Mohawk sees improvements in Western European markets

04 May '10

5 min read

Unilin sales improved 14% as reported or 9% on a constant exchange rate. Our operating margin for the quarter was 9% and the EBITDA margin was approximately 21%. Our European business in the period performed better than the fourth quarter even with more severe weather affecting business and difficulty in some local economies. We saw improvements in some Western European markets as well as Russia. In the U.S., business conditions appear to have bottomed and our customers are more optimistic about the future. In Europe, sales of our two meter laminate planks are continuing to grow as a premium alternative. New products using our GenuEdge technology have the most natural wood looks ever introduced in the laminate flooring category. We are testing new printing technology for high end laminate products that do not use a printed paper layer like most products today. Demand for our board products continues to improve and is increasing capacity utilization of our plants. We have implemented price increases on boards during the first quarter but raw materials have escalated faster than our prices. We are continuing to raise board prices further in the second quarter which should improve margins in the future.

The residential category is expected to improve as we proceed through the year while the commercial business is expected to remain difficult. This year we have already increased prices of carpet, wood flooring, boards and vinyl. We are presently implementing a second price increase in both carpet and board products to offset material inflation but the lag will negatively impact the second quarter. The future periods should improve as we come out of our seasonally slower first quarter. Our second quarter guidance for earnings is $0.60-$0.68 per share which excludes the cost of purchasing our bonds.

The infrastructure improvements, cost reductions and product innovations we have implemented will benefit us as we move through the year. We are well positioned to take advantage of the economic recovery which is just beginning. Our balance sheet remains strong and our capital structure has ample liquidity to allow financial flexibility. We are committed to deliver sustainable growth and increase the value of our company over the long term.

Mohawk Industries Inc

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