Gross margin expanded by 100 basis points to 22.3% despite the lower revenue base, with adjusted gross margin reaching 23.9% compared to 21.2% in the prior year quarter.

"Our first quarter results reflected meaningful structural progress in our transformation," said Yosef Shiran, Caesarstone's chief executive officer. "Gross margin expanded by 100 basis points despite lower revenue, supported by our transition to a third-party manufacturing model and a more optimized production footprint."

Bar-Lev Closure Completes Asset-Light Transition

Caesarstone has fully exited quartz manufacturing at its Bar-Lev facility in Israel, completing a multi-year transition to a global manufacturing partner network. Porcelain production continues at the company's Lioli Ceramica facility in India.

The company expects the restructuring to generate approximately $22 million in additional annualized cash savings by 2027, bringing total savings since 2023 to more than $100 million. Cash restructuring costs in Q1 totaled $0.4 million, with an additional $3 million to $5 million expected through the remainder of 2026.

"With quartz production now fully transitioned to our global manufacturing partner network, we are beginning to capture the intended benefits of a more flexible, asset-light production model," said Nahum Trost, Caesarstone's chief financial officer.

Beyond the facility closures, Trost said the company is evaluating distribution center consolidation and additional fixed cost reduction opportunities to reinforce its path to profitability.

Regional Performance: U.S. Softness, Australia Bright Spot

U.S. revenue fell to approximately $40 million in the quarter, down from $49.1 million a year earlier, which the company attributed to persistent market softness and competitive pressures. Canada revenue dropped 23.8% on a constant currency basis. The U.S. market represents roughly 45% of Caesarstone's global revenue.

Australia delivered a third consecutive quarter of year-over-year growth, with revenue of $17.1 million up 11.2% on a constant currency basis. The company credited the rollout of its zero-silica ICON product line for recapturing market share following the country's ban on engineered stone containing crystalline silica.

EMEA sales declined 10.3% on a constant currency basis, which Trost attributed primarily to shipment timing in the indirect distributor channel and said he expects to normalize in the second quarter. Israel revenue fell to $4.2 million from $5 million, reflecting the impact of a regional conflict that began in late February.

Tariffs and ITC Decision Loom

Trost said the average tariff applicable to products Caesarstone imports into the U.S. is currently approximately 15%. The company has implemented a U.S. price increase to partially offset the higher costs and continues to work with production partners on supply chain optimization.

Separately, the U.S. International Trade Commission voted affirmatively on injury in its Section 201 quartz safeguard proceeding during Q1, and on May 5 issued its recommended remedy: a four-year tariff rate quota with a 25% ad valorem in-quota tariff and a 40% ad valorem out-of-quota tariff. Under the proposal, quota levels would rise and tariff rates would gradually decline over the four-year period. President Donald Trump is expected to issue a final determination within 60 days.

"We are assessing all potential outcomes and remain actively engaged in the process," said Trost. "We would seek to mitigate this impact through further supply chain optimization and appropriate pricing actions."

Silicosis Litigation Update

Caesarstone disclosed 711 active silica-related injury lawsuits as of March 31, including 509 in the United States, 156 in Australia and 36 in Israel. The company has recorded a $48.8 million provision representing its best estimate of probable losses, offset by $11.6 million in insurance receivables.

In May, a Colorado jury ruled in favor of Caesarstone, assigning no liability to the company. The company also settled four additional claims in California during the first quarter. Coverage disputes between Caesarstone and certain insurance carriers, initiated in July 2025, remain in early stages.

Trost also referenced the Protection of Lawful Commerce in Stone Slab Products Act, introduced in the U.S. House of Representatives in 2025, which would shield manufacturers and distributors from liability for injuries caused by unsafe fabrication or alteration performed by third-party fabricators. The bill remains in early legislative stages following an initial subcommittee hearing in January 2026.

"We view the underlying intent of the legislation as a constructive step for our industry," said Trost.

Path Forward

Caesarstone ended the quarter with $52.3 million in cash, cash equivalents and short-term bank deposits, and $1.8 million in total debt, for a net cash position of $50.4 million. That compares to a net cash position of $57.5 million at the end of 2025.

The company reiterated its target of returning to positive adjusted EBITDA in the third quarter of 2026, assuming no material deterioration in global economic and geopolitical conditions.

"As consumer confidence and housing market activity normalize, we believe Caesarstone is well positioned to benefit from a recovery in countertop demand with a stronger cost structure and improved brand positioning than we had entering this period," said Trost.