Mohawk 2Q Earnings Up 8%
Calhoun, GA, July 20--Mohawk in the second quarter reported earnings of $93.8 million and earnings per share of $1.39, both 8% above last year.
Analysts were looking for second quarter earnings per share of $1.35.
Net sales in the quarter were $1.62 billion vs. $1.49 billion in the prior year, an increase of 9%.
Net sales in the Mohawk segment were $1.18 billion in the quarter, an increase of 7%. Net sales in the Dal-Tile segment were $439.8 million, an increase of 16%.
EPS in the first half were $2.42 and net earnings were $163.8 million, both were up 7% over last year. Net sales in the first half were $3.12 billion, an 8% increase over the first half 2004.
Jeffrey S. Lorberbaum, chairman and CEO, stated, "Mohawk turned in another strong performance for the quarter. I am especially pleased with the excellent Dal-Tile performance which continues to exceed our expectations. The 15.8% operating margin is one of the highest we have recorded. Our investments in Dal-Tile including the expansion of our manufacturing plants in Muskogee and Mexico, adding distribution points and opening new design galleries are continuing as planned. This should support continued growth in the ceramic tile business and increase capacity to satisfy our customers' requirements.
"The Mohawk segment also reported good results for the quarter with both the commercial and residential new construction business expanding as demand remains strong. We continue to broaden our carpet tile offerings through our Lees and Mohawk brands. Carpet tile is a growing category among designers and architects.
"Our retail replacement business was soft during the quarter as a result of fewer consumers shopping in retail stores. Sales of our Home products are still under pressure as we have exited some marginal products and some customers have reduced their inventory levels. The profitability is in line with the Mohawk segment and we are investigating alternatives to maximize our business.
"Price increases were implemented in the second quarter as a result of raw material and energy cost increases. This impacts our margins as the timing of price increases lags behind the cost increases. Many of the raw material cost increases appear to have moderated during the quarter. However, increases in oil costs and worldwide commodity demand could further affect our costs.
"We recently announced the acquisition of Unilin, who is leader in high-end laminate in both the U.S. and European market. We expect to close in the fourth quarter this year. This is the second significant step, after our 2002 Dal-Tile acquisition, in broadening our participation in the hard surface flooring market. Unilin is the only fully integrated U.S. manufacturer with a history of innovation and cutting edge products. Unilin's management will remain in place and lead our laminate efforts.
"Our leverage at 24% debt to capitalization provided the opportunity to acquire Unilin. We are in the process of obtaining regulatory approvals for the combination in the United States and Europe. The combined management team is developing a long-term strategy to maximize our laminate business. We expect the acquisition to be slightly accretive in 2006.
"A strong housing market and declining unemployment continue to support the overall economy. Our business in the residential new construction and commercial markets has continued to show strength. Other economic factors such as high oil and gasoline prices have affected our retail replacement business. Future raw material and energy prices are not predictable and may affect our industry. After considering these factors, the third quarter earnings forecast is from $1.71 to $1.80 EPS."
Related Topics:Mohawk Industries, Daltile
