Caesarstone Ltd. Q2 FY2024 earnings call

• Strategic restructuring initiatives are positively impacting the business, with gross margin improvement showing optimization of production footprint and partner relationships.
• Driving cost efficiencies with facility closures on track for annual savings of ~$20M in 2024 and ~$30M annually by next year. Sourcing over 60% of production from global partners.
• Focus on sales and marketing, developing differentiated products to improve sales mix and mitigate pricing pressures.
• Strengthened porcelain business by increasing stake in Lioli Ceramica from 60% to 81%.
• Invested in Indian innovation, developing zero crystalline silica products and expecting to more than double offerings in Australia by end-2024.
• Monetizing non-operational assets: sold 69 acres of undeveloped land at Richmond Hill for ~$10M, with plans to monetize remaining property and sublet Sdot Yam facility to generate cash flows.

Global revenue for the second quarter was $119.4 million, down 16.9% year-over-year. In the U.S., sales were $59.8 million, down 13.8%. Canada sales were down 15.9% on a constant currency basis. Australia sales were off by approximately 20.8% on a constant currency basis. EMEA region saw a decline of 14.9% on a constant currency basis. Israel sales were off by 38.9% on a constant currency basis. Gross margin improved to 22.9% compared to 8.3% in the prior year quarter. Adjusted gross margin was 23.8% compared to 9.6% in the prior year quarter.

• Reaffirmed positive operating cash flow for full year 2024, with majority in first half.
• Expect restructuring-related cost savings of ~$20M in 2024 and ~$30M thereafter compared to 2023.
• Moderated full-year 2024 adjusted EBITDA outlook to mid-single-digit million loss due to increased shipping and material costs in the second half of 2024.

• Increased sea freight fees estimated to add ~$3M-$4M per quarter, impacting P&L more in Q4 2024.
• Turkey's export restrictions on certain materials increased Bar Lev plant production costs for quartz and polyester, though alternative sources found but with less favorable economic terms.
• Silicosis related claims: named as co-defendant in 43 lawsuits, with one case in trial and others in early stages, though adverse verdict not expected to materially impact financial position.

Q: Regarding the change in guidance and shipping costs, can you give more detail on shipping costs, pricing actions, and if costs will retrace?

A: Shipping costs expected to impact second half by $3-4M per quarter. Pricing actions not specifically mentioned, and shipping costs may not retrace immediately. Additional savings from Richmond Hill closure as majority inventories sold.

Q: About the Richmond Hill plot of land, any best guess on proceeds for the developed portion?

A: Believed to be in the area of several tens of millions of dollars.

Q: Update on monetization of Israel facility and stake increase in Lioli Ceramica?

A: Sdot Yam facility subletting to start generating cash flows in 2025. Increased stake in Lioli Ceramica to 81% to strengthen porcelain business, with expectations of future profits from the site though not material in short term Q: On margin impact from Lioli stake increase and porcelain roll out?

A: Not expected to be material in the short term Q: On potential future cost reduction actions if needed, utilization rates, and impact of volume decline on profitability?

A: More agile with less fixed costs, able to adjust costs. Not providing sensitivity on gross margin to volume decline, but previous quarters show improvement in margins post-restructuring