Caesarstone Announces $20M Cost Reductions Amid Industry Challenges

Caesarstone Ltd. reported Q2 2025 earnings, with CEO Yosef Shiran attributing softness in repair and remodel activity to industry-wide issues. Shiran emphasized decisive actions to align the cost structure and improve profitability, including $20M in new cost reductions. The company is also expanding its porcelain portfolio.

Caesarstone Ltd. (CSTE), a leading manufacturer of engineered stone products, reported its Q2 2025 earnings, highlighting persistent industry-wide softness in repair and remodel activity. The company's CEO, Yosef Shiran, attributed the slowdown to broader economic headwinds and competitive pressures. Despite the challenging environment, Shiran emphasized decisive actions to align the cost structure and improve profitability, announcing an additional $10 million in annualized cost reductions, bringing the total to $20 million [1].

Shiran stated that over 70% of production has been shifted to the company's global manufacturing network, enhancing operational flexibility, and that production partnerships are expanding to reinforce competitiveness. The company is also accelerating product development and expanding its porcelain portfolio to capture growing market opportunities in this attractive product category. The CEO noted progress in Australia, with the launch of a full zero crystalline silica collection in response to regulatory requirements.

The company's CFO, Nahum Trost, reported that global revenue was $101.1 million compared to $119.4 million in the prior year quarter. On a constant currency basis, second quarter revenue was down 15.6% year-over-year due to lower volumes resulting from continued global economic headwinds affecting activity across all channels in addition to competitive pressures. Gross margin was 19.6% compared to 22.9% in the prior year quarter, and operating expenses in the second quarter were $32.5 million or 32.1% of revenue compared to $36.6 million or 30.6% of revenue in the prior year quarter.

Financial Results

U.S. sales declined by 17% to $49.6 million, with softness in the residential and commercial segments. However, the company's business with Lowe's remained a bright spot, increasing in double-digit percentages compared to the second quarter of 2024. Australia sales were down 18.2% on a constant currency basis, reflecting regulatory changes and softer demand. Canada sales decreased by 12.5% on a constant currency basis. EMEA sales increased by 0.7% on a constant currency basis, helped by an expanded direct presence in Germany. Israel sales declined by 21.6% on a constant currency basis.

Adjusted EBITDA in the second quarter was a loss of $6.4 million compared to a loss of $0.1 million in the prior year quarter. Adjusted diluted net loss per share was $0.33 on 34.7 million shares compared to $0.14 in the prior year quarter on 35 million shares. The company ended the quarter with total cash of $75.6 million and total debt to financial institutions of $3.2 million. Net cash position was $72.4 million.

Outlook

Shiran reiterated a focus on investing in strategic transformation initiatives to position the company for scalable growth. Trost noted that the structural improvements made to the business model will enable the company to achieve higher levels of profitability on current sales levels. Management expects additional cost-saving measures taken during the quarter to contribute to further improvement in the cost structure.

Risks and Concerns

Management highlighted persistent global economic headwinds, competitive pressures, and the impact of regulatory changes in Australia and the U.S. Trost reported that as of August 1, based on their mix of sources, they estimate a tariff impact in the range of 15% to 25% on products sold in the U.S. The U.S. represents approximately half of their total revenues. Ongoing bodily injury claims related to crystalline silica dust exposure remain a significant risk, with 423 lawsuits active as of June 30, 2025. The company recorded a provision of $44.9 million and noted insurance receivable for silicosis-related claims totaling $25.6 million.

Final Takeaway

Despite ongoing revenue challenges and margin pressures, Caesarstone's decisive actions to expand cost reduction programs, accelerate porcelain product development, and adapt to regulatory changes are designed to position the company for improved profitability as volumes recover. The company remains focused on executing its transformation strategy, maintaining financial flexibility, and addressing legal and market risks through operational enhancements and disciplined cost management.

References

[1] https://seekingalpha.com/news/4481044-caesarstone-outlines-20m-in-new-cost-reductions-while-expanding-porcelain-portfolio