CSTE - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Caesarstone Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded.

It is now my pleasure to introduce your host, Mr. ICR. of Cray Brad sir. ahead, go Please

Brad Cray

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

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

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

non-GAAP will EBITDA comparable In quarter adjusted measures, can company's addition, company's The the in loss, per the earnings found XXXX call, net Investor on GAAP measures posted reconciliation income non-GAAP adjusted profit, gross Relations and adjusted most of this these on second constant make share, company reference net be adjusted loss, currency. which measures release, is to to certain the website. including income, directly financial the

will Yos for questions. activity regarding would we go over call the call, to cover the and open turn financial you. results Yos. today's And details to then will discuss ahead. now Thank I additional On call Nahum before to business like Please our

Yosef Shiran

us day, thank everyone, you, results. Thank Good Brad. our you to for second and joining discuss XXXX quarter

across to and margin conditions slow enhance efforts are bearing Our second our partners last positive gross in the assisting the our compared a The our indicator globe. relationships demonstrates us overcoming impact ongoing that to of quarter production initiatives. manufacturing year performance our in our strategic fruit footprint market with improvement restructuring clear optimize is and

to territories we affecting we our which the primarily progress strategic several Current conditions key continue on residential operate, in initiatives. channel. negatively in in revenues the Nevertheless, make are

by and deliver next operations. approximately annually XXXX our our million $XX First, XXXX to savings, on to in and year with track facilities closure in our across of are driving cost $XX cost Sdot-Yam expectations. annual savings Richmond line efficiencies Hill The million remain we compared of previous

sourcing network our over better now allowing partners, Additionally, demand. global us XX% we driving from our to production production manufacturing of align are margin improvements to and of

developing Second, sales improve mitigate we mix to mainly sales our pricing on continue focus help products and pressures. and differentiated marketing, on to

Third, business. we our continue strengthen porcelain to

During as our from our our July, commitment stake to we increased in business. market, porcelain position Indian porcelain a Lioli our driver our growth in strengthening move key This for we facility, the see underscores to which Ceramica XX%. XX%

new and product investing Fourth, number we of developed crystalline innovation. a already are zero lines. silica in We've launched R&D and

than important the We July quartz products double we silica Australian X the offering expect This to more that in effect our as is XXXX. of as particularly regulatory the ban by to in zero market. into adapt crystalline of on went end Australia

maximize ways for Lastly, sell we to undeveloped our for agreement property value $XX an recently Hill nonoperational land to explore XX of our continue Richmond assets. into at We to million. approximately entered acres

by We XXXX. end QX transaction to close expect this the of

XX acres evaluate remainder higher-value land to property, of the buildings. continue to consists of We the opportunities developed of monetize and which

available XXXX. during finalizing cash additional generate Sdot-Yam manufacturing will the areas us of to This are also We facility. subletting flows within enable the

specific are our business hurdles despite making which particularly and conclusion, macroeconomic our the the business. to remodeling sectors we transforming market in and in persistent significant In global the progress challenges the renovation in is residential exposed,

the on current we business costs the will to environment. remainder further align year, of reducing expenses our Through to the focus

innovate improved and to investments long-term strategic as market make drive to profitability continue the growth and recovers. will We

in to more I detail. will review now our over results turn the to Nahum call financial

Nahum Trost

morning, good Thank you, and everyone. Yos,

volumes, resulted decrease revenue remodeling regions. our lower Global which was XX.X% were currency This down quarter on by by a $XXX.X across year-over-year, or XX.X% second quarter the The constant economic and lower main renovation headwinds, was our particularly residential in second in pressures. results. impacted accompanied at basis. demand competitive channels Looking for primarily global million, driven by

In decline mainly favorable residential and softer product by were This $XX.X mix. was U.S., XX.X% markets end million. to driven sales the less down

bright we were However, were as transition U.S. Big materials in reflecting mainly in market Australia. spots our that XX.X% XX.X% conditions currency basis, a similar regulations sales with did approximately of and the a market commercial alternative Australia by comply see currency down some basis, experiencing Canada Box. and business new on constant constant on the sales slower dynamics off

slow in conditions Israel, EMEA the EMEA currency sales Terror, War constant basis significantly the region Sweden as off basis second a market result XX.X% of currency activity U.K., in and the constant Our saw our by mainly a the XX.X% quarter, of on region. were on in a due indirect In reduced has which a decline to on business.

prior by P&L Gross the quarter significantly X.X% second to the our quarter margin in to compared year driven product year gross the The performance. XX.X%, by was gross Adjusted was X.X% unfavorable increase benefits production at of quarter. mix. import offset to margin Looking margin partially in the quarter. XX.X%, compared in primarily prior second improved in footprint,

to were noting worth quarter facility closure, related and plant in number mainly utilization the our associated transitory a the the margin Hill of Australian It's XXXX, factors that second gross lower with of in market. investments including operational Richmond that Sdot-Yam

to into of or nearly account the normalized of our million a $XX.X by taking impairments The is and percentage footprint, recorded quarter. basis revenue XX.X% expenses of to those efforts. quarter lower result previous due our of connection mainly revenue in expenses reduction a production XXX Sdot-Yam transitory closure. On year Operating of during quarter factors, the XXXX restructuring-related due $XX.X second our gross the second enhanced mainly to in increased in prior in or XX.X% efficiency the restructuring with million the points basis, margin compared facility were

by XX.X% million in revenue to compared revenues. prior the quarter. expenses dollars, but year due as to last loss Excluding percentage a In legal compared were were expenses restructuring XX.X% operating and to lower were absolute contingencies settlements, expenses, year higher $X.X lower of these

million to the the XXXX gross quarter, due was of this $XX.X Operating the expenses the with and second million the margin quarter, during higher $X.X year impairment mainly and in loss the restructuring-related in connection in the to improvement quarter facility second prior compared recorded quarter with Dorian closure.

we've quarter improvement EBITDA $X.X This the a million optimization Adjusted loss reflects $XX.X to our made cost of in loss year the initiatives. of in second prior was million restructuring the a efforts quarter. in and primarily progress compared

quarter, inventory reductions working generated liquidity from in capital balance our to and driven sheet. We Turning position. positive the operations mainly flow improvements. by We other quarter with $XX million a the cash strong ended of

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

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

provide additional few a to some like on items. color I'd Now

Hill half of closure sold that benefiting we as expect the this closure the of the XXXX EBITDA Richmond our to to XXXX, Regarding majority plant, the to mainly contribute were already. plant to of in from year second continue compared improvement inventories

X affected costs. we impact As offset our geopolitical to that developments benefit, input by are that

will $X freight we at inventory we more First, million more expensive This towards impact increasing were of which per our seeing from quarter. year is fees, an sold. to P&L as QX roughly this are $X million impact the estimate

the increased Israel. trade Turkey of Second, export the and certain materials have in restrictions year, polyester. Bar-Lev cost specifically plant imposed on to These short earlier for restrictions our term, quarts this production

While less are we alternative sources favorable. the for successfully imports, have acquired economic terms

financial impact will costs higher expand sea the material negatively expenses outlook. expect and our in freight as our will I momentarily We and results, operations upon

I would provide Lastly, update an to in claims on facing U.S. we the silicosis like related are the

our fabricators individual employees. distributors filed allege during fabricators lawsuits XX, As other we XX or Plaintiffs June co-defendants XXXX, among contracted in named they of the including cutting products. as their polishing are and illnesses, by silicosis, manufacturers, of and

with The the a first in trial expected is in case verdict days. coming currently

So we our this believe to the it defense, of is case. outcome predict difficult in

is on of its a not believe or operation. such on own possible, financial adverse verdict position results only a adverse verdict we While our impact would reasonably have material an

at outstanding stage. claims The early remaining an XX are

we While any, these time. the this exposure, are defend an at estimate claims, to of all plan we provide vigorously to potential unable if

positive reaffirming the year. this year all cash XXXX cash majority are with to half of expectation the deliver mind, flow of full of positive operating the we first for a With in the flow our towards weighted

We XXXX our of restructuring-related of expectation savings also and $XX reiterate to a year realize compared approximately to cost of $XX full XXXX. in thereafter full year million million

XXXX. Therefore, material cost face range, half million to In in in that the year earlier. mainly expected increased second of the are full and we increases EBITDA shipping outlook will XXXX moderating discussed dollar the the mid-single-digit adjusted costs loss be our we a to half, due I second

first conditions compared assumes headwinds, while the making also in we demand XXXX our half we of outlook significant market This are similar the global half. In market in transformation. continue progress we and as believe conclusion, second strategic to navigate to

on profitability focus conditions improved and as to our market position marketing footprint cost optimizing Our investments in us drive strategic production efficiencies, and R&D stabilize. sales,

to we for call the that, With ready are open now questions.

Operator

begin And Company. with come The Garner from We [Operator first Benchmark Reuben will Instructions] questions. now the will question

Reuben Garner

them guidance. any start in there? a us Do change additional guess give shipping plan actions to you more the pricing the Can I little take Nahum, you with you mentioned lag? they appropriate? detail we'll costs. Or kind onetime it's next and not just you help expect retrace to of are to, I guess, there's a and just into going year? -- is Or that

Nahum Trost

it we from we the addition area we impact the the in of to million the half shipping costs, materials. million And so negative second expect $X quarter. the an in mentioned, results per Reuben, of, raw $X in increase -- at also to as impact to sourcing that, have

the So going half, half impact those second of our second items to X are year.

Hill, sold there in from specifically restructuring other inventory expensive the midyear. by was the we previous full savings coming that On that from are hand, which actions the Richmond took, are more additional almost

the more this offset savings, the we that expenses partially will expect from to and shipping we've So generate the and mentioned. raw materials higher

Yosef Shiran

shipping some know add it's expect in very today, exactly significant Yes. and one down -- cost but above high, how when, maybe much and stage, will at it could stage We the also to But go this normalized is don't at levels. amount. that the that it's

Okay.

Reuben Garner

compared dollar for environment was Does to half? half demand And is the mentioned that in that half you a the the second Or similar comparison assumption the a to first revenue comment? the then second mean similar amount year-over-year first.

Nahum Trost

we first and No. the market comment the to was in quarter. dynamics The compared that second saw

that is So assumption assumption we also the second are the this for the using currently half.

Reuben Garner

the least Okay. you've And may the And signs course things undergone over be in at states here globally, softened If and deteriorate do of already the some there have do if been summer. that things things today? deteriorate have Do does stand Where like those do that you look I you your were what costs? could would a guess utilization actions they out restructuring. if more needed? of kind future take to rates

Yosef Shiran

Yes.

One to new is biggest us agile, ability advantage which the of costs. reduce setup, of the makes more the

can up have the quite better than And deploying necessity if have fixed costs, things the without We relatively we control can expect, ramp ongoing so in money. to we less addition, we be positive the of more turn capacity fast cost.

So yes, we more adjust. are we agile and can

Reuben Garner

from there about to see think margins a what in don't profitability? you here? If I is on that another, way So has kind of like XX% decline volume, what impact decremental would know, look

Nahum Trost

sensitivity actions improvement look compared quarters. took can hand, that are generated we level after information restructuring -- of or But in we you that revenues the No, the you of those can quarters. generated one in providing in the to And margin. the we margins that gross on on we see previous at not

the to Just Part second maybe to of the higher. to had of compared that, add relates last this transitory margin associated of production gross quarter up with here a last facility. factors closure the to the we that year in it was quarter year.

rate last a almost we were of under So margin. of gross generated around XX% the of you this we it, current gross volume, XX% And if exclude year, year at margin.

during we The year. majority the to of relates restructuring took the actions that this

I the it believe you help can you -- calculate to can So sensitivity.

Reuben Garner

going helpful. Good luck That's Great. forward.

Operator

with Elliott Stanley next will question The from Stifel. come

Andrew Maser

Stanley. is Maser on Andrew This for

portion a had Richmond portion that if the one just Hill of any had it. plot the guess on Wondering I what for you could of best you quick maybe about other of land. receive

Nahum Trost

of several So we it's we previous of mentioned also dollars. of in area in as millions calls, the tens believe

our mentioned of in we million. the site is the we As $XX This undeveloped. part for call, the undeveloped sold

all millions other in developed, The we is the And as part to will able buildings. believe get, the including I of several said, we tens all, dollars. be of

Andrew Maser

of And is you there on Israel provide facility? update the any can monetization the

Nahum Trost

Yes.

available the his to P&L on here the XXXX. we area we in benefit majority of will from this the benefit also be subleased start it, compared view, part, dollars will Yos side, mentioned a area point basically in year. As Stod-Yam millions of from plant, start not cash of flow to will we commencing the of it from several to but and It

Andrew Maser

I lastly, wondering was your decision Ceramica stake if can your really. details you any timing Just increase business? more then on to in could And anything expand the on you or Lioli provide

Yosef Shiran

you know, part of out is plant our a as very growth we And believe we plans. India porcelain, So get important plant, is in a a lot good and can of it. our

next haven't profits lot, the also and this year this with we and believe initiatives start a seen see from we are we to So taking but far, we continue site that during sales. year, will

to had of it low. one XX%. said, the of And relatively decided So the as XX% buy to we brings to I and far, us, to We it's sales, partners, increase see we venture. but XX% which

are we move. So happy with this very

once are our a tough see was It negotiation. to we starting report we more. mature, will And that expectations

So far, very significant, it's it's not significant strategic so wise. but

Yes.

this say can Lioli. what So about I is

happy you questions any we have If answer. to around will it, be more

Andrew Maser

and guess, from a as far over time? there stake as is should anything investors then rollout Any -- to that mix margin standpoint, about think porcelain related the I margin increased

Nahum Trost

at I material. stage, it will don't that be this think don't think I

yes, of the lot not So in short you term. see will the it in P&L a

Operator

any session. ahead, concludes like to Shiran the to This Please Mr. closing over Yos remarks. go conference our I would sir. question-and-answer for turn back

Yosef Shiran

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

Nahum Trost

you. Thank

Operator

you attending presentation. today's Thank for

You may now disconnect.

Caesarstone (CSTE) 7 Aug 242024 Q2 Earnings call transcript