Caesarstone: Business Up in U.S.
MP MENASHE, Israel – Unfair-trade sanctions against Chinese quartz may be good news in the U.S. premium-quartz-surfaces market, but it’s taking a toll elsewhere. Just ask Caesarstone.
The quartz-surfaces manufacturer reported better results for its U.S. operations during this year’s second quarter. Other international markets didn’t fare so well, leading to an overall dip in company revenues.
Total revenue for Caesarstone in April-June this year totaled $141.1 million, said Ophir Yakovian, the company’s CFO, in a Wall Street analysts’ call last month. While that’s slightly higher than the $139.2 million for the same time in 2018, a “constant-currency” adjustment to filter out economic variations translated into a 2.9% year-to-year decrease.
The decline came “due to soft market conditions, combined with more-competitive markets, mainly in Australia and Canada, along with lower performance in IKEA US,” Yakovian said.
What caused those competitive conditions in Australia and Canada, two of Caesarstone’s stronger markets?
“Our global markets are adjusting to the new conditions following the final resolution on imported quartz countertops from China to the United States,” said Yuval Dagim, Caesarstone CEO. “These newly imposed duties have adversely impacted our markets outside the U.S., that have seen a more competition coming from China.
“The impact was greater than anticipated and resulted in a softer than expected performance during the second quarter.”
In Australia, an increase in Chinese quartz-surface shipments, coupled with a soft housing and remodeling market, drove this year’s second-quarter sales down 12% from 2018 on a constant-currency basis. The same conditions caused a 11.6% decline in Canada.
In the United States, this year’s second-quarter revenues of $64.5 million showed a 6.8% increase from April-June 2018, even with some soft sales from IKEA, the company’s main corporate client. Caesarstone officials linked the upbeat quarter in the United States to the company’s Growth Acceleration Plan, combining an overall 7% cut in headcount, a throttling back of its U.S. factory by 50%, and expansion of sales and marketing.
“It’s actually allowed us to put quite many projects together in order to speed up the improvement and efficiencies in our company,” Dagim said. “We put a new team in place, we created the North American region. We took our best talent in the region and put them in the more senior positions.
“We are more-confident that we can capture the opportunity that that we’ve seen in the market in the United States, and we’re definitely going to see growth coming from the U.S. business over the next quarters.”
Part of that growth may also come from partnering with a U.S. home-center/DIY network, although Dagim wasn’t ready to confirm that last month.
“No formal news at the moment,” he said. “We are still working on this relationship I think it’s going well so far, but not to the point we can advise the market on a new deal. We’re still keeping positive on this opportunity.”
The decline in Chinese quartz surfaces in the United States after unfair-trade tariffs appeared didn’t mean the end of price-competitive products, he added.
“We see a significant increase in the imports from low-cost manufacturers – specifically more from India and Turkey, but from others as well,” he said. “So, I think that there is no vacuum here.
“There’s no shortfall of the low cost manufacturing slabs or sources in the United States.”
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