Mohawk Industries, Inc.
Mohawk is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world.
The Company manufactures and distributes carpets, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (“LVT”), and sheet vinyl flooring.
Employees: 40,900+
Revenue: $11.737B for FY2022
HQ Location: Calhoun, Georgia, US
What they do:
The Company’s industry-leading innovation develops products and technologies that differentiate its brands in the marketplace and satisfy all flooring-related remodeling and new construction requirements.
The Company’s brands are among the most recognized in the industry and include American Olean®, Daltile®, Durkan®, Eliane®, Feltex®, Godfrey Hirst®, IVC Commercial®, IVC Home®, Karastan®, Kerama Marazzi®, Marazzi®, Moduleo®, Mohawk®, Pergo®, Quick-Step®, and Unilin®
Their vision and priorities:
To create fashionable and sustainable products that enhance the spaces where people live and work.
Financial and Business Goals
Outlook for Q1 2023
Flooring industry will slow in the near-term due to higher interest rates and inflation
They will try managing the current environment while investing to optimize long-term growth and profitability
Their commercial sector is expected to continue to outperform the residential sector
Inflation is predicted to ease in U.S. and Europe
Aligning production with demand unabsorbed overheads will continue in Q1 with lower-than-usual production ramp-up
Q2 should be sequentially stronger, with seasonally higher sales, increased production, and lower material costs
Q1 adjusted EPS guidance of $1.24 to $1.34
Things to know right now
Acquisitions
They completed the acquisition of Elizabeth, a leading Brazilian ceramic producer, and they are awaiting regulatory approval for their acquisition of Vitromex in Mexico. Both Vitromex and Elizabeth will almost double their local market positions, expand their customer base and product offering and improve their manufacturing capabilities.
They also completed five additional bolt-on acquisitions in U.S. and Europe in 2022
Operation projects on track
Capacity expansion projects are on schedule in:
North America: LVT, laminate, quartz countertops
New West Coast LVT plant operating as planned
Europe: Porcelain slabs, laminate
Operating Business Segments:
Flooring North America
In the North American market, Mohawk is a leading provider of broadloom carpet, carpet tile, carpet cushion, rugs, premium waterproof laminate, luxury vinyl tile, sheet vinyl, and revolutionary waterproof wood flooring.
The Company’s comprehensive product offering supports the needs of residential and commercial customers across all sales channels.
Approximately 60% of flooring sales are generated by the United States
37% of the Total Company Revenue comes from this sector
Global Ceramic
Mohawk is the world’s largest manufacturer of ceramic tiles. The segment produces ceramic floor and wall tile; stone floors; porcelain slabs; and quartz and stone countertops for residential and commercial applications. Manufacturing operations in North America, South America, and Europe facilitate sales in approximately 160 countries.
35% of Total Company Revenue comes from this sector
Flooring Rest of the World
With manufacturing operations in Europe, Oceania, Asia, and South America the segment has become a global leader in premium laminate, luxury vinyl tile, sheet vinyl, carpet, carpet tile, and wood flooring with sales in approximately 120 countries. The segment is also a leading producer of boards and insulation material used extensively in the European market.
Approximately 40% of flooring sales are generated by the Rest of the World (ROW)
28% of Total Company Revenue comes from this sector
Their Competitors
Kimball International
Milliken & Company
Hooker Furniture Corporation
Ethan Allen
Their financial calendar
Q1: January-March- Earnings 28th April 2023
Q2: April -June - Earnings 28th July 2023
Q3: July-September - Earnings 27th October 2023
Q4: October-December - Earnings 9th February 2024
Next Earnings Report:
Around 28th April 2023
Positives from the last earnings report Q4FY22:
Global Ceramic Segment
Delivered a 4.0% increase in net sales, or 5.2% on a constant currency and days basis.
The Segment’s operating margin was 7.0% as reported or 7.1% on an adjusted basis as a result of improved pricing and product mix as well as productivity gains, partially offset by inflation and lower volumes.
In the U.S., ceramic sales and volumes both increased due to their premium product offering, price increases, and growing countertop business.
Flooring North America
Their commercial business remains solid as remodeling and new construction projects continue. The multifamily channel was the strongest residential performer, and they are re-aligning resources to focus more on this sector.
Their resilient sales grew in the quarter as they leveraged their WetProtect and antimicrobial technologies to differentiate their collections.
Challenges from the last earnings report Q4FY22:
Net sales for the fourth quarter of 2022 were $2.7 billion, a decrease of 4.0%
Net earnings of $33 million and diluted earnings per share (EPS) of $0.52 a decrease from 2021
Sales across their businesses were slower than they expected in the quarter as residential flooring sales contracted with rising interest rates, declining home sales, and lower consumer confidence.
Global Ceramic Segment:
In Europe, this segment remains under pressure with slowing demand, customer inventory reductions, and inflation. The costs in Europe were impacted by peak energy prices and reductions in plant volumes from temporary shutdowns.
Sales in both Mexico and Brazil decelerated in the quarter as inflation and increasing interest rates reduced residential demand.
Flooring Rest of the World
Net sales decreased by 9.9% as reported or 1.9% on a constant currency and days basis as a result of favorable pricing and product mix offset by inflation, lower volumes, and temporary plant shutdowns. Natural gas prices in Europe peaked at an unprecedented level in the third quarter, raising their material and production costs.
Their European flooring categories experienced significant volume declines, with many residential remodeling projects being postponed as inflation eroded consumer discretionary spending.
In Australia and New Zealand with problems with the local economies, as inflation and mortgage rate increases has had an impact on flooring sales.
Flooring North America
Sales decreased by 6.8%. The Segment’s sales in the quarter slowed faster than they anticipated, primarily due to declines in residential channels, rug sales, and customer inventory reductions.
The Segment had a negative operating margin of 3.1% as reported, or approximately breakeven on an adjusted basis, as a result of favorable pricing and product mix offset by inflation, temporary plant shutdowns, and lower volumes.
Earnings in the Segment were compressed due to lower sales, consumption of higher-cost materials reduced inventory levels, and temporary plant shutdowns.
Their premium laminate sales were impacted by slowing retail traffic and customer inventory adjustments.
Their new laminate manufacturing line is operating at planned levels and will deliver their next generation of features.
Highlights in FY22:
Net sales were approximately $11.7 billion, an increase of 4.8% versus the prior year as reported or 8.8% on a constant currency and days basis.
Challenges in FY22:
Adjusted net earnings excluding restructuring, acquisition, and other charges were $823 million and adjusted EPS was $12.85 a decrease from this same time in 2021.
The U.S. housing market declined under pressure from rising interest rates and high inflation.
In Europe, energy and overall inflation escalated, and consumers reduced discretionary spending to pay for essentials.
With lower home sales and residential remodeling in the second half of the year, their flooring volumes decreased.
Throughout the year, commercial new construction and remodeling activity outperformed residential.