Caesarstone to Cut Global Employment by 7%
By Emerson Schwartzkopf
MP MENASHE, Israel – Caesarstone Ltd. will cut its global employment by 7% as part of a new plan to spur growth and find new efficiencies.
The Israeli manufacturer of quartz surfaces will also halve the production of its U.S. plant in Richmond Hill, Ga., while increasing its U.S. salesforce.
The moves – part of the company’s Global Growth Acceleration Plan – came as the company announced a net loss of $405,000 on revenues of $128.1 million in this year’s first quarter.
“We believe that this plan will yield better allocation of our resources while more efficiently positioning our business for sustained profitable growth,” said Yuval Dagim, Caesarstone CEO, in a May 1 press release announcing first-quarter results.
In a conference call later that day with Wall Street financial analysts, Dagim said the company headcount would decline by approximately 110 employees across all business units.
“Our headcount reduction measures are intended to move Caesarstone towards a more-efficient, lean and agile organization,” Dagim said.
Most of the employee cuts will come in U.S. operations, Dagim noted.
“We are temporarily reducing the effective capacity of our U.S. manufacturing facility by 50%, which should provide for increased production efficiency and reduce inventory levels,” Dagim said.
Shutting down one of the Georgia plant’s two production lines, Dagim said, would move the company to “around 85% utilization” of all its facilities in the United States and Israel.
“We’re going to have enough room for any growth increase, or any more demand coming from the markets, definitely for the next two or three years,” Dagim added.
Dagim detailed several other actions being taken with the three-year strategic plan, including a greater importance on marketing in the United States.
“One of our forward initiatives will be to expand the U.S. salesforce over the next months by approximately 15% to 20%, or 20-30 people,” he said. “The emphasis will primarily target larger metropolitan areas where our presence has been underrepresented in the past.”
Caesarstone’s U.S. revenues of $56.4 million in 2019’s first quarter showed only a nominal loss – 0.6% — due mainly to lower performance with the company’s partnership with home-furnishings giant IKEA, said CFO Ophir Yakovian. The company’s non-IKEA core business in the United States, Yakovian added, grew for the third consecutive quarter.
The company faced larger first-quarter declines in its Australia/New Zealand and Canadian markets, Yakovian noted.
Both Dagim and Yakovian cited a soft U.S. market for the first half of 2019 due to industry inventory of quartz surfaces due to the huge exports from China in anticipation of possible 300% unfair-trade tariffs. Dagim, however, made a distinction in product positioning.
“If we look at it correctly we would not be competing with the Chinese neck-and-neck,” he said. “Most of it – 90% — was to serve the low end of the market, and we are playing in the medium and premium end.”
Yakovian expected stronger U.S. revenue growth as inventory levels return to normal
This year’s first-quarter financials also showed some progress on reducing Caesarstone’s inventories, with the $147.5 million on March 31 representing a 7% decline from the amount at year-end 2018. However, the $147.5 million is far above the $80.2 million in inventory at year-end 2014.
