Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin improved significantly to 22.9% compared to 8.3% in the prior year quarter.
- Closure of the Richmond Hill facilities is on track to deliver annual cost savings of approximately $20 million in 2024 and $30 million annually by next year.
- Increased stake in the Indian porcelain facility from 60% to 81%, strengthening their position in the porcelain market.
- Positive cash flow from operations of $10 million in the quarter, driven by inventory reductions and other working capital improvements.
- Strong liquidity position with cash, cash equivalents, and short-term bank deposits totaling $103.6 million.
Negative Points
- Global revenue for the second quarter was $119.4 million, down 16.9% year-over-year.
- Sales in the US were down 13.8% to $59.8 million, driven by softer residential end markets and less favorable product mix.
- Australia sales were off by approximately 20.8% on a constant currency basis, reflecting slower market conditions and regulatory transitions.
- Operating loss in the second quarter was $9.3 million compared to $46.9 million in the prior year quarter.
- Increased shipping and material costs are expected to negatively impact operations and results in the second half of 2024.
Q & A Highlights
Q: Can you provide more details on the increase in shipping costs and whether you plan to take any additional pricing actions to mitigate this?
A: The increase in shipping costs is expected to impact results by $3 to $4 million per quarter in the second half of the year. Additionally, we face higher raw material costs due to sourcing challenges. However, savings from previous restructuring actions, particularly the sale of more expensive inventory from Richmond Hill, will partially offset these higher expenses. (Yosef Shiran, CEO)
Q: What are your assumptions for market demand in the second half of the year?
A: We assume similar market dynamics to those observed in the first and second quarters of this year. This includes the same level of demand and competitive pressures. (Unidentified Respondent)
Q: If market conditions deteriorate, do you have additional cost-cutting measures you can implement?
A: Yes, our new setup allows us to be more agile and better control ongoing costs. We can reduce costs quickly if needed and ramp up capacity without significant investment if market conditions improve. (Yosef Shiran, CEO)
Q: Can you provide an estimate of the potential proceeds from the sale of the remaining Richmond Hill property?
A: We believe the developed part of the Richmond Hill property, including buildings, could fetch several tens of millions of dollars. (Unidentified Respondent)
Q: Is there any update on the monetization of the Israel facility?
A: We have leased the majority of the available areas in the Sdot Yam plant, which will start generating cash flow in 2025, amounting to several million dollars. (Unidentified Respondent)
Q: Can you expand on the decision to increase your stake in the Indian porcelain facility?
A: Porcelain is a key part of our growth strategy. We increased our stake in the Indian facility from 60% to 81% to capitalize on its potential. While current sales are low, we expect significant growth and profitability from this plant in the future. (Yosef Shiran, CEO)
Q: How will the increased stake in the porcelain business impact margins?
A: In the short term, the increased stake in the porcelain business will not have a material impact on margins. (Yosef Shiran, CEO)
Q: What is the status of the silicosis-related claims in the US?
A: We are named as core defendants in 43 individual lawsuits. The first case is currently in trial, and while we believe in our defense, the outcome is difficult to predict. The remaining 42 claims are at an early stage, and we are unable to estimate potential exposure at this time. (Nahum Trost, CFO)
Q: What is your outlook for adjusted EBITDA for the full year 2024?
A: We expect a loss in the mid-single-digit million range for adjusted EBITDA in 2024, mainly due to increased shipping and material costs in the second half of the year. This outlook assumes similar market conditions and demand as seen in the first half of 2024. (Nahum Trost, CFO)
Q: How do you plan to navigate the global market headwinds and improve profitability?
A: We are focusing on cost efficiencies, optimizing our production footprint, and making strategic investments in sales, marketing, and R&D. These efforts position us well to drive improved profitability as market conditions stabilize. (Nahum Trost, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
