Profits for the world's biggest floorcovering company fell from a year ago and were below what analysts had forecast in the third quarter.
Mohawk Industries, Inc. said Thursday its adjusted net income in the third quarter totaled $246 million, or $3.29 per share - down 12 percent from a year ago. The results were 29 cents per share below the consensus estimate among analysts that follow the company.
In response to the disappointing earnings report, Mohawk shares, which had traded higher before the announcement, plunged more than 17 percent in after hours trading late Thursday.
The company announced plans after the market closed to repurchase up to $500 million of its stock to help shore up share prices, which have plunged by more than 45 percent so far this year.
Third quarter sales for the Calhoun, Georgia-based carpet and tile maker were up 4 percent from a year ago to $2.54 billion, primarily due to acquisition of Godfrey Hirst in Australia. But Mohawk CEO Jeff Lorberbaum said the third quarter results "fell short of our expectations" and the Australian market slowed due to higher mortgage rates, lending restrictions and reduced exports to China.
"Sales growth in all segments was lower than our estimates, price increases had less impact and we experienced more inflation than predicted," Lorberbaum said. "Transportation costs continued to rise due to the limited availability of common carriers and higher fuel prices. Additional manufacturing reductions were required during the period to control our inventory levels."
Mohawk is raising prices of most of its goods. But Lorberbaum said higher commodity and shipping costs, combined with higher import duties on Chinese imports, are pushing up costs for nearly all of its carpet, tile and wood flooring products.
The decline in housing starts and higher interest rates are likely to limit sales and profits in the final three months of 2018, Lorberbaum said.
"We anticipate fourth quarter results continuing the soft trends we experienced in the third period," he said. "We expect sales to be slightly slower than the prior quarter in most markets and product categories. Even with price increases across the company, we will not offset inflation and our results will remain under pressure."
Despite the expected drop in sales and profits in the fourth quarter, Lorberbaum said he remains "confident about Mohawk's position in the global market" as the biggest floorcovering manufacturer.
Mohawk announced last week an agreement to purchase Eliane, one of the largest ceramic tile companies in Brazil, for $250 million. Brazil is the world's third largest ceramic tile market, where Eliane is a leader in premium porcelain with annual sales of about $215 million.
"We anticipate the acquisition closing in the fourth quarter," Lorberbaum said.
Mohawk said its board has approved a new plan to repurchase $500 million of the company's stock, which Lorberbaum said " represent an attractive opportunity."
Mohawk shares have dropped from $276.67 per share at the start of 2018 to close Thursday at $151.07 per share, cutting the market value of the company by more than $9 billion.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340