Yosef Shiran, CEO of Caesarstone - #PreMarket Prep for July 28, 2015

Good morning, thank you very much.

For the last 20 years I managed public companies. Some of them I took public, some of them were public companies before I joined them. About 7 years ago I met a private that held a part in Caesarstone and they offered me to join Caesarstone. What intrigued me about Caesarstone was the possibility to build a global brand, so this is how I joined Caesarstone.

I think with those companies, like everybody, like experience for everybody else, you gain some expertise. What I learned is first and foremost, of course, to work with people, to motivate them, to collaborate. And in addition to that, of course, all other aspects of businesses: how to build an efficient business, how to build the right organizational structure, to understand a lot about consumer preferences and consumer understanding and perception about your products, product development, brand building of course, and engagement with global players, either big retailers or other leading brands.

Caesarstone invented the quartz surface in '87 by Kibbutz. Kibbutz is a sort of special form of living typical to Israel where you have no property and everything belongs to everybody, sort of say. The average kibbutz is about 1,000 people. This specific kibbutz that invented Caesarstone is about 700 people. So they were looking to come up with an invention that will create the best surface. They thought about quartz. Quartz is a mineral that is very durable and very strong, one of the strongest after diamond. And they started to develop the whole process. By the mid-90s, after a very tough beginning, they started to produce tops and the company started to grow. And then step by step it was presented to the world. Quartz is still a relatively new story globally, or let's say relatively new. And quartz is the best alternative today over other alternatives to serve as a countertop. So you may be familiar with granite, with marble, with laminate or solid surface. They are all being replaced by a better solution: quartz surfaces. And of course we believe that Caesarstone provides the best quartz surface around. So Caesarstone operates globally today in 55 countries. Our biggest markets are the United States, the first one, then Australia, then Canada, and then Israel. And then of course Europe. We operate as I said in other countries. Quartz penetration varies and you may see a very high penetration, for example, in Israel and Australia. In Israel quartz penetration is around 85%, in Australia it's close to 40%. In the States it's only 10% but growing very fast. We believe that we have brought the best surface in the world to the market and we hope that Caesarstone products will continue to lead the market and increase our share there. So this is more or less it.

You can use it for flooring, for walling, but it's a killer category. And I mean by that that it's better in almost all the aspects when you compare a product to serve as a countertop. When you go to flooring, it's very good. You can use it for malls or for airports or for other places where there is a high wear need. But you have alternatives that can be as good as quartz. In to serve as a countertop, it's still the best solution that's available.

So we decided to go to IPO as a strategic move in order to improve our access to cash and to make sure that it will not be a limit down the road when we need to grow and to invest. As you probably have seen, we invest a lot of money in product lines and in buildings for those machineries and also for other issues like marketing and building brands. So we wanted to have access to this money. We decided to take it public. The process was a bit tough. When we came to the States through the roadshow, there was a lot of skepticism around the success of quartz and whether really the American consumer will adapt it and will prefer it over other alternatives. So in a way we started as a what is called the 'show me' company. So let's see what you can do and then decide. But still, we managed to do the IPO and yeah, and the rest is history, you know it already.

So I think, and of course in my answer I'm referring to every company, not specifically to Caesarstone. So of course as you said, a good economy is better than a bad economy and this clearly applies also to us. I think maybe what is special in the quartz business is the material conversion story. And I mean by that that when a better product is replacing inferior products, so this of course helps when times are bad. So you may find that these kind of companies perform better in bad times. In addition to that, of course, the rate of adaptation of new ideas in specific markets. Some markets tend to adapt new ideas faster, some markets tend to adapt it in a slow pace. Of course, and in addition to that, the brand reception. So sometimes it takes time to build a brand, sometimes it is easier to build the brand faster. So these are the main issues. In terms of what could derail growth or success, again I'm relating here to every company, adverse effects can come from competition, can come from new technologies that you may not have access to or you fail to develop, market conditions as you suggested of course, and of course unsuccessful performance of a specific company. So all that is relevant to every company, as to Caesarstone of course.

So opening the factory in the States, of course, works similarly with our growth idea and the reason that we also came public. We wanted to be close to our main market and the proximity to strategic market is very important. It helps us to shorten time to market, to improve our service, and also in a way to even if it's little to pay something back to the community that we sell a lot in. So all those were the reasons to come to the States. We have the ability in the place in Georgia, near Savannah, Georgia, and Richmond Hill, Georgia, to expand the plant. There are no specific plans on the table now but we bought land and our intention is with time and with the demand when it comes to be able to increase our factory in the States.

Thank you very much for your time.