Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Caesarstone Second Quarter 2023 Conference Call. All participants will be listen-only mode. [Operator Instructions]. After today’s presentation there will be an opportunity to ask a questions. [Operator Instruction] This event is being recorded.

to conference like to now would turn over the Mr. I Investor Relations. Cray, Brad Please go sir. ahead,

Brad Cray

and and operator, line. Yosef Executive Financial joined you, morning I by Caesarstone's Officer; Officer. Chief Caesarstone's Thank Shiran, good am the to Trost, Chief Nahum everyone on

in the responses various Certain or and actual company's constitute current today's questions such that results call caution materially. events We expectations statements. you conference may statements may and statements to forward-looking reflect differ only that

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

In constant including addition, call, adjusted currency. will profit per company measures, adjusted to income, gross make income net reference on this net share, financial and certain EBITDA non-GAAP adjusted the adjusted

of Investor directly measures which be website. reconciliation quarter these can measures company's company's most release, XXXX in earnings GAAP the Relations the found on to comparable the is posted second non-GAAP The

call now Thank Yosef. would you. ahead. And Please I turn like over go to the to

Yosef Shiran

Thank business open us our to results regarding we you, second financial everyone, for for call will discuss our will and joining day, our quarter. I and cover Brad. additional discuss whom before then details you, questions. the activity thank Good

areas performance, were Caesarstone’. our our focus cash flow which to net of second produce and cash a for quarter at Looking we significant remain increased of pleased straight strong operating position, both

with a resulted conditions offset working are to and business have landscape, hard and We goal competitive demands. in which to growth restructure headwinds profitable global the from reignite ongoing lower challenging economic the

aimed address recent collections reengineering mentioned previously blends products devoted expected as During varying Australian behind calls. as to investments regulations materials and alternative we new the quarter, of using existing significant operational on well

significantly final the collections exciting a be to months. investing XXXX, costly second the of products, in our only of to in full the of projects innovative year. R&D in Australian array are launched of we create Separately, our are few an portfolio in course efforts next in these core reengineer completing half We stage

which sales in our in pricing Additionally, with we investing U.S. marketing are believe in focused performance combined in that particularly revenue further and drive we strategy improved will future periods, the on improvements

plan many evident of steps We are our quarters. as in to restructuring coming part swiftly important the are strategic cost efforts taking with of implementation the comprehensive will improve believe which results, and increasingly become our moving reduction we our

for The closure manufacturing of marked infrastructure. improved and Ceasarstone a Sdot-Yam production our streamline step groundwork laying pivotal facility for manufacturing within the efficiencies

structure, of organizational to also our cost meet of to We saving of several management several the regards to are mix production shift and better network Far This actions, within other to enacted our In demand. East. third-party our increasing manufacturers strategic in senior further changes working production an the have align consolidation expected simultaneously to reduce costs positions. we strategic is including

We further cost East. XXXX. will of and smaller expected at structure are book also to transition Far actions plant network These the samples the work our our manufacturers in improve that was third-party in being commencing our to done

position including financial cash profitability expect and significantly our are Looking to our gradually. improve the ahead, QX and track on QX we flow, improve to we in

solid innovative grateful in our team executing we shareholders growth create line as deliver our results company all move are our are to our hard and We strive strategy more who work forward. for we the members a for to as agile, top of and profitable

I through Nahum financial will call now and performance. details walk over the you, Thank of the our to turn to

Nahum Trost

morning, good everyone. and you, Thank Yosef,

a decrease of XX.X% was between basis, XX.X%. due down last quarter year, of second in results. revenue the second On at constant million $XXX.X was second Looking million Global in the revenue quarter compared second $XXX.X mainly a currency our to quarter of quarter and all markets U.S. previously partially the in against volume by constant revenues revenues lower impact generated U.S. of outside X.X% currency benefit the dollar stronger difference the dollar our the pricing revenue U.S. The of to offset enacted reflects actions.

One XXXX will that during impact is we the year I reflect factors. market of second prior strong of realized comparisons increases of activity. two a note the challenging our which quarter price a revenues number period in

at of activity The impact conditions other results. and is products. the of in America that and destocking in residential The in our second more factor slowed pressure the market Market third-party with the impacted more renovation is slowdown in Therefore, by sales were quarter the of residential activity and revenues distributors. landscape half now severe which North the down pronounced commencing of XXXX. was our second softer many channels global competitive remodeling result

to sales dynamics large through sales quarter. In Australia as the pressure. basis, U.S., X.X% our mainly tied down markets, particularly U.S. were basis, a similar our market box off sales Higher the a customers with end better better fared business third-party softer performance the sales positive were down to XX.X% on constant with in Canada markets, currency currency XX.X% and residential were relatively for owing experiencing roughly commercial severe constant big about distributors. less on In other

second quarter, factors, as which we are of Looking at margin I gross P&L quarter related discuss. temporary will the our where I saw several largely a with drop-off factors second significant performance. in many start will to

to the and XXXX. for gross rose quarter. in XX.X% the was quarter year in margin X.X% XX.X% compared of X.X% margin prior gross the first Our quarter Adjusted

we gross our for were point out revenues estimate impact lower nontypical a certainly we other factoring pain was number of quarter, margin our the transitory margin XX%. a in when believe and around the While during quarter,

in several As factors. reflects gross difference the margin year-over-year reported,

plant in closing was at decline. for roughly margin our productivity us, cost basis The Lower for points is absorption, the activity those accounting Sdot-Yam XXX the experienced fixed also including higher a the mentioned costs. first lower related unit of factor We to plant manufacturing factor. by resulting

under our significant a and of pressure collections, in consumed Yosef addition, also which resources coming heavily Israel. invested reengineering amount as resulted in In in margins and mentioned, we existing throughput

aimed develop the regulation manufacturing to Sdot-Yam unit produced tirelessly and refine previously attain facility evolving Australian work in those as shift. mix as to to this this meet saw teams to costs due test, throughput higher engineer our We reduced and those capability well manufacture products Israel. Our Bar-Lev plant at in

were two Second inventories. We fronts. factor impacted concerning on is

First, pricing and XX% the partially portion write-down margin quarter. of factors from the the the units an a our hand difference. from inventory higher the combined large lower sold These the benefit the on during of factors inventory with two actions offset previously enacted costs. gross during cost These represented of shipping by quarter beginning were were at year,

these down challenges the and addressable margin gross XXXX additional margin are half efforts as of our confident cost gain should during our from higher improve inventory. and are of efficiencies of wind We many the restructuring second that we

to also We from lower expect expenses to raw and material sea benefit freight year. last compared

$XX.X year the Operating $XX.X second the million, compared an to and expenses Dorian of million prior in plant expense quarter were impairment included related quarter restructuring million closure. to and the in $XX.X

the loss adjusted quarter. loss second quarter. income. the and The were of XX.X% year closure, the settlements the compared reflects $XX.X Excluding year to and EBITDA XX.X% in quarter planned compared EBITDA the to expenses adjusted prior of in was prior the to difference in related Adjusted a $XX.X contingencies legal million revenue million primarily lower of operating expenses operating

short-term cash, a sheet bank quarter compared XX, cash We institutions XXXX, our million $XX.X generated securities and during cash Caesarstone equivalents balance XXXX. of the sheet. to of inventory our to million. debt of efforts. to million of June reduction and short-term deposits as included from second quarter financial of mainly used $X.X driven operations total This amount marketable balance Turning flow $X.X the by cash positive of $XX.X the million in with in

ended Israeli quarter our credit with our lines full availability lines credit. During and paid the the quarter, banks we of down of from on

XX, $XX.X Our net $XX of as December position million XXXX. million as of to as compared XXXX, XX, XX, And XXXX. of $XX.X was million cash March June

turning term on Before to with was write-down plant noncancelable the the and the of totaled related has the plant agreement long-term closure in a ending majority in facility overall. The during May to the costs closed related outlook, with closure million as $XX.X XXXX. our a associated gone to The that to planned quarter. lease Sdot-Yam

the cash band million, operations which of to million. we narrower within expect $X to by costs to estimate cost million also a cash $X related of come $X.X to We We mid-XXXX. now incurred total incur

process ability noncancelable the accepting is lease the as million part facility result of The also of and bids sodium the I've in based we our the estimates savings, those part call, onetime expect closure, die-down sublet to we of earlier. are to on mentioned portions sublet lease agreement of to on in of property. our that $XX to realize mentioned the $XX the a in Above approximately As previous savings of beyond million. annualized

I We leases operations inventory to year outlook of based for an associated represent that time. beyond will million is $XX end above to expect cost by other efforts. year capital the XXXX million increasingly cash reductions offset with generate that our cost would the reiterating our and remaining working the full subleases will mention lease position. with flow $XX and to regards cash optimization received annualized savings. cash along In outlook, anticipated cash are This and we costs sub savings again our be of improved to positive on from the improvements, from executing with over net

show first in the of and quarter second improvement third of Additionally, better year. EBITDA half should compared the up fourth Adjusted in adjusted we the the quarter step to year-end, second significant sequentially EBITDA half anticipate the EBITDA to than adjusted improvements. in resulting through quarter additional XXXX

base adjusted sequential factors. in pressured through revenues margin half remain on several year-end, the second our are we and significant EBITDA adjusted to While assumption likely for EBITDA improvement

investments us. have cost the and largely made reengineer already of our have that inventory, through products we are higher behind most operational develop to sold We

that of closure in be give quarter of May asset full portion facility The our will utilization impact quarter last over products the more few evident at of and to remaining our Sdot-Yam start raw Far and benefiting lower XXXX. the in manufacturers third we Increasing East. positive third-party the us shipping higher have assets. of produced will the in months, a expected finally, will from quarter And have eased material on fourth in prices costs a

for we on are are taking our that, questions. value actions Caesarstone, prioritizing our will more stronger now to that for a drive shareholders. produce we we summary, open call company focus ready as With make the that regional long-term cash flow look to In

Operator

question-and-answer Instructions] Garner, question first will Company. Our The Benchmark Reuben comes now We from the begin [Operator session.

ReubenGarner

much of on and $XX gross gross million. help $X with bridge is there's the quantify profit mean went What revenue inefficiencies kind you how we kind the else several going that's causing you about is some -- write-down? that's from million of pricing XX-point sequentially down out. How closing the QX, else called you Nahum, anything what's can decline the start, I pieces to what, Can that pieces margin, dynamic? and To that about, much causing from competitive QX but plant Anything me on saw. that's gave fell with the you

NahumTrost

Yes.

that QX So several quarter. this reflected during items we temporary recorded

of the is You inventory one said them it items. accurately,

second points. a And we in the of our during points, large of negative on So reflected had recorded in an slow-moving QX almost That a inventory addition, items. XXX as basis investment reengineering also, quarter, basis impact impact of significant mentioned portfolio. we our a almost portion provision XXX

in the around and the which our expenses, increased XXX factors, utilization in plants, basis the reduced of this those additional resulted points. impact -- negative overhead And

of consideration, into So decline, factors QX. XX.X% items if X gross generated you those you that XX% in which we have is main margin the take the main around from factors,

ReubenGarner

So year. the in recur back the of those should items not half

you your your if any that if of -- or efficiencies in mean does from So or gross that kind north mid-XXs actual volume is is XX. volume profit would XX%. that take there And the is growth range in baseline revenue of for improvements revenue above

NahumTrost

part, in last project especially July reflect QX in reengineer investments, August, some right still of and you're portion the products. in will -- our QX in

on an So it results. will be impact -- still it's still QX -- be it will

beginning of our be and cost out higher again is product during to addition QX. that, the washed to expected of In completed

into more I QX like first the consideration, taking quarter. X those think So much should . look factors our

ReubenGarner

look closer to should like quarter QX XX%. the more first so

NahumTrost

as that of we half Yes. like expenses This raw will more material we second evident positive the start we progressing benefit There become are paying in freight . are a in indicators reduction prices. from XXXX. are will sea the lower

ReubenGarner

see -- of some line Is QX, levels the that of but savings G&A come these the the the you offset QX a sequentially -- then restructuring it's some we'll that still number any that like kind down it, to highest It however that? or G&A down is of frame And was it's looks headwinds? there top a come near on are touch that been. to are from from kind

NahumTrost

restructuring We to related is do closure. our expect the only not Sdot-Yam

much wider that restructuring Our more is several factors. planned includes

to for . in relates we expect also them yes, second half. consolidation example, G&A of G&A, do come -- management slightly Some to the positions of so several down the in

YosefShiran

would about just collection explain This -- associated I bit the like Australian only. Reuben, a reengineering in all this is Australia. to the this regulations related with to because maybe little work is

is we decision. don't anticipating the will So collection. the regulation know to we combination anticipated to raw expensive the very the product. materials yet in and process all a change change and in the And a the We of this Australia, had Australian transform of be Australian what

But step we Australia. be estimation. a is according this in a So we and position way, but for costs, to best future our incur development better doing it that something decided have in take in the are anyway, to

this is to one that is important thing understand. So

The second which the is this the move. in to is aspects. part may connected is one plan, consider And restructuring strategic multidimensional also

that only, are it's course, the because So other partners doing that shift course, not and the the sales marketing Far the savings improvements but we strategic of other to of East. Nahum mainly stuff in Sdot-Yam, closure mentioned, and of of

So a this clarifications. -- few just is

Operator

Mr. Our Elliott, comes from Stanley next question Stifel.

StanleyElliott

half. improved the the kind -- year starting talked about where of as given to of frame in kind kind it just are profitability the of kind You point help of out first we progresses.

year last second Do the half. X% You will it, that that. did be below a margin or let's call of that you above think in about you sort roughly maybe,

NahumTrost

half, I gross balance the more from as quarter prices, several margin reflects become we during should And over to will quarter stronger lower in mentioned first indicative significant a that second should I starting number a gradual are the the gross inventory shipping improvement you our -- currently as be, and plan, the sheet, see in at the balance margin we indicative in think restructuring as the we we factors, baked QX during expect more improvement expect items. look and will several progress we costs half, there and second as as margin will more raw temporary our more earlier, a in well. that a but QX, -- are lower as our this material look gradual

StanleyElliott

kind flattish So of it return sounds on like 'XX for of have other really 'XX sort with the probably underway you initiatives negative of or of of focus more the to kind EBITDA kind then and that to of profitability? some restructuring and some

YosefShiran

the We are of already have are very is of the do. looking, to restructuring we big see a more that lot in and it’s a from we and middle quarter-to-quarter are benefits we done, starting plan to there what because

internal we and So a expect refine QX, to we projection. as have gradual between the QX improvement, said, to will we

as long mind very high that Nahum that because we time with prices during year high course, gradual improvement suffering shipping definitely of during a we a raw of material period bear on and And produced the of said, of for were but external are the inventories last level QX, the projection cost see prices. were call a in

this almost out. is So washed

we'll definitely see improvement So QX. an in

In the addition doing. cost benefit to improvements and that will big cutting that to other from we start we are the like

StanleyElliott

targets kind to basis of there year-over-year the of flow the through half way should all inventory? size on any inventory down, think second in a 'XX. either a with kind basis ballpark from or work on a about in reduction Or dollar we is balance And what of cash the

NahumTrost

Yes.

of And of we continue nicely of And is days down progresses positive the as XXX to So expect as reduce in the we flow net position plan. the focus XXX for outlook, of the current cash operating, this the restructuring mentioned point to on continue operating and we came starting with inventory, expect a inventory from and as XXX the our almost which level half as only generate also during our days. from and first basis to year around not cash still to said, the the you continue days, days year. flow from cash lower the and we

lower on on but control, also of better So not only back raw cost. -- on the our only inventory, cost material shipping that, prices not tighter but

expect also generate we positive So flow cash in to a to continue second half. the

Operator

This concludes conference I our for Mr. the back closing Yosef session. question-and-answer would to like over turn remarks. to Shiran any

Yosef Shiran

on this attention to So progress forward look you our updating and next Goodbye. morning, quarter. for thank you your we

Operator

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

you. You may disconnect. Thank now

Caesarstone (CSTE) 9 Aug 232023 Q2 Earnings call transcript