Caesarstone: On Track for 2022
By Emerson Schwartzkopf
MP MENASHE, Israel – 2022 started in record form for Caesarstone Ltd. and plans to continue growing throughout the year … including a brand-new porcelain-slab product by the fall.
And, while increased operating costs took a bite out of margin and profits, company CEO Yuval Dagim said last week that the general view remained positive.
“Overall, our results for the first quarter were in line with our expectations as we continue to benefit from the healthy demand for our products, successful integration of our acquired businesses, expansion of our digital platforms in several regions, and the focused execution of our multi-material growth strategy,” Dagim noted on a conference call with Wall Street analysts on May 11.
Last week, the surfacing company reported $170.4 million in revenue for this year’s first quarter, marking a 16.7% increase from the same time last year. Increases in raw materials and shipping, however, led to a basic quarterly net income of $6.2 million, down 56% from the $14.1 million in 1Q 2021.
Caesarstone product demand remained the strongest in the United States, as $85.2 million in 1Q 2022 revenues showed a 20.3% increase from the same time last year. Canada’s $23.7 million in the first three months of this year surpassed 1Q 2021 revenues by 33.5%
Dagim credited a part of North American growth with the company’s big-box retailers. “We have experienced an increase of revenue, volumes and activity with IKEA,” he said. “At the same time, we were very pleased to hear from Lowe’s that we are now a greater business partner with them, and we are putting more and more designs of their brand and our brands in Lowe’s.
Nahum Trost, Caesarstone CFO, also noted strong double-digit growth in natural stone sold in the United States through the company’s Omicron Granite & Tile distribution network that it acquired in early 2021.
Revenues in North America and worldwide also picked up due to Caesarstone price increases effective in late 2021 and early this year, Dagim said. Another price increase with some products started right after 1Q 2022 in April.
Dagim noted revenue growth in the first quarter as “pretty much a 50-50 between prices and volume.”
“We are expecting both to contribute to our double-digit growth this year as well,” he added, “but I think pricing will be a bit more-dominant in volume going forward in the coming quarters.”
Caesarstone is also focused a worldwide spread of sourcing its products in dealing with higher transport costs, Dagim said.
“We are utilizing more our facility in the United States,” he said. “And we are, on other side of the globe, utilizing more our OEM supplier in China to be servicing our business in Australia. So, we’re utilizing the global footprint the best as we can.”
Continued revenue growth should be fueled in this year’s third quarter with the global introduction of Caesarstone-branded porcelain products. Dagim said the new line will be produced through Lioli Ceramica in India, which Caesarstone acquired in mid-2020.
Other growth opportunities remain a possibility. When questioned about using Caesarstone’s cash holdings to repurchase stone, both Dagim and Trost emphasized using available money to fund company growth.
“The main purpose of our cash is to serve the growth that we see,” Trost said, “and to server for any potential M&A (merger and acquisition) that might come down the road.”
“Omicron was one step in the right direction,” Dagim said. “We are looking for more steps like the Omicron acquisition to see if we can improve our footprint in the U.S. and to cover more intensively more metros of the U.S. markets.”
