Mohawk's Sales Declined 5% in Q3, Earnings Loss of $760 Million
Calhoun, GA, October 27, 2023-Mohawk reported net sales of $2.8 billion for Q3 2023, a 5% decline compared to sales of $2.9 billion in the same quarter last year. The company reported an earnings loss of $760 million for Q3 2023, compared to a loss of $534 million in Q3 2022.
For Q3 2023, the Global Ceramic Segment reported a 0.5% decline in net sales to $1.1 billion.
Flooring NA sales declined 12% in Q3 to $962 million in Q3 2023, from $1.1 billion in the same period last year.
Flooring ROW sales were down 8% to $2.3 billion in Q3 203 from $2.5 billion in the same period last year.
For the first nine months of 2023, net sales were $8.5 billion, a 6% decline compared to net sales of $9.1 billion in the same period last year. The company reported an earnings loss of $579 million for the first nine months of 2023, compared to a loss of $8 million in the same period last year.
For the first nine months of 2023, Global Ceramic sales were virtually flat at $3.3 billion.
Flooring NA sales declined 11% for the first nine months of 2023, from $3.3 billion to $2.9 billion.
Flooring ROW sales were down 8% to $2.3 billion in the first nine months of 2023, from $2.5 billion in the same period last year.
Commenting on the company’s third quarter results, chairman and CEO Jeff Lorberbaum stated, “Our results for the quarter were in line with our expectations as our industry faced continued pressures across all regions, primarily due to constrained residential investments and further tightening of consumer discretionary spending. Our third quarter performance was seasonally impacted by vacations in Europe, which reduced our sales and earnings versus the prior quarter. Lower material and energy costs offset the decline in both price and mix. We also faced foreign exchange headwinds of approximately $20 million on operating income or $0.25 on EPS. Across the business, we benefited from cost reductions, productivity initiatives and lower input costs. We are managing our working capital and generated strong free cash flow of $385 million in the quarter and $660 million for the year to date.
“During the quarter, central banks around the world continued to raise interest rates to slow down their economies and reduce inflation. Their actions are affecting new construction and remodeling in both residential and commercial channels, postponing spending on new projects. In the U.S., mortgage rates have climbed to their highest level in more than two decades, which has suppressed the housing market and limited home renovation activity. In Europe, consumers are postponing large purchases like flooring as a result of higher energy costs, inflation and uncertainty due to the war in Ukraine. Our industry faces a greater impact from these pressures than other sectors given that most flooring purchases can be deferred. With the high fixed costs required to produce flooring, competition increases as the industry slows and participants attempt to increase their sales to maximize absorption. As a result, our average selling prices and mix have declined, with the impact offset by lower material and energy costs, restructuring benefits and process improvements.
“The predicted timing of the housing sector recovery continues to be postponed, and we are managing the business to optimize our results and cash flow until it occurs. We are taking actions to increase our volumes while managing margins and operating expenses. We have launched differentiated collections, selectively introduced promotions and expanded our participation in the new construction channel. To further enhance our competitive position, we will shut down older ceramic production in Italy, and we are converting our U.S. rigid LVT production to a direct extrusion process. These restructuring initiatives will result in a non-recurring charge of approximately $55 million, of which $50 million is non-cash. When completed, these initiatives should improve our profitability by $30 million annually by enhancing our productivity, lowering our manufacturing costs and optimizing our production flexibility.”
Related Topics:Mohawk Industries