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Mohawk Q2 earnings surpasses their expectations
31 Jul '09
5 min read
Unilin sales declined 32% as reported or 24% on a constant exchange rate basis. Even with revenues down substantially, the operating margin was over 15% excluding restructuring costs. Our laminate sales have declined with residential remodeling and home sales. Royalties were impacted by declining industry sales and new licenses. In the second quarter we expensed the closing costs for a European flooring plant to reduce capacity and costs. We are expanding our customer base with our warehouse in Russia in preparation for local manufacturing.
Board demand is down in Europe creating excess capacity and compressing prices in the market. The roofing structure sales are softening and selling prices have remained stable. We are reducing our costs by cutting infrastructure, SG&A and headcount while improving productivity. In addition, working capital, maintenance costs and capital expenditures have been reduced. New investments are being made in technology, products and systems to reduce costs and maximize our future.
In the second period, industry conditions were weak and we anticipate the present trends continuing in the third quarter. U.S. residential appears to be stabilizing at a low level with signs of improving home sales which are supported by low mortgage rates. The commercial decline continues and we are adjusting our business to the demand levels. Our carpet raw material costs are expected to increase slightly in the second half.
The Unilin results are expected to be lower due to holiday shutdowns, higher period costs and lower royalties. Our third quarter guidance for earnings is $0.54 to $0.63 per share. Excluded from this guidance is an estimated restructuring charge of approximately $25 million, most non-cash, related to infrastructure reductions in manufacturing and distribution. Each of our businesses is managing the balance sheet to maximize our cash position, reducing expenditures and remaining focused on our customers. The investments in our products, systems and organization will make our business stronger and more competitively positioned as the economy improves.
Board demand is down in Europe creating excess capacity and compressing prices in the market. The roofing structure sales are softening and selling prices have remained stable. We are reducing our costs by cutting infrastructure, SG&A and headcount while improving productivity. In addition, working capital, maintenance costs and capital expenditures have been reduced. New investments are being made in technology, products and systems to reduce costs and maximize our future.
In the second period, industry conditions were weak and we anticipate the present trends continuing in the third quarter. U.S. residential appears to be stabilizing at a low level with signs of improving home sales which are supported by low mortgage rates. The commercial decline continues and we are adjusting our business to the demand levels. Our carpet raw material costs are expected to increase slightly in the second half.
The Unilin results are expected to be lower due to holiday shutdowns, higher period costs and lower royalties. Our third quarter guidance for earnings is $0.54 to $0.63 per share. Excluded from this guidance is an estimated restructuring charge of approximately $25 million, most non-cash, related to infrastructure reductions in manufacturing and distribution. Each of our businesses is managing the balance sheet to maximize our cash position, reducing expenditures and remaining focused on our customers. The investments in our products, systems and organization will make our business stronger and more competitively positioned as the economy improves.
Mohawk Industries Inc
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