Caesarstone Revenues Set New Record (Again)

MP MENASHE, Israel – Caesarstone (NASDAQ:CSTE) set another record earlier this year in sales of its quartz surfaces, especially in North America, as the company turns the key on a southeastern U.S. manufacturing plant.

Yos ShiranRevenues in the first quarter of 2015 increased by 14.2% to $107.8 million compared to $94.4 million in the same quarter of the prior year, according to Yos Shiran, Caesarstone CEO, in a conference-call report to Wall Street analysts on Tuesday.

Growth in revenues was driven primarily by a continued increase in U.S. sales, which were up 27.6% to $48.0 million compared to $37.6 million in the same period in the prior year.

Canada grew by 18.7% to $13.9 million in 1Q this year, with growth driven by a new partnership with IKEA Canada.

“We are excited to see continued momentum for the Caesarstone brand, particularly in our key markets, the United States, Canada and Australia, where our growth remains strong,” Shiran said.

Gross margin in the first quarter was 42.0% in 1Q 2015, compared to 41.5% in the same period in the prior year, due mainly to favorable product mix, benefits of scale and improved utilization of production lines in Israel. These factors were partially offset by negative exchange-rate fluctuations, start-up costs related to the U.S. manufacturing facility in Richmond Hill, Ga., and continued growth in lower-margin fabrication and installation revenue in North America.
 
Shiran announced the start of production at the Georgia plant, which he noted as being in “the commissioning stage.”

Shiran told the analysts that Caesarstone expects the U.S. plant’s first production line to become operational this quarter. The second line — the seventh globally for the company — is also “on schedule and is expected to become operational in the fourth quarter of 2015.”

Caesarstone increased its expected capital expenditure related to the first and second lines in its new U.S. manufacturing facility from $115 million to $130 million.

The exclusive supplier agreement with IKEA in both the United States and Canada continues through the end of next year, Shiran said. When asked about a possible extension beyond 2016 by UBS analyst Ben Miller, Shiran noted that “there is no news to report on that end.

“I think it is going well,” Shiran added. “We are trying to improve and to make it flawless and make it better for everybody.”

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