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CALHOUN, Ga., Oct. 24, 2024 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) today announced third quarter 2024 net earnings of $162 million and earnings per share (“EPS”) of $2.55; adjusted net earnings were $184 million, and adjusted EPS was $2.90. Net sales for the third quarter of 2024 were $2.7 billion, a decrease of 1.7% as reported and 2.1% on an adjusted basis versus the prior year. During the third quarter of 2023, the Company reported net sales of $2.8 billion, a net loss of $760 million and a loss per share of $11.94; adjusted net earnings were $174 million, and adjusted EPS was $2.72. The Company’s prior-year earnings were impacted by non-cash impairment charges of $876 million in the third quarter of 2023.

For the nine months ended September 28, 2024, net earnings and EPS were $425 million and $6.66, respectively; adjusted net earnings were $494 million, and adjusted EPS was $7.75. Net sales for the first nine months of 2024 were $8.2 billion, a decrease of 3.8% as reported and 4.0% on an adjusted basis versus the prior year. For the nine months ended September 30, 2023, the Company reported net sales of $8.5 billion, a net loss of $579 million and a loss per share of $9.10; adjusted net earnings were $462 million, and adjusted EPS was $7.23.

Commenting on the Company’s third quarter results, Chairman and CEO Jeff Lorberbaum stated, “We delivered a solid performance in soft market conditions, which reflects the positive impact of our sales initiatives, productivity and restructuring actions as well as lower input costs, partially offset by pricing and mix pressure. Due to our increased earnings and management of working capital, we generated free cash flow of $204 million in the quarter, for a total of $443 million year to date. This year, we are investing approximately $450 million in capital projects focused on growth, reducing costs and asset maintenance.

In all our regions, market conditions were slower than anticipated given high interest rates, lingering inflation and lower consumer confidence. During the quarter, our sales initiatives delivered volume gains in many product categories, offset by pricing pressures and negative mix. Though the commercial channel has lost some momentum as the year progressed, it continued to outperform residential.

In our markets, central banks are shifting from a restrictive policy to a more balanced approach to stimulate their economies, which should benefit our industry as consumer and business spending expands. We expect that recent interest rate cuts in the U.S., Europe and Latin America will strengthen housing markets and increase flooring sales next year.

We remain focused on managing the controllable aspects of our business to enhance our results. With gross margins under pressure from weaker industry demand, all of our businesses are implementing strategies to maximize volumes and plant utilization. To increase sales, we are launching innovative new products, marketing initiatives and promotional activities. We are enhancing productivity and exercising disciplined cost management in all aspects of the business. We are executing the restructuring initiatives that we announced last quarter, which are expected to yield more than $100 million of annualized savings. These actions include rationalizing inefficient assets, streamlining distribution, and reducing administrative costs. These projects will continue throughout next year to achieve our planned savings.

For the third quarter, the Global Ceramic Segment reported a 3.1% decline in net sales as reported, or a 2.2% decline on an adjusted basis, versus the prior year. The Segment’s operating margin was 7.9% as reported, or 8.6% on an adjusted basis. The Segment’s margins expanded due to increased productivity, while lower material and energy costs offset labor and freight inflation. We are enhancing our mix by leveraging industry-leading printing, polishing and rectifying technology to deliver collections with differentiated visuals. In addition to our restructuring projects, we are executing many cost containment initiatives, including product reformulations, process enhancements and improved administrative efficiencies. The U.S. Department of Commerce expects the preliminary anti-dumping decision relative to ceramic tile from India to be rendered in November 2024, with tariffs potentially retroactive to August 2024. In the U.S., we increased our builder partnerships by providing a complete product offering and superior service. Our quartz countertops are outperforming other work surfaces, and we will start up our new production next year. In Europe, our volumes exceeded the prior year, and product mix from advanced technologies and expanded participation in the commercial channel partially offset pricing pressures. We have announced targeted price increases in Mexico, and volume in Brazil has begun to strengthen.

During the third quarter, our Flooring Rest of the World Segment’s net sales decreased by 3.5% as reported, or 6.3% on an adjusted basis, versus the prior year. The Segment’s operating margin was 9.9% as reported, or 10.5% on an adjusted basis. This year, the Segment did not see its usual sales improvement in Europe after summer holidays due to continued weakness in the economy. In response to current conditions, we are reducing operational and administrative costs, simplifying SKU complexity and enhancing logistics operations. To optimize volumes, we executed promotional activities, which pressured both our pricing and mix, partially offset by lower input costs. In slowing markets, our insulation and panels businesses faced increased competition as new industry capacity came online, which impacted pricing. In Australia and New Zealand, we improved pricing and mix in our carpet collections, though volumes remained under pressure.

In the third quarter, our Flooring North America Segment’s sales increased 1.2% versus the prior year. The Segment’s operating margin was 7.5% as reported, or 9.1% on an adjusted basis. We believe we are outperforming the overall market, with sales and margins improving over the prior year and increased volume partially offsetting lower pricing and mix. We are retiring high-cost equipment and exiting underperforming product categories while investing in capital projects that have short paybacks. Sales of our LVT and laminate collections grew as consumers embraced our new products with enhanced performance features. We continue to deliver product innovation with a new resilient plank flooring technology that is environmentally friendly and provides greater stability and performance. Our commercial sales were led by our carpet tile collections that offer industry-leading sustainability and award-winning designs inspired by nature.

Global conflicts, political uncertainty and inflation are weighing on consumer confidence and discretionary spending around the world. Short-term macroeconomic conditions remain unpredictable, and we do not anticipate an industry improvement this year. Demand remains weak, and each of our product categories and markets faces unique economic situations. Our mix is impacted by consumers trading down and by new construction outpacing the higher value remodeling channels. We are responding to current conditions with sales and restructuring actions, operational improvements and cost containment initiatives to strengthen our business. We continue to pursue volume through innovative product introductions, marketing programs and promotional activity to leverage our fixed cost structure. In some products, we are seeing raw material inflation that will increase our costs in the fourth quarter. As we end the year, we expect to reduce our manufacturing levels to manage our inventory, increasing our unabsorbed overhead. We anticipate the recent U.S. hurricanes will negatively impact our fourth quarter sales by $25 to $40 million with offsetting benefits from rebuilding next year. Given these factors and the effect of seasonality, we anticipate our fourth quarter adjusted EPS to be between $1.77 and $1.87, excluding any restructuring or other one-time charges.

We remain confident in the fundamentals of our business and our strategy to improve our results. In 2025, we anticipate demand in all of our markets improving as interest rates decline and consumer spending in the category accelerates across the world. Elevated home equity levels will provide property owners with resources to renovate their residences. All of our regions require significant new home construction, and we have grown our participation in this channel. Commercial construction and remodeling should also expand as financing becomes more affordable and investment returns increase. As our markets recover, we will leverage the extensive improvement that we have implemented to maximize our sales and margins.”

ABOUT MOHAWK INDUSTRIES

Mohawk Industries is the leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawk’s vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Our industry leading innovation has yielded products and technologies that differentiate our brands in the marketplace and satisfy all remodeling and new construction requirements. Our brands are among the most recognized in the industry and include American Olean, Daltile, Eliane, Elizabeth, Feltex, Godfrey Hirst, Grupo Daltile, Karastan, Marazzi, Moduleo, Mohawk, Mohawk Group, Performance Accessories, Pergo, Quick-Step, Unilin and Vitromex. During the past two decades, Mohawk has transformed its business from an American carpet manufacturer into the world’s largest flooring company with operations in Australia, Brazil, Europe, Malaysia, Mexico, New Zealand, Russia and the United States.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words “could,” “should,” “believes,” “anticipates,” “expects,” and “estimates,” or similar expressions constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Management believes that these forward-looking statements are reasonable as and when made; however, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ from historical experience and our present expectations or projections: changes in economic or industry conditions; competition; inflation and deflation in freight, raw material prices and other input costs; inflation and deflation in consumer markets; currency fluctuations; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; identification and consummation of acquisitions on favorable terms, if at all; integration of acquisitions; international operations; introduction of new products; rationalization of operations; taxes and tax reform; product and other claims; litigation; geopolitical conflict; regulatory and political changes in the jurisdictions in which the Company does business; and other risks identified in Mohawk’s U.S. Securities and Exchange Commission (“SEC”) reports and public announcements.

Conference call Friday, October 25, 2024, at 11:00 AM Eastern Time

To participate in the conference call via the Internet, please visit http://ir.mohawkind.com/events/event-details/mohawk-industries-inc-3rd-quarter-2024-earnings-call. To participate in the conference call via telephone, register in advance at https://dpregister.com/sreg/10193716/fdbc8887b0 to receive a unique personal identification number. You can also dial 1-833-630-1962 (US/Canada) or 1-412-317-1843 (international) on the day of the call for operator assistance. For those unable to listen at the designated time, the call will remain available for replay through November 22, 2024, by dialing 1-877-344-7529 (US/Canada) or 1-412-317-0088 (international) and entering Conference ID #5581374. The call will be archived and available for replay under the “Investors” tab of mohawkind.com for one year.

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