Higher raw materials costs hit Mohawk's earnings. The US-based floorcoverings maker reported third quarter net earnings down 4% to $108.7 million compared to a year ago.
The lower net income came despite higher sales revenues, due partly to increased prices to cover raw material cost increases, and higher volumes. Net sales for the three-month period ended Oct. 1, 2005, increased by 11% to almost $1.7 billion versus $1.5 billion for the third quarter of 2004.
Jeffrey S. Lorberbaum, chairman and CEO of Mohawk Industries, Inc., said, "The effect of both Hurricanes Katrina and Rita has reduced our results in the third quarter as we previously reported. As our raw material supply chain has begun to bring production capacity back on line, we are seeing cost increases and some supply disruptions. Additionally, natural gas, diesel fuel, and gasoline prices have substantially increased in the quarter. As disclosed earlier, Mohawk implemented carpet price increases of between 5% to 8% in early October and also increased hard surface prices. In addition, Mohawk announced another carpet price increase of similar size to be implemented in mid-November to offset the continuing cost increases."
It was in the carpet [Mohawk] segment that the increased cost of raw materials was most keenly felt. Operating income fell to $110.9M. from $131.4M. previously, whilst sales increased to $1.25 billion versus $1.13 billion a year ago. The Dal-Tile hard flooring business reported operating income up by 10%.
Specifically on its carpet business, Mr. Lorberbaum, commented: "The [Mohawk] segment grew 11% in sales with new residential construction and commercial channels continuing to out pace the residential replacement business. During the latter part of the quarter, we saw carpet purchases and shipments increase ahead of our price increase. Price increases continue to lag the rapidly rising costs for energy and raw materials. Lower consumer confidence and the impact of the storms on gas and energy costs could influence spending in the future."
