Mohawk Growth Slows
April 25, 2005,
Calhoun, Ga. — Hampered by a broadly soft market, higher raw material and energy costs, a jump in inventories and a drop in its big home fashions business, Mohawk Industries Inc. reported that first quarter profits rose a lackluster 5.1 percent, while sales climbed 7.4 percent, both figures lagging the sharply faster pace of growth the company has set in recent years.
That was an improvement over the fourth quarter of last year, when profits were virtually flat, inching up just 0.3 percent. But it was also well off the rapid earnings growth the company reported through most of last year — with profits up 58.1 percent in the first quarter; 16.2 percent in the second quarter; and 23.3 percent in the third quarter of 2004.
Sales advanced 7.4 percent, to $1.5 billion from $1.4 billion. But even that was slightly behind the 7.8 percent growth during the fourth quarter; the 25.6 percent of last year's first quarter; the 19.2 percent top-line growth of the second quarter; and the 17.5 percent of the 2004 third quarter.
Sales in the core Mohawk business — Mohawk floor coverings and Mohawk Home — rose 5.9 percent, to $1.1 billion, but lagged the 11.9 percent growth put up in the Dal-Tile hard flooring business. Dal-Tile operating profits shot up 18.4 percent, to $58.5 million, eclipsing a profit drop of 8.6 percent in the core Mohawk business.
Helping to prop up the bottom line were price increases that helped offset rising raw material costs; continued cost-cutting, which helped to offset weaker margins; and lower interest costs. But taking a big bite out of profits, inventories soared sharply higher in the period, by 27.7 percent — way ahead of the 7.4 percent increase in sales — to $1.1 billion from $897.5 million during the same period a year ago.
In a notable departure from past practice, Mohawk alluded to results in its big Mohawk Home business, even though it did not break out specific results for the segment. “Home product sales,” the company said, “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.”
Mohawk Industries Inc.
|Qtr. 4/2 (x000)||2005||2004||% change|
|a. First quarter results include miscellaneous expenses of $2 million, compared with $1.4 million during the same quarter a year ago.
|Oper. Income (EBIT)||123,630||119,039||3.9|
|Per share (diluted)||1.03||0.98||5.1|
|Average gross margin||25.8%||26.3%||—|
First Quarter Segment Results
|Operating Income||2005||2004||% change|