Mohawk Industries reported fourth-quarter 2024 net earnings of $93 million and earnings per share (“EPS”) of $1.48; adjusted net earnings were $123 million, and adjusted EPS was $1.95.
Net sales for the fourth quarter of 2024 were $2.6 billion, up 1.0% as reported but down 1.0% on an adjusted basis from the previous year.
In the fourth quarter of 2023, the Company reported net sales of $2.6 billion, net earnings of $140 million, and earnings per share of $2.18; adjusted net earnings were $125 million, with adjusted EPS of $1.96.
For the fiscal year ending December 31, 2024, net earnings and EPS were $518 million and $8.14, respectively; adjusted net earnings were $617 million, and adjusted EPS was $9.70.
Net sales for the fiscal year ended December 31, 2024, were $10.8 billion, a 2.7% decrease as reported and 3.3% on an adjusted basis from the previous year. For the fiscal year ending December 31, 2023, the company reported net sales of $11.1 billion, a net loss of $440 million, and a loss per share of $6.90; adjusted net earnings were $587 million, with adjusted EPS of $9.19.
Non-cash impairment charges totalling $878 million impacted the company’s prior-year earnings.
Chairman and CEO Jeff Lorberbaum commented on the Company’s fourth quarter and full-year results, saying, “Our fourth quarter results exceeded our expectations as sales actions, restructuring initiatives, and productivity improvements boosted our performance.
Furthermore, the negative sales impact of US hurricanes was limited to around $10 million. While residential demand in our markets remained soft, last year’s product introductions and marketing initiatives helped to boost our global sales performance.
Home Sales Worldwide
The fourth-quarter environment was a continuation of the conditions our industry faced throughout the previous year. Consumers continued to limit large discretionary purchases, and cumulative inflation, economic uncertainty, and geopolitical tensions weighed on consumer confidence.
Home sales worldwide remained suppressed in 2024, while U.S. homeowners remained locked in with low mortgage rates, and existing U.S. home sales fell to a 30-year low. Central banks in the United States, Europe, and other regions lowered interest rates late last year, but the impact on housing turnover was minimal in most areas.
New home construction was also constrained around the world, with rising home prices and interest rates affecting starts. Throughout the year, commercial investments slowed, but they remained higher than residential remodelling.
These factors reduced market demand while increasing industry competition for volume. This also resulted in increased unabsorbed overhead and temporary shutdown costs as we managed production and inventory.
Given these circumstances, we focused on increasing sales through innovative new products, marketing campaigns, and promotional programs.
Long-term profitable growth
Last year, we implemented significant restructuring and operational improvements that are lowering our costs and will benefit our long-term results.
Despite a soft market, these actions resulted in an approximately 6% increase in full-year adjusted earnings per share. We generated $680 million in free cash flow and repurchased 1.3 million shares of stock for $161 million.
We ended the year with approximately $1.6 billion of available liquidity and a debt leverage of 1.1 times. We are well-positioned to navigate this market cycle, pursue opportunities for long-term profitable growth, and emerge stronger as housing markets improve.
In the fourth quarter, our Global Ceramic Segment’s net sales increased 1.5%, as reported, or 1.2% on an adjusted basis, over the previous year.
The segment’s operating margin was 3.4%, as reported, or 5.3% adjusted. Unfavorable pricing and mix reduced the Segment’s operating margin, but productivity gains partially offset this.
We implemented numerous cost-cutting initiatives, including product reengineering, process improvement, and rationalization of higher-cost operations. In the United States, we are leveraging our ceramic service centres to increase contractor sales and strengthen our position with kitchen and bath dealers across the nation.
In Europe, our specifier team, A&D community showrooms, and premium products are driving commercial sales growth while we are increasing export sales outside the region.
In both Mexico and Brazil, the integration of our acquisitions has improved our product offering, sales organizations, and market strategies, and our Brazilian exports are increasing as the local currency falls.
Operating margins reduced
During the fourth quarter, our Flooring Rest of the World Segment’s net sales fell by 2.1% as reported, or 4.8% adjusted, compared to the previous year.
The segment’s operating margin was 8.8%, as reported, or 10.0% adjusted. Operating margins were reduced due to competitive industry pricing and rising material and labour costs, which were partially offset by productivity gains and lower energy expenses.
Our restructuring initiatives in the Segment are progressing and improving our cost position and productivity as we rationalize inefficient assets, streamline our product portfolio, and reduce administrative overhead.
We increased the sales and mix of our premium laminate and LVT collections through increased advertising that drove customers to our stores.
Our panel volumes remained stable as we implemented more aggressive promotional strategies, and our more differentiated decorative panels performed better in stronger non-residential projects.
Our insulation business experienced weak demand and margin pressure due to increased competition and material costs, so we announced price increases to partially offset these higher input costs.
We are investing in our panels and insulation businesses to increase their geographic reach and develop new products to meet those demands.
Increasing volume across sales
In the fourth quarter, our Flooring North America Segment’s net sales increased 2.8% over the previous year, as reported, but decreased 0.5% on an adjusted basis.
The segment’s operating margin was 4.5% as reported, or 5.7% adjusted. Lower pricing and mix, as well as higher input costs, reduced the segment’s operating margins, which were partially offset by higher volume, stronger productivity, and cost-cutting actions.
During the quarter, we completed our LVT restructuring initiatives, which will improve operations and generate significant savings. We concentrated on increasing volume across sales channels, optimizing our SG&A spend, and expanding our presence in both the home centre and residential construction markets.
Our hard surface sales increased across all channels due to the increased distribution of our 2024 product introductions. We believe our residential carpet collections increased market share, with PETPremier collections and fashion categories driving our performance.
Our industry has been experiencing a cyclical downturn for several years, and we are confident that our markets will return to historical levels, though the inflexion point remains unpredictable.
We anticipate continued softness in all of our markets during the first quarter as a result of high interest rates and weak housing. Intense volume competition will continue to put pressure on our pricing, but our mix should benefit from our differentiated products introduced last year, premium collections, and commercial offerings.
Increased material and labour costs will reduce our margins in the quarter, as we can only pass on a portion of the higher costs to the market.
Strengthened US Dollar
Our companies are finding new ways to cut costs and improve processes, which will help to mitigate the impact of rising input costs.
We are restructuring our Mexican ceramics business to improve operational performance, resulting in an annual savings of approximately $20 million. When completed in 2026, our cumulative restructuring actions will result in annualized savings of approximately $285 million.
This year, we are focusing our capital expenditures on increasing sales, improving product mix, and lowering costs. As we stated in our 8-K filing on January 24, 2025, the Flooring North America Segment implemented a new order management system that encountered more issues than expected.
Our manufacturing and financial systems remained unaffected by the conversion. The majority of system processes have been corrected, and our shipments are now consistent with our order rates.
Our invoicing was delayed, and we are addressing shipping and invoicing errors with customers that primarily occurred at the start of the implementation.
At this point, we estimate that the missed sales and extraordinary costs will have an impact on our first quarter operating income of $25 million to $30 million. We are working closely with our customers to address any issues or concerns.
We believe that the extraordinary costs will have a limited impact in the first quarter. It is difficult to estimate the sales impact in future quarters, but we do not expect the system conversion issues to have a significant long-term impact on our customer relationships.
The US dollar has strengthened significantly, which will have a negative impact on our translation results this year. As a reminder, our first quarter is the lowest of the year and will have two fewer days than the previous year.
Given these factors, we anticipate that our first-quarter adjusted EPS will range between $1.34 and $1.44, excluding any restructuring or other one-time charges. This guidance includes an estimated $0.35 EPS impact from Flooring North America system issues.
Historically, our industry has experienced cyclical downturns followed by strong recoveries as flooring demand returns to previous levels. All of our regions require more home construction to accommodate growing household formations, and ageing homes will require significant updating following years of postponed remodelling.
As the economy grows, so will business investment in commercial channels. We are uniquely positioned as the world’s largest flooring manufacturer due to our geographic scope, leading innovation, comprehensive product portfolio, and financial strength.
When the industry recovers, higher volumes will boost our manufacturing and overhead costs, improving our results. In addition, our mix will improve, pricing will strengthen, and margins will grow.
We are well prepared to manage in the short term and maximize our results once the category recovers.”
About Mohawk Industries
Mohawk Industries is the world’s leading flooring manufacturer, producing products that enhance residential and commercial spaces all over the world.
Mohawk’s vertically integrated manufacturing and distribution processes give it a competitive edge in the production of carpets, rugs, ceramic tile, laminate, wood, stone, and vinyl flooring.
Our industry-leading innovation has resulted in products and technologies that differentiate our brands in the marketplace while meeting all remodelling and new construction needs.
Our industry-leading brands include American Olean, Daltile, Durkan, Eliane, Elizabeth, Feltex, Godfrey Hirst, Karastan, Marazzi, Mohawk, Mohawk Group, Pergo, Quick-Step, Unilin, and Vitromex.
Over the past two decades, Mohawk has grown from an American carpet manufacturer to the world’s largest flooring company, with operations in North America, Europe, South America, Oceania, and Asia.
Related News:
Debt-laden SpiceJet’s Q4 FY24 net Profit increased Sixfold to Rs 119 Crore.
