CSTE - Earnings call 4 2023 | Caesarstone Ltd.

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Operator

Greetings, and welcome to the Caesarstone Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of ICR. Thank you.

You may begin.

Brad Cray

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

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

net posted financial Relations loss, would And then the will we results call company adjusted will go reference measures which on including per addition, over company's be will non-GAAP open adjusted constant currency. The the to income profit; for this Yos call, loss call, non-GAAP reconciliation In gross Yos. quarter the Please release, of financial directly most website. you. to found today's additional measures adjusted income; our earnings comparable business I the in and ahead. to Investor discuss net, can call before now the details make the adjusted in like regarding XXXX these is fourth certain turn share; activity to On GAAP measures EBITDA cover Nahum on questions. Thank company's

Yosef Shiran

markets. thank and geopolitical and XXXX, regulatory to full year day, through regional macroeconomic, we navigate Good key challenging everyone, fourth results. were dynamics Brad. quarter you, in for joining us In you, our Thank discuss and able our to occurring

optimized $XX.X foundation left plan. totaling savings delivered our strategic production realigned enhance XXXX to we utilization grow share front that greater to plan X We resources are brand, from will Hill generating production cost accomplish from our flow efficiencies, In a have on this transitioning in and to us initiated partners. to of operating improved December, of closing of positive for with generated set actions the actions million. new to of better XXXX, solid than accordance a manufacturing executing and business our taken global us opportunities. and in efficiencies We And cash net production capital the we we which Sdot-Yam management This second facility. quarter with allowing believe compete, profitability. In as structure are cash decision We a positive have restructuring We global objective position us believe and our to we quickly more and footprint, this market an made close operations. allow meaningful announced our during consecutive capture our Richmond us our of production these strategic working our million. Overall, in restructuring get driving financial quarters, stemming implemented better cost and regard facility. significant actions, back of primary factors allowed to cash flow network $XX.X workforce,

Following we XX% sourcing partners. these strategic changes are over business now from products of to production our operations, our

expect that we further trend move XXXX. percentage as through We up to

workforce by $XX and reduced and the already spend our million XX% million the that in turn, approximately of during able result realized X approximately the another we closure $XX expect XXXX. we XXXX these top in As our to annual of In on cost were to of facilities, across on XXXX organization. CapEx, we're realize have savings reduce of savings

Hill additional agreements property. With this leases lease cash mind, on the are maintain inflows the our potential all Richmond realization in our long-term associated as a and the marketing, believe into of products profitable reignite our portion have across expansion we premium executed noncancelable our sub have that in base view an upon strategy with cost we of facility and Sdot-Yam also sales and We that for savings porcelain a brand, manufacturing growth place we clear of our to reduce R&D invest our business. potential to

would market. I to an Now Australian provide our on update like

a governments crystalline announced to territory in silica in effect Caesarstone into including known on territories. to XXXX, Caesarstone's over state quartz-based ban in well The earned joint Australia, is federal, in and use, July go manufacture most containing years. previously expected states Australian in we XXXX, products. the products Australian have and the December As region ban Australia, the decision engineered slabs X, and our the is of brand announced stone success and The tremendous supply

Australian retain conclusion, our goal to to restructure further XXXX, during We and we while have our resources will significant we believe regulations. of our will allow actions capture all with the in products, us to in with materials our of business. to new us collection position alternative XXXX, alternative the to our allow second We profitable will areas to which achieving quarter approach took have the will comply the of cash a that the market full been believe proactive stabilize we that growth, By position. Australian net supply end diverted we market. In improve

now we With and prudently be initial are restructuring are work prepared allocate details stakeholders. back primarily margin capital place right I and Thank the profitability. We other our growth, into in measured improve financial into our the global our through the to and R&D over to value drive top expansion done. our of results is to to with to all saving and While drive our strategy cost believe you, walk progress as more to our performance. there branding to turn pleased Nahum the will and against call line our we business, plan, have actions, we

Nahum Trost

good and morning, Thank you, Yos, everyone.

was rates, a quarter compared in year. North million million On quarter currency result results. in $XXX.X fourth fourth spending. by primarily and driven the global of constant market fourth XX.X%. Looking as The a decrease residential remodel in higher sales basis, at particularly were has the $XXX.X last down renovation conditions channels, impacted to interest quarter which of mainly was revenue softer Global our American

lesser XX.X% softer commercial residential through by by the market impacted customers for particularly the to sales big markets, by to sales were on have were sales quarter but X.X% impact mainly a region. our currency mid-XXXX U.S. were implementation which did as In that on to as Canada with constant in has competitive conditions. sales, fourth products. In currency were third-party Israel higher XX.X% dynamics terror, not basis, partly the distributors. similar performance business. our constant challenged sales the in addition, extent. Australia the offset given activity tied off sales our reduced mainly on quartz ruling. improved planned by Australian war market landscape experiencing end the This approximately result was basis, significantly of decision In a quarter, down the year-over-year lower sales were slower slabs fourth an of a on box our U.S., and in reflecting government's a The ban

Looking at P&L our fourth quarter performance.

transition to year to related lower margin inventory Our by by to gross quarter, non-cash XX.X% production manufacturing cost our partners. Operating the Adjusted mix, decrease in revenues, in unfavorable [ the of expenses higher quarter. and increased compared the $XXX.X The million for XX.X% partially margin fourth lower lower utilization. These were we in higher reflected production the prior gross was provisions in of slow-moving sea were benefits as fixed expenses ] absorption manufacturing product due prior footprint improved million lower offset was the third-party network year-over-year prior margin mainly driven and mainly quarter. a factors compared quarter in year of $XX.X to XX.X% year. onetime the our charge global to capacity unit freight the the the impact cost

XX.X% Excluding in legal quarter. million EBITDA in settlements, to impairment higher $X.X lower loss operating in XX.X% contingencies prior percentage prior and gross decrease compared the The was quarter. compared million were expenses the the quarter from mainly lower resulted revenue and loss restructuring and the to primarily fourth operating the reflects year The expenses, of $X.X revenues. Adjusted margin.

to fixed lower of cost was actions unfavorable third-party capacity absorption. the by the significant manufacturing of impact year XX.X% offset global the as compared capacity The ASP, This to performance margin restructuring was financial On year adjusted year year. down market by down Sales XX.X%. was lower Gross full network improved margin throughout shipping basis, highlights. in costs transition XX.X%. production for plants during Adjusted we lower and currency costs our difference were margin undertook XX% related mainly to mainly partially the benefits lower to full our to challenging due increased XX.X% we lower and partners underutilized due as at footprint. our across significant gross last conditions driven production looking of utilization our revenues unit at to XX%, within of XXXX. The were manufacturing was year. for reflects the constant sales compared mainly a portion volume, higher the footprint the Now gross business

revenue we year. Excluding the year year. legal the to impairment Operating expenses and settlements, XX.X% prior restructuring the noncash loss expenses of XX.X% during compared for in contingencies, full incurred were

full gain XXXX Our to reflecting the the lower gross $XX.X loss adjusted million of compared a and million change was margin loss. year year, year-over-year of EBITDA primarily last with $X.X operating a

balance remains solid. Turning to sheet our balance sheet. Caesarstone

and to million. December of of cash to equivalents institutions total As financial cash, $XX.X XX, bank XXXX, short-term with $X.X debt the million, deposits totaled

flow During the of fourth million. another we from generated of operations positive cash quarter, quarter $XX.X

mainly full year, inventory cash by For the reductions and from million, in $XX.X to totaled driven the quarter operations flow the year.

now closure, million of XXXX Hill XXXX XXXX, was January XX, $XX.X as compared Our compared plant regards of and to December Sdot-Yam $XX.X closure, to of during Richmond of XXXX net as savings occurred XXXX. In plant during in position which of full which quarter XX, realize million cash expect the results. to million year a December $XX XXXX. We second the occurred to

results. XXXX savings expect full compared for of We after million to million of additional total year a $XX XXXX $XX

are the initiatives savings. recognize process agreement the to of noncancelable manufacturing cash us Hill portions we lease sublet We best will inflows the of with on a profitability, for stronger accepting the leaner our significant facility, on alternative our At of planned compared much Richmond and entered outlook, footing looking our Sdot-Yam on our cost the regards top monetize still our bids on associated site, additional to focus which that in underway, allow to ago. to operations XXXX a have year as restructuring are to based we asset. In

in our are the of XXXX. Revenues environment. I the fourth demand a this turbulent stabilization with will for quarter. in are full line been signs of has We what on trending Against first seeing XXXX provide quarter in year color outlook backdrop,

both similar. So we be periods to roughly expect

more be revenues the the quarter seasonality This considers expect for we market to year. Australia, We expect outlook America, our the the perform expect quarter on second depressed We our to In half based introduce with revenues anticipate for we In air regulatory several assumptions. In lowest terror, year on the those pocket believe quarter in in historical we to revenue to due our trend. to the stronger quarters be decision the and be first cause following products. in as of for North year-over-year war the to with and move sales the begin a into full as roughly to outlook the remain comparisons but Israel, that as we adjusted are favorable seeing will line pressures to regulations we XXXX. actions, expect ease our move likely comply year temporary EBITDA revenue the materials first through we positive. restructuring alternative XXXX. Based during on we of

As bring us approximately XXXX. to of are XXXX X savings to million mentioned, $XX the the P&L in of poised closures compared plants realized

and quarter spend savings We first plant in breakeven, become the expect are to Hill from expenses on to of and the related negative of the timing as the the coming that adjusted second Richmond will half given significant year. be more for marketing expected sales, EBITDA

resources that bottom year the actions on significant the capture so. do remain to and we allow to we will and improving believe our us focused the taken believe will restructure we areas In prudently the have are allocating line set move stabilize turn, as through We business growth. have to foundation we profitable to

we operations. positive all on from based actions the be another cash of and improvements year taking, we to that are Finally, flow full expect XXXX

that, move through continue for growth invest to call allocation year. approach With as capital we open for a to the the will are we taking now ready We while disciplined questions. to

Operator

The Instructions] [Operator from question with Reuben Benchmark The Company. first comes Garner

Reuben Garner

North were throughout in assumption what to environment Maybe changed Can the fourth on have a I Or in talk basis you're you year referenced easing about you it dramatically an stabilization better you there? signs particular. what result in in the just versus things Maybe year-to-date results? think, start, or is seeing quarter? the will of stabilization, exactly seeing that America, rate

Nahum Trost

Reuben, Nahum. it's

things progress line stabilization, basically, to terms mentioned, So the on further. a dynamics we the trending first see as QX, same that we gradual also And in But deteriorating, QX expect in the is based see signs as see improvement not year. the let's we analyze we with as read, we we QX, say, of QX. meaning of in during in and macroeconomics

Reuben Garner

pricing how whole to help And think from then the business in America Can in saw whether you quarter versus about Okay. a standpoint? altogether? you fourth a us and the XXXX, what about volume or that's how with North

Nahum Trost

So yes.

volumes, saw again, So see in we see impacted the gross the relief We other products North saw selling but on and Canada, decline residential -- box. regions, and we the higher soft we rather we we margin quarter. back certain impacted we globally. sold the the In like pricing mix big expect basically the This things a higher channel the price, and commercial in mainly the the The regions that to not on the the was that but in dynamic, extent, macroeconomic, it mentioned down during positive same channels in also lesser that same rate, throughout signs America, to a of certain and the that based in channel. mainly we mix a of inflation negatively is dynamic it of average saw the to extent. And some macroeconomic the analyze, XXXX. Australia a

Reuben Garner

XXXX, understand -- so Okay. X out facility actions. have it place. over of into kind What the of us savings then total on help And $XX already why portion you question the your what out is closures next what in Can restructuring the million portion gets of a some taken -- expense years, of year? next the it's pushed

Nahum Trost

Yes.

cost the Hill of closed beginning was higher was digested Richmond we reflects only the the -- still cost. produced higher during and and still plant the prices be that January, will that This in in holding are XXXX. So inventory

only the be Hill, reflected eat especially Richmond in and XXXX, of -- will in the will So the Richmond Hill that In inventory positive full from expensive digest more savings coming we from XXXX. in XXXX. the half first came

Reuben Garner

XXXX, positive? you flow this more year from did Okay. and one positive. Do going benefit you I'm 'XX? about more in going I'm to cash And to The inventory. Is sneak look a reducing done. have In you there it of capital, how operations being room working think then from goal in to got cash get Or to obviously, it how last? go do differently flow we than big

Nahum Trost

flow in still The a improvement positive extent cash this to of days. year lesser back improvement on although we have for definitely will inventory inventory, be room the in

Just -- some year days the the days, to as we the manufacturing also closing end of XXX have was from reminder, I still of activity. on XXXX as said, reduced beginning improvement Richmond we at that XXXX. of days around inventory it room during back Hill the for the a And XXX

will increase capital. the as that also from that to in our and from profitability benefit believe and not year improvements significant, we during will addition only working be that, the In we more

Operator

is Stifel. next Elliott The question with Stanley from

Stanley Elliott

we you're When And sequential some at quarter. December of can looking sequential you that I under -- is be buildup? in XX% give a actually the under us the growth that outlook, of revenue looking curious how at severe blocks context talk into to build. we're just for after the this And going improvement contract, X, to July get on improvement, the about building we your But pressure. business I'm say

Nahum Trost

Stanley.

used see before COVID expect impacts, QX years, revenues. previous seasonality lowest then of evident XXXX. -- then our is to first that be results our in quarter all, of we mentioned, believe and of QX impact we we to in to in that I And the -- the external we mean, So as we and be terms in other

expect we be higher to QX compared in terms and QX revenues So and also QX QX compared of to QX. to

quarters, improvement the in the mentioned line with while section in trending a So basically, see to is gradual coming as we we QX, outlook expect QX. in

came ready we were to we that one we during reason. And regulations and approach with the are -- preparing -- a year that December. QX, to maintain of and end meet the that said, the is be by position published leading market. and expect to regulations, by will collection the middle this So are it new we proactive in of took as regard Australia, will a our And that

Stanley Elliott

what rate magnitude the $XX July guess to the $XX be sense we million Is there. is to look I Just for get Any should million? Australia to going a going a business of mean expect is it run after business? it change like like that trying X?

Yosef Shiran

the are well, the until as terms far, of so July. in quite expected products And be introduced. continues business positive now And what still are Australian to see. the in in be this Stanley, and exactly the that the don't very is selling market. There government. we needs will business So we From a we July, reaction to seeing What usual the cleared sign for to will know Australia by products. that things and wait have continue we

introducing but the we And similar, good, seems the but the And let's accordance yet. But from by So the Australian also, it products. are don't it's we some the as way, of -- competitors have -- in not positive. similar say, localized is in regulations. also the overall, reaction our very we something signs introduced of government stone which have new are that products with believe is that carved

the be And in And and what are have the got production. we to will said, the weeks. see revenue. wait definitely response advancing I with and exact products will some we the positive as with So last we few

Australian new regulations. of porcelain, relevant have are We to market our the the which also under lines

leading all, maintain the we be? stage. in will exactly market. in it We believe don't continue How will this our we that much at know all to position So

Stanley Elliott

Yes. guess That's kind fair. of of clarification. point a And I just last one

see running inventory a positive you So now you mentioned cash clarification, of that also maybe more the you're XXXX? going import point And Are side? in be with you the cash. positive on how lastly, model help then operating this us days, free flow to expecting

Yosef Shiran

to terms So the XXX of from we inventory, went in down as has by that days QX. end Nahum the of said, XXX

to aiming XXX. be lower are than We

cash still is for of CapEx. there. And there in terms free are So reducing we room our improvement flow,

porcelain will plant CapEx we we But for and -- So have the all our what Hill, of Israel, less than be we factory Richmond for it used also and to Sdot-Yam will still in in India plant it's mainly. -- have the had in when course. additional

So all and course, in free after still will all, have cash course, believe we we positive of generate will, we flow, flow cash of that that.

Operator

session. like the turn Yos any our concludes would to This over Caesarstone's for closing question-and-answer back I remarks. Executive Chief Shiran, to Officer, conference

Yosef Shiran

progress you much. next this to on you Thank Thank morning, Bye. for your we quarter. forward our Thanks. and you look attention updating very

Operator

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

may now disconnect. You

Caesarstone (CSTE) 21 Feb 242023 Q4 Earnings call transcript