling price of Markowitz is from a regular product category, it is the selling prices is up by about 20% to 30%. So overall, as a product mix. And I mean, the capacity utilization on that product line is also similar to the overall capacity utilization. And of course, it is a very important product for our product line because it is a as it's a patented product, it is not available with everybody. So the competition levels on that particular product segment is not the same as some of the other product lines.

24:24 Do you expect the volumes to grow up further? Yes, we do expect the volumes to go up further. At this point of time, because of the geopolitical issues, we are not able to enhance the volumes because of shortages of raw materials and other things. Understood. Second question is on the profit. So India profit before the tax that has sharply from Q1 on a lower revenue. Just wanted to understand why did this happen? And what will domestic sales add in H2? So the domestic product mix which we are launching in India, say, about 70% of the products are being produced from the India factory.

25:09 And there is a 30%, 35% product mix, which is coming from UAE. So basically, once the domestic starts, it will improve the overall capacity utilization in India, which will reduce the overhead costs and it will increase the overall revenues. So definitely, it will improve the financial results for India. Understood. Yes, that's it from my side. Thank you. Thank you. Next question comes from the line of Roshani Mehta, an individual investor. Please go ahead. Hello. So my first question is, so I can see that The U. S. Revenue was flat and the segment reached breakeven.

25:55 So are tariffs on Chinese costs turning into real orders for us? What is your question? I didn't get it's not very audible. Am I audible? Yes, yes, please. Yes. So like The U. S. Revenue was flat and segment reached breakeven. So are tariffs on Chinese courts turning real orders for us? Chinese courts tariffs have been implemented like it's almost like five to six years. So there is no impact from Chinese courts to our revenue. And whatever tariffs have been imposed on the Section two zero one is all being paid by the customers. We are not paying any part of the tariffs from Section two zero one or three zero one rather. Okay. Okay. Okay.

26:41 So another question is that after converting INR 110 crore of loans into FZD equity, so when will the approvals come through and is there any loans still left to convert? Majority of the loan is already converted to equity. And the process time for conversion of the loan will be approximately two to three months. But it is already since the approval is already done, it is already I mean, it's with immediate effect. The financial effect will be immediate. Okay, okay. That's it from my side. Thank you. Thank you. Next question comes from the line of Aarav Jain with An Individual Investor. Please go ahead. Hello, am I audible?

27:28 Yes, please. Thank you so much for the opportunity. I just had few questions. So our receivables rose about INR17 crores since March. So I just wanted to know what was the reason behind this? And when can we expect collections to get back to normal? So the reason why the receivables rose by INR 17 crores is because of the geopolitical situation, we had disruption in the month of March and May. So literally, in March and May, there was the dispatches was really not there. And post late May, we started the dispatches from a UAE facility. And usually, the turnaround time for these receivables is anywhere between ninety to one hundred fifty days. So probably, you will see the receivables get back to regular levels towards the end of Q3.

28:26 Okay, okay. Understood. My second question is how much of the H1 operating cash flow came from higher payables? And what is the debt reduction plan for H2? You're asking how much of the can you repeat your question, please? Sorry. Yes. I just wanted to know how much of the H1 operating cash flow came from higher payables? And what will be your debt reduction plan for H2? I believe about 70%, 75% H1 revenue came from higher payables. Okay. I mean, is an approximate number. You don't have the exact number with me, but it's approximate number based on assumption.

29:13 Okay. Okay. Got it. Got it. Thank you so much. This is from my side. Thank you, and all the best for the future. Thank you, sir. Thank you. The next question comes from the line of Rahul Sankanya, an individual investor. Please go ahead. Yes. Thanks for the opportunity. My first question is regarding the ForEx gain. So the ForEx gain has fallen roughly in the last year. So could there be a future reversal? And like how much are you protecting yourself against the currency moves? So the previous gain, which happened during the last year was because of the sudden increase of sudden depreciation of the Indian rupee from 90 level to 96 level.

30:07 So I mean, at this point of time, it looks that the dollar is dollar versus INR is playing somewhere around that same region, same value. And regarding whatever packing credits that the company takes, we take it in foreign exchange. So we hedge the future orders against the value. So that's good enough. Could be like you had paid out tax in H1 despite a loss. Think about the tax line, like are there any recovering or different tax assets or something like that in the balance sheet or is there anything regarding the same?

30:56 No. This the taxes which we paid on the H1 is because of the other income. It was I mean, it is basically the other income accumulation. So overall, on the stand alone basis, there was a profit. So based on that, we had to pay the tax. Okay, okay. Thank you so much, That's it from my side and all the best for your future plans and endeavors. Thank you. Thank you. Next question comes from the line of Sanya Kalpinsha with an individual. Mr. Please go ahead. Hello. Yes, please. How much is the sustainable revenue growth and EBITDA margin comfortable for the year '27?

31:52 We are already at a cash breakeven point. So once there is a dramatic increase in the revenue and overall the utilization levels improve, once there is a stability with the geopolitical situation, the EBITDA margin will improve dramatically from here. Okay. Thank you. I have no more questions. Thank you. Thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I now hand the conference over to the management for closing comments. Thank you all for participating in the earnings call. I hope we were able to answer your questions satisfactorily and at the same time offer insights into our business. If you have any further questions, we would like you to know more about the company, please reach out to our Investor Relations Manager at Valoram Advisors.

32:52 Thanking you. Thank you. On behalf of Global Surfaces Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.