A weak housing market and increasing materials costs continue to plague Mohawk Industries.

Calhoun, Ga.-based Mohawk on Tuesday announced a 23 percent drop in earnings and a 7 percent dip in net sales for the second quarter compared to the same time last year.

“Our results for the second quarter were impacted by the slowing economies in the (United States) and Europe and rapidly increasing commodity costs,” said Mohawk Chief Executive Officer Jeffrey Lorberbaum. “The rapidly increasing costs are impacting our margins even as we raise selling prices to offset these costs.”

According to the flooring manufacturer, net sales from April through June 2008 totaled $1.84 billion compared to almost $1.98 billion for the second quarter of 2007.

Mohawk’s net earnings for the second quarter were just short of $89 million or $1.30 per share. The profits announced Monday show a 23 percent drop from earnings of $115 million during the second quarter of last year.

Second quarter projections for Mohawk initially were set at $1.36 to $1.40 a share, but lower-than-expected sales caused officials on July 8 to drop their guidance for the year to between $1.23 and $1.26 per share.

Still, analyst Kim Gavin, editor of Floorcovering Weekly Magazine, said Mohawk appears to be holding its own.

“That is about what the industry is tracking across the board,” she said. “I would say Mohawk is doing fairly well — all things considered.”

Ms. Gavin said Mohawk is not unlike other carpet manufacturers suffering a “double whammy” of slow home construction and high building costs.

“The industry is suffering from a pretty significant downturn due to a weak housing market,” she said. “They, like everyone, is struggling to maintain margin.”

Mohawk set its projected earnings for the third quarter at $1.06 to $1.15 a share.

According to a company statement released after the market closed Monday, Mohawk will be raising product prices and transportation fees on most products.

“We have many focused initiatives under way to reduce cost, minimize working capital, improve service and bring new products to market,” the statement said. “We remain convinced Mohawk will be a stronger company as we come out of this cycle.”

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