• Australia Sales Decline: Approximately 37.7% decrease on a constant currency basis.
• EMEA Sales Decline: 26% decrease on a constant currency basis.
• Israel Sales Decline: 24.5% decrease on a constant currency basis.
• Gross Margin: Improved to 19.9% in Q3 from 19.1% in the prior quarter.
• Adjusted Gross Margin: Stable at 19.8% compared to the prior year.
• Operating Expenses: EUR25.4 million or 23.6% of revenue, down from EUR29.2 million or 25% of revenue in the prior quarter.
• Net Cash Position: Improved to EUR108.9 million from EUR83.5 million.
• Operating Cash Flow: EUR16.3 million generated in Q3.
• Restructuring Cost Savings: Expected EUR35 million in savings compared to 2023 levels.
• Expected Loss: Adjusted EBITDA outlook revised to a loss in the range of $10 to $11 million.

• Warning! GuruFocus has detected 3 Warning Sign with CSTE.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Caesarstone Ltd (NASDAQ:CSTE) improved its gross margin to 19.9% in the third quarter, up from 19.1% in the prior quarter.
• The company maintained a strong balance sheet with cash and short-term deposits of EUR114.1 million and a net cash position improvement to EUR108.9 million.
• Operating cash flow of EUR16.3 million was generated during the third quarter, primarily driven by the sale of land and working capital optimization.
• Caesarstone Ltd (NASDAQ:CSTE) expects to realize approximately EUR35 million in restructuring-related cost savings compared to 2023 levels.
• The company is transitioning to crystalline silica-free products in Australia, expecting to regain its leading market position by the end of Q1 2025.

Negative Points

• Sales in Australia declined by approximately 37.7% on a constant currency basis due to slower market conditions and regulatory transitions.
• The EMEA region experienced a sales decline of 26% on a constant currency basis, impacted by slow market conditions and geopolitical issues.
• Operating expenses were higher as a percentage of revenue due to lower revenues, despite being lower in absolute dollars.
• Caesarstone Ltd (NASDAQ:CSTE) recorded a loss of $4.1 million in the third quarter compared to a gain of $1.9 million in the prior year quarter.
• The company is facing ongoing cost pressures from trade restrictions and elevated sea freight costs, impacting production and inventory costs.

Q & A Highlights

Q: Can you provide a macro outlook by region and any trends you are seeing? A: Yosef Shiran, CEO: We observe a negative trend in most markets due to economic downturns, high interest rates, and competition from the Far East. However, we are confident in our restructuring efforts and expect to benefit from them in the future. Specifically, in Australia, we are transitioning to crystalline silica-free products and expect to regain our leading position by the end of Q1 2025.

Q: With shipping rates remaining high, how do you plan to offset these costs? A: Yosef Shiran, CEO: We do not frequently change pricing, so the impact of high shipping costs is seen in H2 2024. However, shipping costs have recently decreased, and we expect to see benefits starting in Q1 2025. We do not foresee any immediate increase in shipping rates.

Q: Can you provide more details on trends with US big box retailers? A: Yosef Shiran, CEO: We see more resilience in big box retailers compared to the renovation sector. The residential channel is the most pressured, while the commercial business and big box activity show positive signs.

Q: Are there any potential deals for the Richmond Hill developed land, and is the subletting timeline unchanged? A: Nahum Trost, CFO: We completed the transaction for the undeveloped land in Richmond Hill and are seeking the right buyer for the developed land. The subletting timeline remains on track, and we expect to see cash flow benefits in Q1 2025.

Q: How is the Australian market being impacted, and what are your expectations? A: Nahum Trost, CFO: The Australian market is affected by macroeconomic factors and the transition to crystalline silica-free products. We expect to have a full product offering by the end of Q1 2025 and anticipate regaining our leading position in the market during 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.