Caesarstone Plagued by Production Problems

Posted on 16 November 2017 by CRadmin3

After a couple of huge stock losses in 2015 and the appointment of a new CEO in 2016, problems continue to plague Caesarstone in 2017 – this time in production. Problems in production have so far led to lower than expected profit margins and a slew of management changes at both the company’s U.S. and Israel facilities.

During the third quarter of 2017, Caesarstone yielded nearly $155 million in revenue and a gross profit of only $49.7 million, 15 percent less than the third quarter of 2016.

“Third quarter revenue increased by 7.2% to a new record of $155 million,” said CEO Raanan Zilberman. “Gross margin was far below our expectation as a result of challenges related to our manufacturing performances.”

According to Zilberman, the downshift in production was caused by a change in the company’s product mix, which now uses two formulas: one for premium and one for differentiated. This lead to longer cycle and setup times for each model. Caesarstone claims that this change enables the company to “maintain a premium position in the market and our prices” and that the lag is addressable with the right management.

At the U.S. plant, poor performance was attributed to a combination of extending the range of offerings to high-end products, which require longer to manufacture and having to close for a week because of Hurricane Irma.

“I have decided to appoint a new VP of global operations,” explained Zilberman. “I have already placed a new leadership team in Richmond Hill, including a new plant manager, a new operation manager, a few new department managers and a team of technical and manufacturing experts, all coming from Israel.”

At the Israel facility, changes began in October when two new plant managers and a production manager were hired. The new team will be rotated to “enhance the managerial structure and capacity of management.”

“We are starting to implement a series of improvement process to shorten the cycle time and to minimize the idle time,” Zilberman concluded. “Those improvement processes can take some time, but if we will implement them correctly, they will yield the expected results.”

In addition, to better meet demand, Caesarstone has been utilizing some OEM production for basic SKUs under strict specifications and a quality assurance process.

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