Caesarstone Sdot-Yam Ltd. (NASDAQ:CSTE), a manufacturer of high quality engineered quartz surfaces, today reported financial results for its first quarter, ended March 31, 2012. Pro forma results discussed below attempt to present results as if the acquisition of Caesarstone USA had been completed on January 1, 2011 to allow for comparability.
Revenues in the first quarter of fiscal 2012 increased by 28.5% to $67.3 million compared to $52.4 million in the same quarter in the prior year. This was driven predominantly by the contribution of its former distributor, Caesarstone USA, acquired in May 2011. Pro forma revenues for the quarter increased 11.7% compared to the prior year’s first quarter, with rapid growth in the United States and Canada, up 22% and 69% respectively on that basis. This growth and growth in other regions was partially offset by a 10% decline in Israel against an unusually strong quarter last year. A table detailing regional revenue performance is included below.
Yosef Shiran, Chief Executive Officer, commented, “We are very pleased to report a strong first quarter and expect continued solid performance as the year progresses. Our strategy to shift to a direct distribution model in the United States, Canada and other regions around the world has accelerated our growth, enhanced our diversification, and increased the range and size of our opportunities. We are making investments, particularly in the United States, to rapidly build our brand and business and we remain very focused on continuing to execute well. We expect to drive value to our shareholders by leveraging these investments over time as we extend our global reputation for innovation, quality and service.”
Gross margin in the first quarter increased to 41.8% compared to 38.2% in the prior year, driven primarily by the transition to direct distribution, which generally carries higher gross margins. To a lesser extent, the Company also achieved economies of scale over its fixed manufacturing expenses with increased production volume. The Company noted that adjusting for the impact of $0.8 million of IPO bonus payments and a $0.5 million charge for the excess cost of acquired inventory, this year’s first quarter gross margin was 43.7%. Pro forma adjusted gross margin in the first quarter of last year was 42.6%.
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