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October 30, 2018
Calhoun, GA, October 26, 2018--Mohawk announced a Q3 2018 net sales increase of 3.8%. Net earnings for Q3 2018 were down 12% over Q3 2017.
For the quarter, Global Ceramic Segment sales decreased 1%; Flooring North America Segment's sales increased 2%; and the Flooring Rest of the World eegment's sales increased 17%.
For the first nine months of the year, net sales rose 5.5% YOY and earnings were $632 million, compared to $731 million in Q3 2017.
On October 15, the company agreed to purchase Eliane, one of the largest ceramic tile companies in Brazil, for approximately $250 million and anticipates the acquisition will close in the fourth quarter.
Commenting on Mohawk Industries' third quarter performance, Jeffrey S. Lorberbaum, chairman and CEO, stated, "Our third quarter results fell short of our expectations. Sales growth in all segments was lower than our estimates, price increases had less impact and we experienced more inflation than predicted. Transportation costs continued to rise due to the limited availability of common carriers and higher fuel prices. Additional manufacturing reductions were required during the period to control our inventory levels. Our LVT sales were up significantly but were still constrained by internal production. Our margins were further impacted by a decline in product mix from customers trading down, import competition due to the strengthening U.S. dollar and higher volumes in channels that use lower value products. Most of our markets have experienced weakening demand, inflation and pricing pressures. In the period, the acquisition of Godfrey Hirst added revenues of approximately $70 million, even as the Australian market slowed due to higher mortgage rates, lending restrictions and reduced exports to China. For the period, start-up costs related to new capital projects were $20 million, in line with our plan.
“We have many investments in new products and geographies in various stages of completion that have a combined sales potential of $1.2 billion, which should contribute margins similar to our existing businesses when optimized. The projects already starting up are rigid LVT and premium laminate in the U.S., ceramic tile in Mexico, and rigid LVT, carpet tile, porcelain slabs, technical tile and premium laminate in Europe. Other projects under construction include quartz countertops in the U.S., porcelain tile in Poland, and sheet vinyl and premium laminate in Russia.”
Says analyst Stifel, “Mohawk’s Q3 results and commentary on the next two quarters were extremely disappointing. The company is citing disappointing volume trends in multiple markets around the world as well as the U.S. Inflation continues to be an issue but price relief seems harder to achieve. Mix is trending south in many product categories and the company cites increased competition in certain markets and categories. Transportation costs remain a significant challenge. And the company is having to reduce production levels in many facilities to keep inventories from building.”