Caesarstone Ltd.

Caesarstone Ltd. is a global multi-material designer, producer, and reseller of surfaces, primarily used as countertops in residential and commercial buildings ¹. The global countertop industry generated approximately $151.6 billion in sales to end consumers in 2024, based on average installed price, which includes fabrication, installation, and other service-related costs ². The company's products are sold in approximately 60 countries through a combination of direct sales and a network of independent distributors ³. Engineered stone countertops are a growing category, with global engineered quartz sales to end-consumers growing at a compound annual growth rate of 14.3% between 1999 and 2024, compared to a 5.2% compound annual growth rate in total global countertop sales ⁴. Porcelain sales to end-consumers grew at a compound annual growth rate of 30.5% between 2016 and 2024 ⁵.

The company faces intense competitive pressures from other surface materials and brands, competing on factors such as pricing, brand awareness, product quality, differentiation, design, breadth of offerings, and technological innovation ⁶. Competitors may produce or source similar products at lower costs, potentially reducing Caesarstone's market share and limiting its ability to increase prices ⁷. The engineered stone and porcelain surface market is highly fragmented, with growing competition from low-cost manufacturers from Asia and Europe, and large multinational companies investing in their production capabilities ⁸.

Caesarstone generates revenue from sales of surfaces, and to a lesser extent, their fabrication and installation services, and ancillaries ⁹. The majority of sales are to fabricators and resellers in direct markets and to third-party distributors in indirect markets ¹⁰. Direct sales accounted for 89% of revenues for the year ended December 31, 2025 ¹¹. The company's business model includes providing fabrication and installation services in certain market channels in the U.S., Canada, Israel, and Australia, which are sourced from third-party fabricators ¹².

The company's products are generally marketed under the Caesarstone brand and Lioli brand, with products sold through IKEA marketed as LOCKEBO and KASKER ¹³. Engineered stone products are comprised of an average of 85% minerals blended with polyester and pigments ¹⁴. Porcelain products are comprised of clay minerals, natural minerals, and additives ¹⁵. The product offerings include collections such as Classico, Supernatural, Metropolitan, Outdoor, and Porcelain ¹⁶. In 2024, Caesarstone began transitioning its portfolio to crystalline silica-free surfaces (CSF), which may contain traces of crystalline silica of up to 1%, made from approximately 80% recycled materials ¹⁷. Additionally, following the Omicron acquisition, the company offers resale of natural stone, sinks, and various ancillary fabrication tools and materials in the United States ¹⁸.

In 2025, products produced by third parties accounted for approximately 51% of revenues ¹⁹. The company's engineered stone products are now manufactured by third-party Production Business Partners (PBPs) located in the Far East, India, the Middle East, and Europe, following the closure of its own engineered stone production facilities ²⁰. Porcelain products are manufactured at the in-house facility in Morbi, Gujarat, India, and by third-party PBP partners ²¹. In 2025, approximately 73% of total engineered stone sourcing was manufactured by PBPs, with this trend expected to significantly increase in 2026 to include all engineered stone products ²². Approximately 49% of PBP-manufactured products (or 36% of total engineered stone products) were sourced from "Supplier A," and approximately 31% (or 23% of total engineered stone products) from "Supplier B" ²³.

For the fiscal year ended December 31, 2025, Caesarstone reported total revenue of $397.2 million ²⁴. Gross profit was $73.280 million ²⁵, resulting in a gross margin of 18.4% ²⁶. Operating loss for the period was $125.709 million ²⁷, representing an operating margin of -31.6% ²⁸. Net loss was $137.759 million ²⁹, and net loss attributable to controlling interest was $137.467 million ³⁰, with a margin of -34.6% ³¹. Diluted EPS is not explicitly provided in the summary financial data. Adjusted EBITDA was a loss of $32.560 million ³², with an adjusted EBITDA margin of -8.2% ³³. Adjusted net loss attributable to controlling interest was $51.925 million ³⁴, with a margin of -13.1% ³⁵. Capital expenditures for 2025 amounted to $9.0 million ³⁶. As of December 31, 2025, the company had outstanding bank credit of $2.4 million ³⁷, all payable within 12 months ³⁸. Cash and cash equivalents are not explicitly stated in the summary.

Revenue decreased by $46.0 million, or 10.4%, to $397.2 million in 2025 from $443.2 million in 2024 ³⁹. On a constant currency basis, 2025 revenue was lower by 10.5% year-over-year ⁴⁰. Gross margin decreased to 18.4% in 2025 from 21.8% in 2024 ⁴¹. The adjusted gross margin decreased from 22.1% in 2024 to 19.0% in 2025 ⁴². The adjusted EBITDA margin decreased from a negative 2.6% in 2024 to a negative 8.2% in 2025 ⁴³. The margin of adjusted net loss attributable to controlling interest increased from an adjusted net loss of 6.7% in 2024 to an adjusted net loss of 13.1% in 2025 ⁴⁴. Research and development expenses increased by $0.7 million or 14.6%, reaching $5.7 million in 2025, compared to $4.9 million in 2024 ⁴⁵. Selling and marketing expenses decreased by $6.7 million, or 7.8%, to $79.5 million in 2025, compared to $86.2 million in 2024 ⁴⁶. General and administrative expenses increased by $0.4 million, or 0.9%, to $39.5 million in 2025 from $39.1 million in 2024 ⁴⁷. Legal settlements and loss contingencies, net, increased by $18.4 million, from $7.2 million expenses in 2024 to $25.6 million in 2025 ⁴⁸.

During 2025, the company completed the acquisition of the remaining minority equity interests in Lioli Ceramica Pvt. Ltd. for approximately $1.9 million, resulting in 100% ownership of Lioli as of December 31, 2025 ⁴⁹. The manufacturing network underwent restructuring, shifting focus from in-house production, with operations discontinued at Sdot-Yam, Israel, Bar-Lev, Israel, and Richmond Hill, GA, USA facilities ⁵⁰. Impairment charges of approximately $45.7 million were recorded in 2025, primarily related to the Bar Lev facility, the held-for-sale Richmond Hill facility, and the right-of-use asset at the Bar Lev facility ⁵¹. Restructuring expenses related to manufacturing facility closures and partial asset sales totaled approximately $3.1 million in 2025 ⁵².

A key element of Caesarstone's strategy is to expand sales in certain existing markets, such as the United States, and additional new markets and offerings with high growth potential ⁵³. The company is optimizing its distribution network in the United States, including through the expansion of its brand into the South, Southeast, and Ohio Valley markets via the Omicron Acquisition ⁵⁴. A growing portion of revenues is attributable to installation and fabrication services ⁵⁵. The company estimates it can continue to expand its brand and product sales in the United States, where engineered surfaces represented 4.9% of total countertops by volume installed in 2024 ⁵⁶.

The company's R&D efforts are focused on the development of innovative CSF products, currently primarily tailored for the Australian market ⁵⁷. Additionally, the R&D department has expanded its focus to include the development of porcelain products for various global markets and diverse applications, working in close collaboration with the manufacturing facility in Lioli, India ⁵⁸. The company aims to increase purchases from PBPs in 2026 ⁵⁹.

Caesarstone attributes the decrease in adjusted EBITDA margin in 2025 mainly to lower sales, including lower average selling prices, increased manufacturing costs per unit due to lower capacity utilization in the Bar Lev plant, resulting in lower fixed-costs absorption, higher logistics costs, and increased tariffs to the U.S. market ⁶⁰. These impacts were partially offset by savings from an increased portion of PBP-produced product sales and operating expenses savings ⁶¹. The company is implementing a digital transformation to better streamline processes and support its business strategy, with technological and digital investments geared towards operational enhancements in supply chain management and production, along with improvement of go-to-market tools ⁶².

The company's primary capital requirements have been to fund production capacity expansions, investments in and acquisitions of third-party distributors, and the establishment of German operations ⁶³. Other capital requirements include funding working capital needs, legal proceedings, operating costs, debt payments, share repurchases, and dividends ⁶⁴. Capital expenditures for 2025 were $9.0 million ⁶⁵. The company's inventory strategy is to maintain sufficient inventory levels to meet anticipated customer demand, with inventory significantly impacted by sales in the United States, Australia, and Canada due to the 20-100 days required to ship products from PBP sources ⁶⁶. The company believes that, based on its current business plan, its cash, cash equivalents, short-term bank deposits, and cash from operations will be sufficient to meet capital expenditure, working capital, and liquidity needs for at least the next twelve months ⁶⁷.

The company's capital needs could increase materially, and liquidity and cash flows could be materially affected by the uncertainty related to bodily injury claims ⁶⁸. The company is subject to multiple lawsuits alleging injuries associated with exposure to respirable crystalline silica dust ⁶⁹. As of December 31, 2025, a provision of $47.2 million was recorded for probable and estimable exposure with respect to pending claims ⁷⁰. If there is an unfavorable outcome, subject to insurance availability, the payment of damages could be significant and materially and adversely impact cash flows ⁷¹. The company has lease payment obligations of $133.3 million as of December 31, 2025, with $29.9 million payable within 12 months ⁷². Purchase obligations for products and raw materials amounted to $15.9 million as of December 31, 2025, all payable within 12 months ⁷³. The company had outstanding bank credit of $2.4 million as of December 31, 2025, all payable within 12 months, with future interest payments totaling $0.2 million, also payable within 12 months ⁷⁴.

Caesarstone faces several material risks, including adverse outcomes and potential losses from bodily injury claims related to respirable crystalline silica exposure, with 618 injured persons globally as of December 31, 2025 ⁷⁵, and a provision of $47.3 million recorded for probable and estimable exposure ⁷⁶. The company is unable to obtain insurance coverage for future silicosis claims, and existing coverage is disputed by insurers, potentially leading to insufficient coverage ⁷⁷. Global trade is affected by governmental involvement, including antidumping and countervailing duties, which can cause unforeseeable market changes and increase costs, such as the 3.18% subsidy rate assigned to porcelain products imported from India ⁷⁸. Changes in laws and regulations relating to hazards associated with engineered stone surfaces, such as the ban on engineered stone slabs containing crystalline silica in most Australian states and territories effective July 1, 2024 ⁷⁹, may adversely affect the business. Economic downturns, particularly in home renovation and construction, high inflation, and increased interest rates, may lower demand for products ⁸⁰. The company relies on a network of third-party Production Business Partners (PBPs), with approximately 24% of products manufactured at more than one PBP facility ⁸¹, and disruptions or failures in managing these relationships could adversely affect competitive position, results, or profitability. Fluctuations in currency exchange rates, particularly the Australian dollar, Canadian dollar, NIS, and Euro against the U.S. dollar, may materially and adversely affect profitability ⁸². The inability to offset or pass on increases in costs or adverse changes in global sourcing, manufacturing, and supply conditions could materially adversely affect financial results ⁸³. The company may need to raise funds to finance capital needs, which could dilute shares, increase financial expenses, or limit business activities ⁸⁴. Disruptions to or failure to upgrade IT systems globally may impair operations and hinder growth ⁸⁵. The steps taken to protect brand, technology, and intellectual property may be inadequate, and the company may not succeed in preventing others from appropriating its intellectual property ⁸⁶. Compliance with continuously evolving privacy and data protection laws and regulations, such as the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR), may result in significant liability ⁸⁷. The company may have exposure to greater-than-anticipated tax liabilities, including challenges to transfer pricing arrangements and the allocation of income related to production outside of Israel ⁸⁸. Environmental, health, and safety regulations, such as those in India, may be costly or difficult to comply with, potentially leading to civil and criminal sanctions ⁸⁹. Litigation, disputes, or other proceedings, including a putative class action lawsuit seeking medical monitoring for workers exposed to artificial stone dust in California ⁹⁰, could result in unexpected expenses. Failure to meet ESG expectations or standards could adversely affect the business ⁹¹. Operating results may suffer due to failure to manage international operations effectively or regulatory changes in foreign jurisdictions ⁹². Conditions in Israel and regional instability may adversely affect operations, including the call-up of employees for military reserve duty ⁹³. The tax benefits available to the Israeli facilities, such as the "Preferred Enterprise" status, require meeting various conditions and may be terminated or reduced in the future ⁹⁴. The substantial share ownership position of Kibbutz Sdot-Yam and Tene, which together beneficially owned 40.6% of outstanding shares as of February 27, 2026 ⁹⁵, limits the ability of other shareholders to influence corporate matters.

Management's message to shareholders emphasizes the company's mission to be the leading choice for surfaces globally, with a significant portion of future growth expected from the U.S. market, which is seen as having the greatest growth opportunity ⁹⁶. The company believes that long-term competitiveness requires both organic growth and strategic acquisitions ⁹⁷. Management has successfully executed on this strategy in recent years, including the 2020 acquisitions of Lioli and Omicron, and the 2022 acquisition of Caesarstone Scandinavia ⁹⁸. The company is actively working to optimize its global production footprint by shifting from in-house production to sourcing engineered stone products from third-party Production Business Partners (PBPs) ⁹⁹. In 2025, the company completed the acquisition of the remaining minority interests in Lioli for approximately $1.9 million, achieving 100% ownership ¹⁰⁰. Management is also focused on developing innovative crystalline silica-free (CSF) products, particularly for the Australian market, and expanding its porcelain product offerings globally ¹⁰¹. The company is implementing a digital transformation to streamline processes, enhance supply chain management, and improve go-to-market tools ¹⁰². Despite a revenue decrease of 10.4% in 2025 to $397.2 million ¹⁰³, management is implementing cost-saving measures as part of its strategic restructuring plan, which contributed to a decrease in selling and marketing expenses by 7.8% ¹⁰⁴.