Lorberbaum Details Cost Cutting, Strategic Investments On Recent Earnings Call

Calhoun, GA, August 2, 2024--Citing the impact of elevated mortgage rates, high home prices and the "locked-in" effect on the housing market and, thus, the flooring remodeling market, Mohawk chairman and CEO Jeff Lorberbaum detailed some of the company's cost cutting measures during its recent Q2 earnings call.

"To reduce costs and align our business with current conditions, we're initiating additional restructuring actions across all our segments that would generate annualized savings of approximately $100 million, of which $20 million to $25 million will be recognized this year," he said.

"The cash cost of these actions is about $40 million with a total cost of approximately $130 million. The execution timeline will vary by project, with some extending throughout 2025 and into '26.

"In our global ceramics segment, we will optimize manufacturing by idling some less productive operations and aligning production to increase efficiency. We'll consolidate regional warehouses, further reduce product complexity and leverage technology to lower administrative costs.

"We'll rationalize some of our Flooring North America manufacturing to enhance plant utilization, retire less efficient equipment and simplify our offering. And Flooring Rest of World will lower our administrative and operating costs, streamline our product portfolio and distribution and decommission inefficient assets.

"These actions will complement our previous restructuring initiatives that will reduce costs by approximately $60 million in 2024. Along with these, our teams are implementing many measures to manage current conditions, including enhancing sales opportunities, increasing productivity and managing our overhead and working capital."

Meanwhile, he added, "The businesses that we're putting investments in is the laminate business, the countertop business with quartz, the slab business in Europe, and the insulation businesses. We believe those have the most opportunities for higher growth."

Though Lorberbaum said he believes the industry is at the bottom of this economic cycle, he anticipates present conditions continuing in the third quarter amid elevated interest rates, inflation and weak housing sales.