Facing a tougher year than expected in 2018, Mohawk Industries nonetheless made key acquisitions around its global system that executives believe will set the Calhoun, Ga.-based flooring giant on better footing by 2020.
The company bought flooring companies in Australia, New Zealand and Brazil, where it will produce ceramic tile, and purchased two flooring distributors in Europe. It also expanded production in Poland (ceramics) and Russia (sheet vinyl). Sales were dramatically higher in the latter country, though the weakened ruble dented the impact on dollar earnings. Other bets include the initiation of quartz countertop manufacturing in the U.S. and the expansion of carpet tile production in Europe.
Overall, inflation, higher transport costs and softer demand, especially in Europe thanks to political uncertainty in Italy, hit the company’s profitability, causing it to cut jobs, raise prices and reduce manufacturing output in various geographies. Luxury vinyl tile, a category that has proven tough for the company to ramp up quickly, took market share from other flooring products, executives said.
Net profits were down for the fourth quarter by 26 percent to $188 million, even as sales ticked up 3 percent to $2.45 billion. That excludes charges related to acquisitions and restructuring. Similarly, net earnings for the year were down 9 percent to $922 million on $10 billion in annual sales.
“In this environment, we selectively invested approximately $1.5 billion to enhance our long-term performance, primarily in new product categories and geographies with greenfield projects and acquisitions, cost saving initiatives and buying back shares” to the tune of $273 million, said Jeffrey S. Lorberbaum, chairman and CEO, in an earnings release.
Even still, the company invested in new equipment in Brazil and Mexico and “increased specialization” of plants in Italy, Spain, Poland and Bulgaria.
“We are managing through current conditions while enhancing the longer-term value of our business,” Mr. Lorberbaum said.
Learn more about the company’s fourth quarter earnings here.