Caesarstone Moves Ahead in First-Quarter Performance
MP MENASHE, Israel– Caesarstone Ltd. offered plenty of good news with its first quarter 2017 financial data, although future reports may be a bit less glowing by mid-year.
Ranaan ZilbermanThe quartz-surface manufacturer gave Wall Street analysts positive numbers in a conference call earlier this month, with only the slightest of staggers in revenue growth from the same period last year.
The dip came in quarterly net income, where the $11.2 million fell behind 1Q 2016’s mark of $12.1 million. The slight shade, however, came from a change in net finance expenditures, and not from market performance.
Worldwide, the company posted first-quarter revenues of $136.1 million this year, up from $116.9 million in 1Q 2016. While sales and other operating costs rose, this year’s first quarter operating income of $15.1 million topped last year’s $24.2 million.
The United States remained Caesarstone’s top market with $58 million in sales in 1Q 2017, up 17.6% from the same time last year. Australia remained the company’s second-largest market wit $29.5 million in revenues; Canada remained a strong third at $22.3 million, with a 26.3% increase from 1Q 2016.
Raanan Zilberman, Caesarstone’s new CEO, noted that the company delivered revenue growth at a pace ahead of initial guidance, or estimates, for the first quarter, but April-June may bring a calming effect.
“We believe that Q2 will be a little bit more moderate, and we will bring the first half of the year to an annual growth of 8% to 10%,” he said.
“We’re excepting the second quarter year-over-year growth to be lower than the growth in the first quarter, potentially low single-digit growth,” added Yair Averbuch, the company’s CFO. “For the most part, this is related to a tough comparison versus a strong second quarter last year, and an IKEA comparison.”
Caesarstone’s direct relationship with furniture giant IKEA in the United States and Canada continues to be a mixed bag, with the increased exposure with a highly visible name brand is balanced with overall lower margins on sales.
When asked about the U.S. market, Zilberman said that while current revenues are strong, there’s still work to be done.
“If we drill down to the U.S. at this moment, I like to say that we are pleased to see the business perform well in the first quarter,” he explained. “That said, it’s still not consistent enough to draw a conclusion for me.
“I do believe that there is a good opportunity for us in the U.S.; that’s our biggest market. There is a clear and solid demand for quartz. We just need to come to the party.
“Basically I see four fundamentals that need to be in place to continue and capture growth in the U.S. One is a good plan. Two is relevant sources. Three, is a solid team with a drive and four, very high level of execution.
“Together with the U.S leadership team, we will be closely and carefully reviewing and managing the different elements to ensure that we leverage on the opportunity that we have in the markets.”
Zilberman also noted that Caesarstone’s U.S. production facility continues to ratchet up performance.
“In Richmond Hill, (Ga.), our U.S plant, we’ve now seen six months of consistent improvement in volume,” he said. “That said, we still have work to do and we need to continue and improve our processes in the plant.”
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