Greetings, and welcome to the Caesarstone Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a remainder this conference is being recorded. It is now my pleasure to introduce your host Brad Cray of ICR. Thank you. You may begin.

Thank you, operator, and good morning to everyone. I'm joined by Yuval Dagim, Caesarstone's Chief Executive Officer, and Ophir Yakovian, Caesarstone's Chief Financial Officer. Certain statements in today's conference call and responses to various questions may constitute forward-looking statements. We caution you that such statements reflect only the company's current expectations and that actual events or results may differ materially. For more information, please refer to the risk factors contained in the company's most recent annual report on form 20-F and subsequent filings with the Securities and Exchange Commission. In addition, on this call, the company will make reference to certain non-GAAP financial measures, including adjusted net income, adjusted net income per share and adjusted EBITDA. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's Fourth Quarter 2018 earnings release, which is posted on the company's Investor Relations website. Thank you and I would like to now turn the call over to Yuval. Please go ahead.

Thank you, Brad, and good morning, everyone. With six months of my tenure as Caesarstone's CEO, I've been able to spend a significant amount of time with our teams and customers around the world. The many great attributes and assets I've witnessed with the Caesarstone organization have instilled greater confidence in me as we move forward. We spend the last few months preparing our annual operating plan for 2019, where we mapped the opportunities and the challenges we are facing both internally and externally, and we built the plan to address them. While we're realizing that most of the improvements will take time and investment to mature, we see a few near term solutions. Just last month, we took a major step forward in North America by combining our US and Canadian operations to take advantage of the many similarities between the two regions. We understand that combined North American region provides us numerous opportunities. Scale benefits include the ability to unify certain functions under one team that can create an enhanced go-to-market strategy, refined operations and improve efficiencies. The main goal of this step is to better position us to capture additional market share in the US have increased our stability in coming years. This is especially important now given the recently implemented tariff on US imports of quartz countertops from China. Once our North American realignment is integrated and working well, we expect to better execute our objectives in the region. Strengthening our capabilities in North America is directly aligned with our actions to enhance our global platform and to more effectively leverage the Caesarstone brand. We are making investments in talent and technology throughout the organization in order to better manage our go-to-market supply chain and production processes. This will allow us more efficiently having the right…

Thank you, Yuval and good morning everyone. We start with our revenue for the fourth quarter. For the fourth quarter of 2018, global revenue was $142.9 million, compared to $148.1 million in the fourth quarter of last year. This was mostly attributable to an adverse effects impact of $4 million. On a constant currency basis, revenue declined by point 7% versus last year. We saw sales improvement in Europe, stable performance in Canada and softer performance in other regions. In the United States, fourth quarter sales were off by 0.7% compared to the fourth quarter of 2017. This was primarily attributable to continued weakness at the retailer IKEA. As discussed in prior calls, changes in IKEA's promotional structure continue to impact our results. While IKEA represent an attractive source of revenue, and returns to Caesarstone, the timing and structure of their promotional activity does affect our results. In our core US business, revenue grew as low meet single digit pace which represent the second consecutive quarter of growth. Ongoing changes to enhance our go-to-market strategy and strengthen distribution capabilities allowed us to grow. Despite the previously discussed second half of 2018 surge in pre-buy activity ahead of recently implemented tariffs on US import of quartz countertops from China. As a reminder, since August, there have been several announcements from US government agencies in the interest of promoting fair trade in response to Chinese imports. As it pertains to quartz countertops, there are three cumulative tariffs. The first of which is a 10% tariffs on broad basket of Chinese imports in August. The other two preliminary tariffs announced are specific quartz countertops including countervailing duty of effectively 34% since September and anti-dumping duty ranging from 242% to 341% since November. I think all of these up, the US as to date…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Susan Maklari with Credit Suisse. Please proceed with your question.

Hi, this is Amanda on for Susan. Thanks for taking my question. So just given the significant amount of pre-buy ahead of the tariffs, can you talk to that near term impact and what's the risk that the higher inventory continues to impact post 1Q and also any additional color on the tariff impact to your global operations? Thanks.

Hi, Amanda, it's Yuval. I think it is right that at the moment markets are kind of flooded with the pre-buying slabs from China. And I think we are experiencing that through same demanded before, not an encouraging spike in any market demands as we see from the first quarter. We expect that will be fully absorbed in the market in quarter one and quarter two and therefore we are expecting to see some kind of increasing volumes and demand on a second half of the year. And looking at the global, so we are monitoring the effect globally, we can see that we see a much – a very different environment than we've experienced in the past quarter. But we are monitoring and we will react accordingly, but currently this is what we see.

Okay, great. Thank you. And then can you just provide an update on maybe output of your Israeli facility? Are you continuing to see improvement and throughput and streamlining production there, despite additional product complexities?

Yes, sure. I think it's quite – I'm quite happy with the improvements we see in operations from quarter-to-quarter. That includes the Israeli facilities and our facility in Richmond Hill when we just appointed the new plant manager who started the beginning of the year, so we look like positively on our production efficiency as we move throughout the year. And along with that we see actually no shortage of capacity for the next invisible time, I guess for the next two or three years, we see us servicing the markets quite well with our three facilities.

Thank you.

Thank you. Our next question comes from the line of John Baugh with Stifel. Please proceed with your question.

Good morning, Yuval and Ophir. I have two questions. I guess the first was around the gross margins and maybe if we could focus on calendar '18 as opposed to the fourth quarter and the past we've gotten some color on the various numbers, basis point impacts from I believe the four factors that you cited. Is there any color that you could provide, again for the year on those and I'm particularly interested in Israel and what those plants have done through the year whether they're truly improving because it sounds like Richmond Hill's getting better just don't have a frame of reference as to whether is Israel gross margins are getting better.

Yes, so you asked about the Q4 main drivers for the gross margin?

I'm really focused on the year, so the year 2018.

Yeah, so I think as we as we said I mean the main factors for the year and actually for the fourth quarter we experienced the same it's the same trend of the product – the manufacturing costs in Israel which is higher and we see it as a negative impact on the gross margin. Another one is the foreign exchange headwinds that we experience. The inventory and logistic inefficiencies, we talked about that in previous calls and it still affects us and the higher raw material cost. And the other – on the other side, the positive side we see better geographic and product mix and for the full year the improvement that we see in Richmond, the significant improvement in the output in Richmond and in the yield there is also driving favorable outcome in the gross margin for the full year.

And if I may add John, I think if you if you look forward, there's still room for improvement in our operations and supply chain divisions and for that I think we've recruited quite a quite many new talents, two of which are new VP for Operations and new VP for Supply Chain, both – one just joined the business, the other one will be joining the business next week. So I'm looking forward to see more improvement throughout the year.

So Yuval, is the Israeli – are the Israeli plants in terms of gross margin, I mean, are they improving sequentially? It's been quite some time where that's been a factor and a drag on gross margins and you've talked about product complexity there in terms of producing too many complex products. Is that been resolved, where does that specific issues in and are we seeing any sequential improvement? Thank you.

Thanks for the question John because I think it's maybe an opportunity to clear some of the things. Most of the pressure that we see on gross margin actually comes from the market and commoditizing some of our designs and products. Actually when we go to – when we look in more deeply on the different models that we have we actually beneficial quite a lot for the new products even though they're more complicated to produce, but if you look all in all in terms of gross margin they are very profitable and when you analyze it properly, you see that the pressure comes from the commercializing some of the simple products that we have that can be produced in other facilities of our competitors and mostly low manufacture – low cost manufacturing facilities in China.

Okay and then just quickly on IKEA and the US piece of IKEA and I appreciate that you don't like to talk about a customer specifically, but this has been a source of pretty wide fluctuations for some time now in terms of performance. And I think investors in general don't have a sense for whether IKEA US is growing, shrinking, still very profitable, is there any help you can give us on that account going forward? Thank you.

I think John it's fair to say that quarter-on-quarter we still see a lower quarter in this year rather than last year. I think the promotional change that IKEA did probably second quarter last year hasn't been fully manifested itself on the first quarter last year and it's now fully impacting our quarter this year. Yes, I think the relationship and the volumes are quite stable with IKEA and I don't expect for 2019 any spike that I can visit in the moment. So it looks quite stable for this year.

Thank you. Good luck.

Yeah, just to add there John, we do – we'll see a tough comp in IKEA for Q1 and the – as Yuval mentioned, we have less control on this – on the activities that IKEA is taking on their promotional and how they structure their promos and the timing and the length of their promotional activities, but our expectation for what we know is to be more – pretty stable next year.

Thank you.

Thank you. [Operator Instructions] There are no further questions at this time. I'd like turn the call back over to Mr. Dagim for any closing remarks.

Thank you for your attention this morning. We look forward to updating on you on our progress in the quarters to come. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.