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    CSTE
    Earnings call· Jun 2026(Q2 FY26)

    Caesarstone Q2 FY26 earnings call CSTE

    Aug 5, 2026 Source

    Executive summary

    Caesarstone Q2 FY26 — Profitability Improves Amidst Revenue Headwinds and New Tariffs

    Caesarstone's second quarter saw significant progress in profitability, driven by structural actions and cost savings from its optimized manufacturing footprint, despite a decline in global revenues due to competitive dynamics and soft market conditions, particularly in North America. The company is now reassessing its timeline for achieving positive adjusted EBITDA following the announcement of new U.S. tariffs on quartz products, while continuing to focus on strategic priorities and mitigating external challenges.

    Highlights

    5

    • Gross margin improved meaningfully to 24% (up 440 bps YoY and 170 bps QoQ)

    • Adjusted EBITDA loss narrowed significantly to $1 million (from $6.4 million loss YoY and $7.5 million loss QoQ)

    • Australia revenue grew 10.1% on a constant currency basis, marking the fourth consecutive quarter of YoY growth

    • Big box business in North America grew approximately 3% year-over-year

    • Net cash position increased to $51.8 million (from $50.4 million QoQ) with no outstanding debt to financial institutions

    Concerns

    5

    • Global revenues declined 7.7% year-over-year on a constant currency basis to $96.6 million

    • North America revenue decreased 14.1% to $42.7 million, reflecting competitive pressures and soft market conditions

    • New U.S. tariff-rate quota on quartz surface products (25% additional tariff within quota, 50% above quota) effective August 15, impacting future profitability timing

    • Provision of $51.2 million recorded for approximately 800 silica dust claims

    • Operating expenses increased to $33.4 million, representing 34.6% of revenue (up from 32.1% YoY)

    Guidance & targets

    4
    CategoryTargetConfidence
    Annualized cash savings from Bar-Lev closure
    Approximately $22 million
    medium materiality
    High
    Total annualized savings
    More than $100 million
    high materiality
    High
    Additional restructuring cash costs
    Approximately $3 million to $4 million
    low materiality
    High
    Positive adjusted EBITDA
    Achieve positive adjusted EBITDA
    high materiality
    Low

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Global
    Revenue declined on a constant currency basis, reflecting competitive dynamics and soft market conditions, mainly in North America.
    		$96.6 million-7.7%——
    U.S.
    Decline driven by lower volumes in core business and commercial channel, partially offset by growth in the big box channel, led by IKEA.
    Big box business growth: 3% YoY
    		$42.7 million-14.1%——
    Canada
    Decrease mainly reflects fewer housing completions and slow market conditions on a constant currency basis.
    		—-17.5%——
    Australia
    Fourth consecutive quarter of year-over-year growth on a constant currency basis, supported by the Zero Silica ICON collection and continued market recovery.
    Consecutive quarters of YoY growth: 4
    		$20.3 million10.1%——
    EMEA
    Sales were down on a constant currency basis, primarily due to the timing of orders shipped to customers.
    		—-9.8%——
    Israel
    Revenue increased on a constant currency basis, mainly reflecting a favorable comparison to the prior year period impacted by regional conflict.
    		—32.4%——

    Operational metrics

    15
    Gross margin
    24%Up 440 bps YoY, Up 170 bps QoQ
    Q2 FY26

    Improved meaningfully both year-over-year and sequentially.

    Adjusted EBITDA loss
    $1 millionNarrowed from $6.4 million loss YoY and $7.5 million loss QoQ
    Q2 FY26

    The improvement primarily reflects higher gross margin and contribution from cost savings initiatives.

    Adjusted gross margin
    26.5%Compared to 19.7% YoY
    Q2 FY26

    Improvement mainly reflects cost savings from Bar-Lev facility closure and transition to global production network, plus a tariff refund.

    Operating expenses
    $33.4 millionCompared to $32.5 million YoY
    Q2 FY26

    Year-over-year increase primarily reflects higher legal settlements and loss contingencies.

    Operating expenses as percentage of revenue
    34.6%Compared to 32.1% YoY
    Q2 FY26

    Year-over-year increase primarily reflects higher legal settlements and loss contingencies.

    Operating expenses (excluding legal/impairment) as percentage of revenue
    29.6%Improved from 30.1% YoY
    Q2 FY26

    Excluding legal settlements and loss contingencies and impairment and restructuring expenses.

    Finance expenses
    $5 millionCompared to $5.7 million YoY
    Q2 FY26

    Resulting mainly from foreign currency exchange rate fluctuations.

    Adjusted diluted net loss per share
    $0.10Compared to $0.33 loss YoY
    Q2 FY26

    Adjusted diluted net loss per share for the second quarter.

    Net cash position
    $51.8 millionCompared to $50.4 million as of March 31, 2026
    As of June 30, 2026

    Company had no outstanding debt to financial institutions after repaying Lioli credit facility.

    Restructuring cash costs
    $1.2 million
    Q2 FY26

    Cash costs associated with the restructuring program.

    Average tariff on U.S. imports
    15%
    Ongoing

    Average tariff applicable to products imported into the U.S. market.

    U.S. revenue as percentage of total
    44%
    Q2 FY26

    Approximately 44% of second quarter revenues were generated in the United States, served by the global production network.

    IEEPA tariff refund
    $2 million
    Q2 FY26

    Refund received on previously paid U.S. IEEPA tariffs, benefiting gross margin and operating cash flow.

    Provision for silica dust claims
    $51.2 million
    As of June 30, 2026

    Represents best estimate of probable and reasonably estimable losses for approximately 800 claims.

    Insurance receivables for silica dust claims
    $12 million
    As of June 30, 2026

    Recorded globally as coverage disputes are ongoing.

    Industry KPIs

    1
    MetricValueDetails
    Price cost—

    Risks & headwinds

    4
    Soft market conditions and competitive dynamicsOngoing

    Global revenues down 7.7% constant currency YoY; North America revenue down 14.1%

    Mitigation: Strengthening relationships with key customers, expanding big box channel presence, disciplined execution, improving customer service, maintaining lean cost structure.

    New U.S. tariff-rate quota on quartz surface productsEffective August 15, 2026, for 4 years

    Year 1: 25% additional tariff within 13 million sq meters quota, 50% above quota. Subsequent 3 years: in-quota tariff declines to 19%, quota increases to 15.7 million sq meters.

    Mitigation: Evaluating expected impact, implementing appropriate supply chain, sourcing, and pricing actions to mitigate effects.

    Legal proceedings related to silica dust exposureOngoing

    Provision of $51.2 million for approximately 800 claims (600 in U.S.); $12 million in insurance receivables.

    Mitigation: Vigorously defending claims, evaluating reserves and insurance recoveries as facts evolve, recent favorable verdicts and dismissals.

    Timing of achieving positive adjusted EBITDAQ3 FY26 (original target)

    Previously stated goal now being reassessed.

    Mitigation: Evaluating appropriate actions to mitigate the impact of new U.S. tariffs.

    What to watch in Q3 FY26

    4

    Impact of new U.S. tariffs on quartz products

    Next quarter
    CurrentReassessing timing of positive adjusted EBITDA
    TargetSpecific actions and revised EBITDA timeline

    Why it matters

    The new tariffs could significantly impact profitability and supply chain strategy, making management's mitigation plans crucial for future performance.

    Following the new U.S. tariffs on quartz products, we are reassessing the timing of📎 achieving positive adjusted EBITDA while evaluating the appropriate actions to mitigate the impact of these new tariffs.

    2 min read5 chapters

    Detailed Narrative

    01

    Profitability Improvement and Cost Savings

    Caesarstone demonstrated significant profitability improvements in Q2 FY26, with gross margin reaching 24%, a 440 basis point increase year-over-year and 170 basis points sequentially. Adjusted EBITDA loss narrowed substantially to $1 million, compared to a $6.4 million loss in the prior year and a $7.5 million loss in Q1 FY26. These gains are attributed to structural actions, including the closure of the Bar-Lev facility, which is expected to generate $22 million in annualized cash savings, contributing to over $100 million in total annualized savings by 2027 compared to FY23.

    02

    Revenue Challenges and Regional Performance

    Despite profitability gains, global revenues declined 7.7% year-over-year on a constant currency basis to $96.6 million, primarily due to competitive pressures and soft market conditions, particularly in North America. U.S. revenue decreased 14.1% to $42.7 million, impacted by lower volumes in the core business and commercial channel, though the big box business grew approximately 3%. Canada also saw a 17.5% constant currency decline. In contrast, Australia delivered its fourth consecutive quarter of year-over-year growth, with revenue up 10.1% to $20.3 million, supported by the Zero Silica ICON collection. Israel revenue increased 32.4% due to a favorable comparison.

    03

    Impact of New U.S. Tariffs

    The U.S. administration announced a new tariff-rate quota on quartz surface product imports, effective August 15. For the first year, imports within a 13 million square meter annual quota will face an additional 25% tariff, while imports above the quota will incur an additional 50% tariff. Over the subsequent three years, the in-quota tariff will gradually decrease to 19%, and the quota will expand to 15.7 million square meters. Management is evaluating the impact and plans to implement supply chain, sourcing, and pricing actions to mitigate these effects, which are causing a reassessment of the timing for achieving positive adjusted EBITDA.

    04

    Legal Proceedings and Silica Claims

    Caesarstone is facing approximately 800 individual claims related to exposure to respirable crystalline silica dust, with about 600 in the U.S. As of June 30, 2026, the company recorded a provision of $51.2 million for probable and reasonably estimable losses, with $12 million in insurance receivables. The company continues to defend these claims vigorously, noting recent favorable outcomes such as resolved claims in California, a defense verdict in Colorado, and dismissals from several cases.

    05

    Financial Position and Debt Repayment

    The company's financial position strengthened, with a net cash position of $51.8 million as of June 30, 2026, up from $50.4 million at the end of Q1 FY26. During the quarter, Caesarstone fully repaid its Lioli credit facility, resulting in no outstanding debt to financial institutions. This reflects a lean cost structure and effective cash management despite the challenging revenue environment.

    AI-generated summary of the company’s earnings call. Not investment advice.