Mohawk Q2 Earnings Fall 23 Percent from 2007
Calhoun, GA, July 21, 2008-- Mohawk Industries Inc. reported second quarter net earnings of $89 million and diluted earnings per share of $1.29, both 23 percent below last year but slightly ahead of the company's revised guidance.
In the second quarter of 2007, net earnings were $115 million and $1.68 per share, respectively.
Net sales for the quarter were $1.84 billion, a decrease of 7 percent from 2007.
The company generated cash flow from operations of $267 million. In addition, $183 million of debt was paid down improving the company's debt to capital ratio to 30%.
For the first six months of 2008, net earnings were $154 million and EPS was $2.25, both 25% below last year. Net earnings and EPS were $206 million and $3.01 per share, respectively, in the first six months of 2007.
"Our results for the second quarter were impacted by the slowing economies in the U.S. and Europe and rapidly increasing commodity costs," said CEO Jeffrey L Lorberbaum.
"Declining new U.S. home construction and residential remodeling, slowing European demand and rising raw material and energy costs have contributed to the flooring industry cyclical decline. The rapidly increasing costs are impacting our margins even as we raise selling prices to offset these costs.
"Our management team remains focused on improving our market position, increasing quality, introducing innovative products and providing excellent customer service. The team is relentlessly pursuing cost control, working capital management, and process improvement to manage the cycle. We believe these efforts will better position our company for growth when the market improves."
The Mohawk segment performance is under pressure with sales declining 13 percent below last year. The commercial and rug products are performing better while the hard surface and the cushion products are declining more than residential carpet.
Higher energy, raw material and freight costs are causing dramatic cost inflation, Mohawk said. The company has announced three carpet price increases since December to offset rising costs. Mohawk is increasing its commercial carpet tile offering with new value, performance and stylized options in our brands. We have re- engineered processes and improved manufacturing productivity, quality and yields.
Dal-Tile sales were down 5 percent during the quarter. The major factors affecting margins are rapidly rising energy and freight costs along with customers trading down, Mohawk said. The company has increased product prices and energy surcharges to offset rising costs and more may be required in the future.
Unilin sales were up 13 percent over last year and down 7 percent on a constant exchange rate basis, excluding the Columbia acquisition. Sales declines were experienced in the U.S. and much of Western Europe, with Russia and Eastern Europe growing.
The wood operations continue to operate at a loss, Mohawk said. New products are being launched in the third quarter to reposition both the Columbia and Mohawk brands in the market.
Mohawk said it is raising product prices and transportation fees on most products.
Related Topics:Mohawk Industries, Daltile