Mohawk’s 1Q Earnings Up 6%
Calhoun, GA, April 21--Mohawk Industries in the first quarter reported net earnings that were up 6% to $70.2 million, or $1.03 per share an increase of 5% above last year.
Analysts had forecast earning of $1.07 per share.
Net sales for the quarter were up 7% to $1.49 billion
The growth in EPS resulted from selling price increases, lower selling, general and administrative expenses as a percent of net sales and growing hard surface sales offset by continuing raw material and energy cost increases and a slight volume decline in soft surface.
The net sales growth was primarily attributable to price increases and internal growth. The first quarter results were negatively impacted by the weather in certain regions and the timing of the Easter holiday, which was in the first quarter this year versus the second quarter last year.
The Mohawk segment net sales of $1.91 billion in the first quarter were up 6%. This was primarily attributable to increases in prices in all product lines as well as growth in hard surface sales.
In the Dal-Tile segment net sales were up 12% to $401.9 million in the quarter, the result of internal growth and improved product mix.
Jeffrey S. Lorberbaum, Chairman and CEO, stated, "I am pleased with our results and the way we have managed through this period of escalating costs. In spite of weaker industry conditions and rising raw material and energy costs, our first quarter gross margin as a percent of sales was 25.8% in 2005 versus 26.3% in 2004. The prior year comparisons were difficult due to the cyclical rebound that occurred during the first quarter of 2004 and is not repeating this year.
"Our new SmartStrand product introduction, made from Dupont Sorona polymer, is presently being shipped as planned. The timing is later than last years' introductions and will benefit our second quarter.
"Our raw material and energy costs for the Mohawk segment have continued to rise in the first quarter and we have announced a second carpet price increase to offset these changes. The lag between cost increases and implementation of the selling price increases will continue to impact our earnings. We believe these costs will stabilize over the long-term but the short-term trend of these costs remains uncertain. Home Product sales were down with some customers postponing introductions and reducing inventories. We have also dropped some imported Home products, which did not meet our return expectations.
The Dal-Tile segment continued its growth driven by our investment in inventory availability, new products, additional selling efforts and updated sales service centers. Our floor tile and stone products are leading the growth. During the quarter we opened a new design gallery in Houston and our capacity expansions in Mexico and Muskogee are moving forward. When complete in 2006, the expansions will add approximately 20% to our capacity.
"The backing operation we acquired during the first quarter is progressing as planned. We have implemented cost reductions, reduced product complexity, increased asset utilization and transitioned to utilizing the production internally.
"We continue our disciplined approach to capital allocation with capital expenditures as the first priority, acquisitions being number two and stock repurchases third. We are constantly monitoring the allocation of capital among these alternatives.
"Most economists remain optimistic about future growth rates with housing at historical highs, employment continuing to grow, and corporate profits improving. However, recent economic data suggests that the growth rate may be slowing. It is possible that oil and natural gas will negatively impact the economy and our industry. Although there is some improvement in our business, the drivers that influence the industry's revenues and costs remain uncertain in the near term. After considering these factors, the second quarter earning forecast is from $1.30 to $1.39 EPS."
Related Topics:Daltile, Mohawk Industries