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Caesarstone(CSTE) - 2025 Q1 - Earnings Call Transcript
CaesarstoneCaesarstone(US:CSTE)2025-05-07 13:30

Financial Data and Key Metrics Changes - Global revenue for Q1 2025 was $99.6 million, down 14.5% year-over-year on a constant currency basis due to lower volumes across main regions [11][12] - Adjusted EBITDA for Q1 2025 was a loss of $7.1 million compared to a gain of $0.6 million in the prior year quarter, primarily reflecting lower revenues and gross margin [15] - Gross margin decreased to 21.3% from 24.5% in the prior year quarter, mainly due to lower fixed cost absorption and unfavorable product mix [13] Business Line Data and Key Metrics Changes - U.S. sales decreased by 19.4% to $49.1 million, primarily due to softer market conditions in the residential channel [12] - Canada sales were down 11.5% on a constant currency basis, driven by lower sales in the core business [12] - Australia sales dropped approximately 28.2% on a constant currency basis, reflecting market uncertainty and high interest rates [12] - EMEA region saw a bright spot with a 16.4% increase on a constant currency basis, driven by improved market conditions [13] Market Data and Key Metrics Changes - Approximately half of the company's revenues are generated in the U.S., which is facing challenges due to a new 10% tariff on imports [9][17] - The Australian market is impacted by a governmental ban on silica-based engineered stone products, contributing to sales decline [12] Company Strategy and Development Direction - The company is shifting more than 70% of production to a global manufacturing network to enhance operational flexibility [7] - Ongoing investments in porcelain are seen as a strategic pillar for future growth [7] - The company is focused on transforming from an industrial-oriented organization to one centered on R&D, marketing, and brand development [9] Management's Comments on Operating Environment and Future Outlook - Management has withdrawn the full-year outlook due to persistent macroeconomic pressures and the impact of U.S. tariffs [22] - Despite challenges, the company remains confident in executing its transformation strategy and expects to realize approximately $10 million in incremental savings in 2025 [22] Other Important Information - The company recorded a provision of $50 million for lawsuits related to exposure to respirable crystalline silica dust, with an insurance receivable of $31.6 million [19][40] - The net exposure from all claims is estimated at $19 million after accounting for the insurance receivable [40] Q&A Session Summary Question: Can you walk through the improvement in gross margin? - Management noted that the improvement in gross margin was due to modest revenue increases and benefits from restructuring actions [27][28] Question: Do you expect revenue to move higher as the year progresses? - Management indicated that they expect a gradual increase in revenue based on historical seasonality and ongoing actions taken [30] Question: How do tariffs impact the business? - Management stated that most competitors face similar tariff dynamics and they are considering price adjustments to mitigate the impact [31][34] Question: Can you clarify the provision for lawsuits? - Management explained that the $50 million provision reflects probable exposure for outstanding claims, with an additional insurance receivable of $31 million [39][40]