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  "documentTitle": "Caesarstone Ltd. (CSTE)",
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  "presentationDate": "2017-06-15 00:00:00",
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  "notes": "The slide uses comparative financial analysis to argue that CSTE's reported figures are inconsistent with industry norms and competitor data.",
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      "text": "We believe that CSTE is either not properly maintaining its assets, or overstating its sales volume and revenue while PPE remains underutilized.",
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      "text": "Caesarstone's marketing expenses are remarkably low considering they allege to have over 10 times as many distributors in the USA as Silestone.\nCaesarstone's maintenance capex spending is substantially lower than Silestone's, despite CSTE's higher revenues and COGS.\nSilestone's margins are 20% higher, suggesting less volume sold per unit of revenue and therefore lower wear & tear machinery expenses.\nAll quartz machinery (incl. frequent wear & tear replacement parts) are bought from niche group of suppliers with limited price variance.",
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      "text": "marketing expenses",
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      "text": "In order to remove the effects of growth, we have estimated maintenance capex as the D&A recorded for the given year. This is fundamentally the value of the assets that will have to be replaced in order for the businesses to continue its operations.",
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      "text": "This analysis highlights what was already apparent at first glance of the accounts: Caesarstone's free cash flow is inexplicably and illogically better than its competitors. Note that while we have modelled in CSTE's lower tax rate, this does not affect our comparative analysis conclusions.",
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      "text": "We believe that CSTE is either not properly maintaining its assets, or overstating its sales volume and revenue while PPE remains underutilized.",
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      "text": "A comparative financial analysis against Silestone (a.k.a. Cosentino) reinforces our belief that Caesarstone's financial statements are misrepresented. Specifically:",
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      "text": "CSTE's marketing expenses have averaged around 13% of revenues over the last four years. We derived marketing expenses from Silestone's account by way of elimination, which appear to be in the region of 20% of their revenue over the last 2 years. In any case, Silestone have much higher OPEX overall per Figure 21 below.",
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      "text": "As mentioned through this report, CSTE has over 10 times more distributors than Silestone. CSTE's marketing expenses do not reflect this enormous client upkeep with a maintenance cost consequence. This was reflected in our channel checks where a numerous CSTE's listed agents simply did not sell the product.",
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      "text": "In order to make a fair comparison, we have derived unlevered operational cash-flows for both businesses over a 5-year period - CSTE ending in FY 2016, Silestone ending in FY 2015 as FY 2016 results have not yet been released.",
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      "text": "44 http://www.breton.it/engineeredstone/en#ad-image-0\n45 Salaries accounted for, only other costs could be admin, which, given high salaries, are presumably done in house and thus would not be recognised as “External Services”.\n46 Silestone FY 2014 Financial Statements. Note: Note: we were unable to retrieve full financial statements for FY 2015, only raw financial data sourced from S&P Capital IQ.",
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      "text": "10. Caesarstone vs. Silestone – financial comparison",
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