- Earnings call transcript Q3 2022

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Operator

Hello, and welcome to the Caesarstone Ltd.

Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I now would like to turn the call over to Brad Cray, Investor Relations. Mr. ahead. go please Cray,

Brad Cray

conference and that Dagim, to differ events and Caesarstone's Financial company's statements. and in Caesarstone's operator, questions expectations to joined constitute current statements may Nahum I results reflect by or materially. Chief forward-looking today's statements Certain Yuval Chief caution Officer. actual and good you, may responses everyone. various you morning We am Trost, call such Thank that Executive the Officer; only

to refer most please information, risk on factors XX-F company's more For filings the in the SEC. recent Form contained report annual with and subsequent the

directly In third measures and Please addition, turn net on this Thank company's the currency. like would these found of quarter is go constant in company's now XXXX adjusted gross to you. income measures, Investor financial reference company will comparable the adjusted posted on can The certain most to Yuval. reconciliation non-GAAP which to website. income, measures call call, adjusted non-GAAP per over EBITDA Relations I the net release, the adjusted GAAP ahead. be including And the share, make earnings to profit,

Yuval Dagim

and everyone. morning, Thank Brad, you, good

platform and presence substantially XXXX North growth acquired expanding our is of improving the growth our our further revenue. We premium Granite business XXXX currency record leading strategy Omicron quarter from the the our growth throughout our in a consecutive CS revenue innovative a which customer on of results digital our Our America, third of benefited to of market, quarter quarter In and in to constant quarter from basis, into experience business. progress seventh U.S., multi-material against Caesarstone results Connect produced reflect our transform the another integration company. engagement organic multipronged leading across successful largest part countertop fourth of Tile double-digit and

mainly higher due environment the Additionally, successful than challenging offset initiatives volume more as is renovation interest inflation and to the have implementation to continued rates construction softening U.S. to pressure pricing in activity of and macroeconomic helping new

conditions, raw recently that so measures take already the In pressured to third taken have quarter a of announced which to plan align and prices the to response continue reduce new shipping macroeconomic our have production increases these with margins, in As reflected announced most is in we to inventory result increase in in costs. our material we our price levels to conditions actions price XXXX, in far partly market and have and three July, to increases results. our

foreign that interest effective, to we an have environment top as carefully Additionally, exchange bottom the remains headwind demand strategy Overall, in the by inflation our impacted we line are reflected would U.S. related rates. outside and and the increasing and U.S. believe rate to the monitoring strengthening while become higher been dollar, note global fluctuations, have markets third less our of primarily our our results. quarter execution

XXXX strong that exchange outlook respective reflect all regions unfavorable to compared Today, we year revised our local continue U.S. year-end. outside are negatively have currencies. results predominantly dollar the foreign in by impacted Our expected to through impacts full were the to these

of also lesser impact delays. a the revised costs to and higher Our shipping shipping in, outlook extent, factors

as at this to chain like pull years our crisis our levers mix value. the we seen to right the Acceleration Plan to resources have the quartz the diversify forward, and global business create supply optimize levels have Global are inflationary our pressures through environment, to significant look create we still we to taken initiatives through us several additional strategic necessary. our the Growth growth talent in in to we in long-term to our execute pandemic, multi-material would through this have years. industry inventory As and we well most beyond to have allowed With Furthermore, mind, I complex reiterate productivity with over that place believe the and plants efficiencies we has push actions execute ample and positioned past

introduced our U.K., during global Global Caesarstone-branded Growth now porcelain to We during initiatives collection North our of the the the execute more launch expected call turn Israel that, details have complex to and times. to and Australian team's American under efforts I and the to in region I'm proud outlook. XXXX. the in entire these markets, on Acceleration will discuss financial Plan results Nahum With our

Nahum Trost

the up the up continued were U.S., headwinds In higher sales In growth APAC year-over-year organic sell-in were to constant on discussing third of morning, currency last I of due headwind the grew strong currency revenues basis strong primarily higher footprint, to to start in currency the IKEA global in X.X% dollar XX.X% region, driven compared and U.S. up our all of despite our of revenue the last from a everyone. constant up channels, same performance constant million to the by sales for year. prices. against XX.X% generated continue Global basis, Australia, particularly results. period $XXX.X third outside Thank will to driven currency in quarter difference our of the a record discussed a were basis, constant region, experience reflects constant compared year, solid quarter sales On with and our the In year-over-year XX.X%. constant was U.S. strong currency U.S. X.X% from revenues revenues growth were issues. Americas, XX.X%, America. the markets to sales on pricing third supply $XXX.X U.S. chain dollar you, across Canada. good previously our XX.X%, in accounts revenues currency quarter due growth. Canada, third higher saw XX.X% in by from and majority by which the million between by mainly Yuval, North generated sales year-over-year in all the growth In quarter a the The

region growth sales experienced XX.X%, EMEA indirect performance strong of in constant EMEA reflecting our primarily currency business. Our

customer Our constant third this than timing was the October by from partially In growth timing on the place region currency quarter, resulting the the orders. increased Israel, of Jewish basis, given in XX.X% of year. sales took holidays in in a this higher that usual

Looking at P&L performance. quarter our third

gross material which with The logistics, margin the foreign predominantly Our offset rate were actions. quarter. unfavorable prior gross XX.X% was difference XX% margin quarter. compared difference XX.X% by the attributable remainder partially to gross in year to in exchange reflected costs and raw shipping pricing of margin currency fluctuations, the our was delays for higher Adjusted the year-over-year

exchange additional and shipping the expect raw previously impact In three to material actions, to upon our response, through persist. price this the expect foreign rates, Looking mitigate higher cost of enacted unfavorable XXXX building and pricing partially we efficiencies impact costs, ahead, we increases.

was our most Our third results. quarter reflected and went in recent July XXXX price in partially into effect increase

mentioned, Yuval to production already revenue actions to to XX.X% have to As reduce year quarter. costs. in to take in were we align XX.X% market expenses levels and Operating and measures the our plan inventory conditions continue taken the prior compared to new of

largely margin the the representing revenue expenses reflects and quarter. or contingencies, settlements negative in decline margin EBITDA third margin $XX.X the legal in which year year XX% in was operating by Excluding were a of to FX. gross impacted The prior compared a compared quarter of million XX.X% decline prior XX.X% the of in $XX.X was X.X%, the primarily Adjusted to loss million, quarter. year-over-year

of million. initiatives. marketable balance to short- securities as resources bank our short-term balance Turning strategic balance total and to provide cash and long-term ample with sheet included believe our on sheet. We cash, XX, XXXX, $XX.X Caesarstone sheet debt financial with $XX.X to us of deposits execute September continues of and institutions to an our equivalents million,

to outlook. our Moving

$XXX full The a be are million predominantly range revenue in currency revising fluctuations. we for range year mentioned, to exchange compared foreign the impact guidance $XXX range to million million to Yuval $XXX million. prior the of is to rate to XXXX revised due As of $XXX revenue of

conditions We softening the we volume for discussed our to today. year expectations have the due moderated also economic that

for of be margin XX.X% XXXX. sales X% be to Additionally, we adjusted year to EBITDA approximately predominantly as expectation The and also shipping- X.X% let to to closing a turn similar XXXX. compares the to EBITDA the for in prior me the now due expect change lesser back full higher our This to to foreign for unfavorable comments. With exchange due in rates, extent, currency expected call is Yuval to a performance to and that, adjusted logistic-related costs. percentage

Yuval Dagim

Global grateful volatile our across closing, remain disciplined of In significant I'm for all global and contributions Plan. by to team through members excellence Nahum. of while Growth execution you, dedication Thank their working appreciate the Acceleration the encouraged globe our ongoing a landscape. we the

objectives. increases This our necessary. operating evaluating careful and our the that confident cost right to to actions deliver our through taking where further teams margins We are are implementation on the areas leadership and of price levers management improve includes

As although are predict we in environment have complex to place execute is of experiencing, macroeconomic that to we I'm right our move the against XXXX, pillars the confident the magnitude into plan and hard it we strategic effectively. duration

I the on on and open call coming multi-material go-to-market we are our are questions. the you leveraging ready product progress our And to look Thank brand, that in focusing additional offerings world-renowned the now control initiatives. create to factors are We innovative shareholder's quarters. again by you. our value forward in updating to for

Operator

comes question from Instructions] Stanley Elliott [Operator with first And Stifel. the

Stanley Elliott

taking are for questions. I increases? all additional kind of is, And we help guys the kind being starting you of 'XX, the in then of pricing guess, Thank of remind had all through pricing sort gist all you, contemplating? I Thank maybe guess pricing of could just expect what equal? the I And you year-to-date level should carryover Yuval. what you the you what off, is else us, of guess sort

Yuval Dagim

I'll Maybe Stanley. start. Thanks,

we those with three successful pricing our any price the all need increases through covered And we see First, increases. going note, cost are quite to and forward forward. the had costs recovery much pretty BOM if price actions further so increase were a price the monitoring going we by year, on far, shipping

Nahum Trost

price beginning increase that smaller than did and in we third year. that the the was in - And ones also the we to the price benefit first Stanley, obviously entire QX third XXXX. third and of The the did the was in increase first in we in of relatively - two from half July the expect

Stanley Elliott

strength, when pretty I margin pricing a you'll sounds the building thinking this like has year. think pricing we been how to or margin kind momentum, it to back the And like get of get curious about piece the little you back here we're of inflation kind when expansion. volatile with do understand Perfect. growth? But

of the back in little easier 'XX. certainly then obviously it the bit tougher have a year, half next and half You comps first of in gets

Yuval Dagim

gross - Stanley, growth QX, margin happening we growth exchange well. in expected without rate the continue impact to of as QX the to have be our in

the impact we strong, to think much. that haven't I dollar expected be to us that

with should So with the in taking, in increases that price future, the I coming gross to the now, that growth be actions are in margin quarters. maybe believe potential our coming near together we we

Nahum Trost

the than quarter-over-quarter, to coming decrease add other the Stanley, that rate. majority to another. are And the - less of year FX one All the fact neutralizing factors more that, other from or is

We are road taking periods. but actions margin taking actions, other the order gross in pricing actions. down different we additional in Not cost efficiencies actions, to improve only are future pricing

Stanley Elliott

aligning about of importing higher. or being product? would Perfect. to of commentary mentioned going And more transportation Are I to production. be that tie guess, your shipping all kind in you guess you costs I product more kind

Just going demand environment changes to manufacturing that now. given curious the making, you're seeing what perspective. from right you're what's happen a Or

Yuval Dagim

Indeed, Stanley.

in well. as seeing probably Canada, not our we this in the shorter we if in continuing markets we have manage do expect will mainly production any time it to year need the facility our do changes actually all We market. our Hill inventory supply that Richmond lines next around. carefully, main be and increase in that to to And in so but believe plants, the in facility Richmond order of Hill capacity are some the American North We as U.S. utilization our we

Stanley Elliott

the for time Great best of guy. luck. Thank and much you very

Operator

the And Benchmark Garner The question you. Company. from Thank with next comes Reuben

Reuben Garner

numbers Good are the some call, so technical apologies everybody. year? Thank guess the But and quarter? you full - morning, in you're saying to beginning you. you what FX questions some for predominantly, I difficulties to gross I And impact at margin like can but if had you I the margin the - repetitive. EBITDA the changed the It it? of of sounds could can put start any quantify

Nahum Trost

Yes, Reuben.

X.X%. constant is the around So U.S. between the - basis revenue, difference reporting reported dollars the and currency

going is EBITDA the to around X.X% lost in that down say in the of we Let's X% revenues gross amount margin, and margin.

Yuval Dagim

the rate the this coming is of from you exchange stipulation So differences. get most change that

Reuben Garner

that's the quarter? third what took in And place

Nahum Trost

as opposed in the yes. the U.S. the stronger quarter, the - second in U.S. when are other stronger the quarter, even that dollar generating the against third And Israeli shekel, got the to which dollar So we saw quarter, in we to dollar GBP. currencies against dollar, third all Canadian Australian getting the the and revenues, compared -

Reuben Garner

Okay. slowdown? actions the think of taking do about how this volume to And cost are what going detail about Stanley's think with taking? to follow-up you're kind can you production go But I we of more into is you're How you kind a question. out shifts? any align

Yuval Dagim

Thanks, Reuben.

We in are taking actions all fronts.

line see. to can so we current we're we be taking less that in and producing demand to going out So we more the shifts - are so

- we to costs just our right well, there in direction. exchange differences, our that the front fluctuation sure on on make but indirect on making might the for decisions coming not looking our any ready future all that sure are we be demand also any are make addition, of company is against order that challenges, to as In rate

Reuben Garner

pulling be example? growth investments an the here back in you Will as U.S., the on

Yuval Dagim

all. I Growth are we Global mean, at Plan. following our Not Acceleration

Australia early our launching first and and launched multi-material. under next the the this the Caesarstone we - launch. sorry, the with in XXXX multi-material We our and quarter are offering we Under U.S. early U.K., quarter strategy, our coming brand Canada are year, this to in Israel have porcelain

we our strategy execute Acceleration continue Plan. our - are to and continuing Growth to we Global So

looking U.S. looking on in be the in will to detail are same be footprint at as potential We we any if across the our acquisition to time. at improving we fits And see to coming do, that Caesarstone. will

Reuben Garner

a there's volume for is think we declines, some of or downside were decremental we coming for kind we from volume then would And margin you've if XX% potentially standpoint next think the that it's do time. Okay. see over price/cost to I that been business, year? so? for year a pretty mean, on one the see I how what about last behind kind last of headwinds given of me clear period

Nahum Trost

to efficiencies. it how focusing up pricing to uncertainty with to hard say in balance XXXX. still are QX. given profitability still to the and we to early things Yuval mentioned, Reuben, and XXXX, aiming regard that and other macroeconomic that we and our improve cash only improve in cost But through shape in But the now predict activities will saw September and

Reuben Garner

Okay, thank you. Good luck guys.

Nahum Trost

Thank you.

Operator

question-and-answer to session. And Yuval you. the floor like closing comments. any the Thank concludes for I now return this to would Dagim

Yuval Dagim

for on Thank morning. this very progress quarter. to attention updating you We your you look next you Thank our much. forward

Nahum Trost

Thank you.

Operator

now Thank concluded. presentation. Thank you attending has you. for conference today's The

lines. You may your now disconnect

Caesarstone (CSTE) 9 Nov 222022 Q3 Earnings call transcript