Caesarstone Off-Target for 3Q 2016
By Emerson Schwartzkopf
MP MENESHE, Israel – For Caesarstone yesterday, a slip in sales turned into a pratfall on the stock market.
Slower-than-expected sales in the United States and Europe led to a third-quarter 2016 miss of 5.5% of the financial-markets expectation for the quartz manufacturer – even as actual worldwide sales grew by 5.5% to a new record of $144.3 million.
Not hitting the company’s previous guidance, however, hit Caesarstone stock hard after the early-morning earnings announcement. Caesarstone trading on the NASDAQ opened at $27.70 per share – down 20.5% from Tuesday’s market close of $34.85 – and stayed below $30 in an up-and-down day before ending at $29.60.
Caesarstone CFO Yair Averbuch, in a conference call to Wall Street financial analysts, noted that the company’s U.S. core business slightly declined and IKEA business sequentially improved, but still generated lower revenue than the same period last year.
The company reported $58.3 million in U.S. revenue for this July-September; during the same time last year, Caesarstone posted $61.6 million.
Yonathan Melamed, Caesarstone interim CEO, said the company is “are intensely focused on reaccelerating growth in the United States,” with a new lineup of sales-and-marketing under U.S. market head Dan Clifford.
“We grew our marketing and sales headcount by 20% so for the year in the U.S.,” Melamed said, “and expect to complete a 25% goal by the end of the year.”
Melamed also cited a recent new-product launch as another plus for improving performance by year’s end, although questioning by UBS analyst Susan Maklari on previously announced launches revealed that things didn’t go quite as planned.
“To be quite honest, there was a launch earlier this year, but there was some operational issues that we revealed and we did complete a re-launch, (along) with some brand new products, because the product that we launched earlier in the year in not a very successful manner.” Melamed said. “This time we did a major marathon through all the regions in September and October. We see some very good initial response on those, and are looking forward to leverage our sales as a result.”
Averbuch noted that Caesarstone’s contract with IKEA is doing well in the United States, and anticipated better year-to-year growth for 4Q 2016.
Melamed also acknowledged that Caesarstone is still finding its footing with the Richmond Hill, Ga., product plant it hoped to have fully online this year.
“We continue to face challenges bigger than anticipated and we have not been able to achieve optimal growth and manufacturing efficiencies to date,” he said. “We have identified the major issues and we are focused on optimizing our manufacturing processes and are including a few changes throughput and goals.
“We expect the planned performance to improve significantly in 2017.”
Overall, Caesarstone reported $403.5 million in worldwide revenues through the first nine months of this year, beating January-September 2015 by 8.4%. Even with the third quarter’s lower numbers, the United States accounted for 41.5% of all Caesarstone sales so far this year.
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