Caesarstone: U.S. Third-Quarter 2018 Sales Flat
By Emerson Schwartzkopf
MP MENASHE, Israel – U.S. tariffs on Chinese quartz surfaces may benefit Israeli-made Caesarstone products in the long run … but the rest of 2018 is a different story.
Company officials noted today that the rush of quartz-surface imports from China places uncertainty in the U.S. market, and caused a conservative revision of performance through the rest of the year.
“While we are encouraged by the long-term benefit of recent preliminary tariffs on U.S. imports of quartz countertops from China,” said Ophir Yakovian, Caesarstone CFO, in a conference call with Wall Street investors, “we are cautious on the near-term impact of the tariff given a surge in 2018 pre-buy activity that may keep U.S. inventory levels temporarily elevated, along with the undetermined effect on supply outside the U.S.
“Therefore, we are moderating our expectations for the full year 2018 and focusing on a range of improvements to better position our company for success in 2019.”
In a conference call with Wall Street analysts this morning, Caesarstone reported $147.7 million in total revenue for this year’s third quarter, down 4.5% from the same time in 2017. Year-to-date worldwide income is $432.9 million, a 1.6% decline from January-September last year.
“Our third quarter and year-to-date results do not reflect the significant potential of Caesarstone’s global market leading position and innovative product offering,” said Yuval Dagim, company CEO. “We are taking steps to create a more seamless global operating model and bring the right talent to our organization at all levels
“Moving into 2019, we expect to better capitalize on market opportunities as we implement a steady stream of best practices and refine our strategy.”
U.S. revenues of $61.9 million in this year’s third quarter reflected a nominal 0.16% increase from the same time in 2017, while Canada’s $25.1 million showed a 1.5% decrease. The biggest changes in Caesarstone 3Q revenues came with its second-largest market in Australia/New Zealand ($33.9 million, down 8.6%) and its own domestic turf in Israel ($9.7 million, down -$19.1 million).
“In the U.S., sales were essentially flat compared to last year,” said Yakovian. “We experienced volume improvement in our core cusiness which benefited from ongoing changes to to enhance our go-to-market strategy, but these positive developments were offset by continued weakness in IKEA (sales) due to previously discussed changes in IKEA’s promotional structure.”
Dagim also noted that Caesarstone is “in the advanced stages” of hiring a permanent president for sales, marketing and distribution in the United States.
“I think we’re quite well-progressed in the development of our U.S. branch,” Dagim added. I think the new pres9ident will enhance this process. We have quite a stable team already and I think we are pushing hard in our go-to-market efforts, and make sure we capture the anti-dumping opportunity coming next year.”
Dagim reported that the company recently appointed a new manager for its U.S. factory in Richmond Hill, Ga., and the facility is “experience better throughput and yield, which has contributed positively to the margins when compared in the prior year.”
The major news in U.S. quartz operations – tariffs on Chinese products – brought a mixed response from Caesarstone officials.
“We are encouraged by the long-term benefit of recent tariffs on U.S. imports of quartz countertops from China,” Yakovian said. “We anticipate a positive impact om our U.S. results in coming years
“In the near term, we are cautious, given there has been a surge in 2018 pre-buy activity ahead of the tariff,” he added. “That pre-buy will likely keep U.S. inventory levels elevated for the near term. Beyond that, we are watching closely to assess the collateral impact to International markets as Chinese producers seek to ship their product to other developed markets.”
Dagim added that “it would be reasonable for us to assume that during Q1 (first quarter) next year we will see a better market for the U.S.”
Yakovian cited the tariff issue, along with U.S. dollar values affecting foreign trade, in moderating total 2018 revenue targets to the range of $572 million-$578 million worldwide and seeing profits in the low range of $74 million-$82 million.
Caesarstone also announced a dividend this morning of $0.15 per share for third quarter 2018 to be paid Dec. 12 to shareholders of record as of Nov. 21, 2018.
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