Caesarstone (NASDAQ:CSTE) reported improved profitability metrics in the second quarter of 2026 despite lower revenue, as cost reductions tied to its manufacturing restructuring helped expand margins and narrow its adjusted EBITDA loss.
Chief Executive Officer Yos Shiran said the company’s gross margin reached 24% during the quarter, improving both from a year earlier and sequentially, even as market conditions remained soft. Global revenue totaled $96.6 million, down from $101.1 million in the prior-year quarter and down about 7.7% on a constant-currency basis.
Margins Improve as Revenue Declines
Gross margin rose 440 basis points from 19.6% in the second quarter of 2025 and 170 basis points from 22.3% in the first quarter of 2026. Adjusted gross margin was 26.5%, compared with 19.7% a year earlier.
Chief Financial Officer Nahum Trost said the margin improvement primarily reflected savings from the closure of the Bar-Lev facility and the transition of quartz production to the company’s global production-partner network. Results also benefited from a roughly $2 million refund of previously paid U.S. IEEPA tariffs.
Adjusted EBITDA was a loss of $1 million, compared with a loss of $6.4 million in the prior-year quarter and a $7.5 million loss in the first quarter. Adjusted diluted net loss per share was $0.10 on 34.6 million shares, versus an adjusted diluted net loss per share of $0.33 on 34.7 million shares a year earlier.
Operating expenses were $33.4 million, or 34.6% of revenue, compared with $32.5 million, or 32.1% of revenue, in the prior-year period. Excluding legal settlements and loss contingencies as well as impairment and restructuring expenses, operating expenses improved to 29.6% of revenue from 30.1% a year earlier, Trost said.
North America Remains Soft; Australia Extends Growth
North American demand remained a pressure point. U.S. revenue declined 14.1% to about $42.7 million from $49.6 million a year earlier, driven by lower volumes in the company’s core business, including weakness in commercial development and sales through stone suppliers.
Caesarstone’s big-box business grew about 3% year over year, led by growth with IKEA, according to Trost. Shiran said the company is continuing to build relationships with customers and fabricators and expand its big-box presence.
Canadian revenue fell 17.5% on a constant-currency basis, which the company attributed to fewer housing completions and slow market conditions. EMEA sales declined 9.8% on a constant-currency basis, primarily due to the timing of customer shipments.
Australia was a notable area of growth. Revenue in the region increased to $20.3 million from $16.6 million, up approximately 10.1% on a constant-currency basis. The quarter marked Caesarstone’s fourth consecutive period of year-over-year growth in Australia, supported by its silica-free ICON products and a recovery in market position.
Revenue in Israel rose 32.4% on a constant-currency basis, mainly due to comparison with the prior-year period, which had been affected by regional conflict.
Restructuring Savings and Balance Sheet
Caesarstone said its restructuring actions are expected to produce increasing savings as implementation progresses. The closure of the Bar-Lev facility is expected to generate about $22 million of annualized cash savings once fully implemented, contributing to total anticipated annualized savings of more than $100 million by 2027 compared with full-year 2023.
Cash costs associated with the restructuring program were $1.2 million in the second quarter. The company expects another $3 million to $4 million of cash costs during the remainder of 2026.
As of June 30, Caesarstone had net cash of $51.8 million, up from $50.4 million at the end of the first quarter. During the quarter, it repaid its Leumi credit facility and had no outstanding debt to financial institutions.
Tariff Changes Could Affect Outlook
The company said broad U.S. import tariffs remain in place, with the average tariff on products it imports into the U.S. estimated at approximately 15%. About 44% of second-quarter revenue was generated in the United States.
In addition, the U.S. administration issued a final determination on July 31 imposing a four-year tariff-rate quota on quartz surface-product imports effective Aug. 15. In the first year, imports within an annual quota of roughly 13 million square meters, assessed quarterly, will face an additional 25% tariff. Imports above that quota will face an additional 50% tariff. Over the following three years, the in-quota tariff is set to decline to 19%, while the annual quota rises to approximately 15.7 million square meters.
Caesarstone said it is evaluating the impact on its production and supply network and plans to use sourcing and pricing actions to mitigate the effects. While management said it entered the third quarter on track to achieve its previously stated goal of positive adjusted EBITDA, Trost said the new quartz tariffs have prompted the company to reassess the timing of that target.
Legal Matters
Caesarstone said it faces claims from approximately 800 individuals alleging injuries related to respirable crystalline silica dust exposure, including roughly 600 claims in the United States. As of June 30, the company had recorded a provision of $51.2 million for probable and reasonably estimable losses and $12 million in global insurance receivables, while coverage disputes remain ongoing.
During the quarter, Caesarstone resolved four California claims, received a favorable defense jury verdict in a Colorado case that assigned no liability to the company, and was dismissed from several cases in various states. The company said prior verdicts remain under appeal and that it will continue to evaluate reserves and potential insurance recoveries as matters develop.
About Caesarstone (NASDAQ:CSTE)
Caesarstone Ltd. is an Israel-based manufacturer specializing in engineered quartz surfaces for residential and commercial applications. The company’s core business centers on the design, production and marketing of quartz slabs and tiles used for kitchen countertops, bathroom vanities, flooring and wall cladding. Caesarstone’s products combine natural quartz with resins and pigments to deliver durable, low-maintenance surfaces known for their aesthetic versatility and resistance to scratches, stains and heat.
Founded in 1987 and headquartered at Kibbutz Sdot Yam, Israel, Caesarstone has grown into a global brand with distribution in over 50 countries.
