MHK - Earnings call transcript Q2 2022 | Mohawk Industries, Inc.

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Operator

Good morning. My name is Victoria, and I'll be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries’ Second Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. reminder, Friday, gentlemen, July a being conference As today, recorded XX, Instructions] ladies this and is [Operator XXXX. Thank you. I Mr. would introduce like to Brunk. James Mr. Brunk, conference. you your may begin

James Brunk

Thank to and call. morning, you, quarterly Industries' investor welcome Victoria. Good Mohawk everyone,

our third me the remind may second Executive discussion which and Securities with release the Officer. during include and of forward-looking quarter guidance risks Chief not statements include as press Exchange Today, and Joining to Chairman update forth and everyone subject Securities those you Chief the President Officer; today's Reform provide Jeff Chris defined and XXXX, release This call that in in Lorberbaum, quarter. of to, periodic including on statements call on to and we and press may but call Private we'll this Wellborn, non-GAAP that I'd limited Operating our like are Act the and filings for various Commission. company's uncertainties, Litigation numbers. are set make our

to comments. any reconciliation I'll press and for refer please our to Investors a GAAP call amounts, opening non-GAAP X-K For in the over turn of his our Form the now Jeff? section website. release to Jeff of

Jeff Lorberbaum

our improvements rose product small our line Thanks, a enhanced or with and approximately up results all constant in increases, to Jim. XX.X% commercial benefiting price mix, basis. quarter top Mohawk's X.X% contributions second sales acquisitions. segments, our on billion, from $X.X as reported and Sales from grew

support our our environment increasingly and to implemented the organizations additional economic global the actions progressed, became quarter As performance. challenging,

and and inflation even was strengthening results in impacted our remained dollar. by as for a the material, with line Our headwind quarter our operating US were the translated significant expectations, transportation energy income

gas faced Over gas discretionary and the spending improvements, by is including numerous in dramatic through eroded impacting Across and XX alternative impacted discretionary rates logistics our faster. US, We're caused more spike a rates increases our uncertain. remain supplies multiple markets, instituted is energy consumers' demand European all pricing controls, in prices higher been which mortgage price considering the consumer causing near-term In natural countries though strategies productivity are other have mix other inflation and these cost supplies being inflation, not sales as demand. taking operational The Volatility to for interest Unlike inflation, have in and supply, risen businesses actions, most ways pass months, our we and have are deferred due to is most extraordinary greater being to the and costs. foreclosures in In have have to of Both construction continues remodeling, past also exceeds to cycles, and strengthen. the those risen and solid. as not and than commercial new regions, changes projects ration that remains subsidies as initiated commercial investments numbers pandemic in sector projects past were much support the issue. economic Europe, an affected. housing markets spending. as US supply available enhancements. are housing have

balance many navigate we including provides acquisition Mohawk's options As expansion, market investments, stock the strong internal near-term buybacks. and dynamics, sheet for

to Foss acquisition as early to $XXX our and integrating in of progress manufacturer making new acquire Europe, with second insulation largest approximately we million we an Floors, we being a July, During completed flooring In Mexico. bolt-on results contributing acquisitions, quarter, our in -- the which the excellent manufacturer. are announced ceramic agreement leading Vitromex, are leading In contributing expected. U.S. acquisition. XXXX We're punch a panel needle the

opportunities. additional explore acquisition to We continue

operational next European including future laminate, our satisfy innovation generation investments demand as as countertops current quartz Our porcelain and LVT, These and well expansion and us deliver projects slab. will efficiency. of schedule, remain product on help

Now our in quarter second performance Jim detail. review will greater financial

James Brunk

Thank on Favorable across That's you, quarterly and or constant a billion. increase small X.X% FX were days margin and excluding acquisitions, our XX.X%, all under as sales XX.X Sales of volume prior and FX. reported, record for year of second decrease Jeff. a quarter sales. negative and the consecutive impact the just basis, softening XXXX for segments a from offsetting $X.X benefit quarter Gross representing charges. a, was XX.X% mix

impact FX these shutdowns which Operating and significant sales in plant XX-Q, as and a of was the slightly amount inflation $XX raw actual quarter than of absolute was the for lower to the included energy headwinds XXX the impact sales, volume initiatives by FX. price lower is business an Although year by versus primarily driven mix million. year-over-year items drove the in mix temporary was of income, detailed a million, materials basis. of of expense offset and and the FX. spending expense XX immaterial enough by and impact and offset increase percentage The the the and a by expense as of the for from to price, and percentage as impact not was basis point decrease be $X drove on productivity income was in will year. other unit was The Interest sales improvement temporary shutdowns was prior year, other year-over-year after is down quarter negate due be income which the to filed initiatives the a of percentage tight mix offset XX% inflation, our productivity, higher the will business amounts inflation SG&A dollar as points and MD&A controls more versus primarily the of basis it of the call. pricing volumes, cost-saving prior XX.X%,

versus was rate XX% tax year. non-GAAP in the Our XX.X% prior

us or as year of expect and an, $X.XX, between tax of full earnings per leads charges We be share to, the rate XX% XX%. reported excluding That $X.XX. to

in pricing prior increase as in quarter, more than lower the mix, reported versus to volume or inflation, actions charges, America, XX.X% for year and versus volumes of increase actions sales as XX.X% XX.X% and prior and significant orders Ceramic $X.X inventory softening to and $XXX Turning volume adjustment Operating of for to and segment. the which base levels. Flooring major profit with sales the X.X% their business resilient X $X. was dramatically North a due our actions Growth and laminate Global products the is an The the retailers who product billion offset XX.X%. income of constant excluding is reduce costs. an the cut quarter. year. concentrated pricing just energy That pricing billion, carpet commercial, the on in rug mix or residential The productivity offset weakness during In under million segments, offset a favorable FX operating with offsetting rug declines. basis primarily were the products an of and impact it's increase is in national rising

Now the partially World, about for decline absent X.X%, in along compensate by with of to adjustment, lines, costs, was lower with unfavorable input price basis led was decrease all this and sales of is improvements and mix percentage be inflation. points benefit would as insulation, drove XX.X% costs with The year-over-year margins decrease panels by raw mix actions favorable a XXXX mainly to Operating productivity versus elimination and have as the XX.X%, and XXX were initiatives. to the inflation, on mix volumes million. compared acquisitions. the especially X.X% QX, Flooring unable and versus as smaller lower primarily constant to of million year. reported points increase American full of peak raw Rest In year, plant sales shutdowns basis. output temporary Flooring increased the year X.X% or sales from prior increased Corporate initiatives and improvement and product materials XXX North sales price between year-over-year cost was million productivity approximately the prior as $XX Pricing a Operating which overall were in drivers may the $XX or across higher volume, $XX for a percentage margin the quarter. main material, corporate with and in FX basis were due offset QX, elimination $XXX million and in

year were the sales. the to QX. $XXX finished over the million, which million. for prior of $X.X $XXX billion, was equipment increasing over up slightly XX and slightly related, with working of days the Inventory depreciation just Property, increase at of billion. $XXX quarter with XXX Receivables the of just balance DSO in an at CapEx and due XX $X.X just to inflation at QX inflation the quarter the Cash $X.X at finished of from free finished relatively and flow an at and from increases billion, That's under and at increase was flat higher of quarter, XX% quarter year. that about million. the primarily with Turning cash $XXX in XX% compared versus prior to Inventories ended impact capital also days XX%, days, quarter sheet. driven plant million days. amortization XXX by

year, forecast to and at depreciation $XXX full approximately $XXX the For amortization million are million. and CapEx

liquidity strong Finally, and $X buybacks. to our overall billion that, call review. grow to our turn enabling acquisitions position debt-to-EBITDA a at in to for the with through sheet and stock our business is times, internal of operational X.X With investments, very I'll balance continue over Chris net

Chris Wellborn

of uncertainty. initiated. in higher Global as construction renovation an of natural remodeling Ceramic best segments, of in the cost sales projects delivered some new most with and European with second gas part natural performance significant The the inflation markets seen markets income investments. from during increased softening remained affected gas commercial came the number ceramic across of you, prices world, quarter the greatest rates improvement, Of Most Thank and interest our continued Jim. which activity and have of due supply business. year-over-year Builder to were our rise again three ceramic the strong spiking our operating US residential to also

pricing As across our implement energy price businesses, and to raw continue new actions. we ceramic material increases

home income in the in business with channel. softening and strongest US its to demand its years. growth, expanded sector highest level home remodeling showed Our center four commercial and residential The ceramic operating the new construction

our by the sales. and mix enhanced quarter, During margins improved were commercial

the higher-cost imports. European introductions Our alternatives in gaining to as traction premium market are product

and implement product higher surcharges. to transportation material costs and continue with To productivity increases discipline. costs, improved continue sales offset energy, freight we price and our initiatives to We improve and manufacturing

fuel new introduced the impact strategies have distribution mitigate of to We rising costs.

in sales are growing the high-end and stone categories. porcelain Our quartz, countertop

operating improving by offering. meet demand, our expanding at product growing Our quartz production. and we countertop and is plant premium are we products expanding maximum are sourcing our To countertop capacity, our mix

year. prior the improved actions during not business they pricing mix. our higher offset ceramic European inflation versus quarter with improved the quarter did during the Though margins, Our sequentially enhanced and sales our fully

We in softened quarter, invest low continue improve slab and add growing demand of to price medium our premium categories our price capacity mix while features as changes. to our innovative and during satisfy Sales to for are products new sensitive they more to porcelain our the business. increased

overall inventory further Our historically and levels are limiting sales. remain low our

R&D materials alternative the Recently, teams with and reduced of Ukrainian reengineering Europe. natural body of gas energy clays. significantly across formulations reducing prices supplies Our increased are use have

Going forward, our our will as be pressure and volume gas greater margins higher. under will costs be

driven We with other lower and and international was our mix market primarily sales residential. our outpacing are commercial ceramic actions by restructuring initiating markets, conditions. these to manage costs growth In pricing

these been levels. not were low sales limited stronger production constraints and in by results could regions if have inventory our Our

The higher in offsetting regions, these in even for interest a a impact grown ceramic and Mexican over per increases softening are tile see or five flooring announced XXXX, materials rates tile and mix Mexico, energy not manufacturer and and category consumer we $XXX ceramic the is are produces year about to company billion the million. year. residential In these X.X costs. improved higher X and of tiles of $X.X facilities abated, in spending The billion we agreed ceramic, have rising had the as $XXX Across has pesos in costs. and generated and million last the June, inflation acquire has Vitromex, sales and years. material sector In primary broad XX% sales operates decorative porcelain, Mexico, we in and to inflation on approximately home price manufacturing impact and in additional mosaic to purchases. the Ceramic actions leading offset regions pricing beginning market distribution square energy market last feet. has clay Vitromex network. Our

many organization. small from opportunities the past XX Together world-class and manufacturing sales Vitromex, rose insulation years, anticipate with quarter, ceramic consumer the increasing contributions offerings, disposable and During sales our primarily of Rest market household price distribution significantly reducing we we to participation have Inflation product combined the the investing World by in and is Mexican of expanded and and from product operations in expand developing state-of-the-art year-over-year, efficiencies our and enterprise. increases, In cost mix Flooring panels acquisitions. income. the

traffic, are slowdown regions our is categories. most European are than retail in in costs. which material a significantly We substantially electricity and reducing impacting seeing volume are and energy industry other higher prices in raw

as announced further to raised gas have quarter. prices as and We prices inflation escalated of continue at chemical rise natural end and the increases the

is Our a and costs substitute gas increasingly being electricity. wood as it for to also provide are rising utilized as natural heat

during to trends. demand their continue the progress Laminate, through sales all and LVT as implemented We're process softened actions inventories. have our quarter, taking Our improved. we changing price are period, increases flooring sheet customers quarter the vinyl cost the escalate price costs announced projects. third are supply to similar quarter. noncritical the reducing seeing postponing following environment, additional reductions, material and improvement and for and the We In including address our and increases

business volume well in growth as insulation continues results deliver price. with Our excellent to as

recent through costs We and passed are acquisition. chemical integrating our have rising

Our our as strong plant increasing shift adding second to a benefit as remain up they investments ramp is costs. from insulation and of new Sales distribution. manufacturing energy we reduce products sales

the we business well, panels Our volumes performed progressed slowed though as through quarter.

its year and to output. We French our are that improving higher-value with products. last improve acquired and integrating plant raise We're the cost and small continue we prices panels mix

We the panels more of products. higher-end decorative distribution are durable and expanding our HPL

from cost and energy both wood Our environment. waste the investments are production in benefiting our

For sales the driven while market sector residential rates. North interest quarter, commercial rising America softening pressure was inflation is segment and mix. the The face household our Flooring across stronger consumers primarily growth all pricing of as commercial by improved improved the gains, and channels,

customers service our reduced As levels inventory in the their improve, residential channel.

to though volumes costs. pricing continue raising actions offset material absorption inflation, are We and energy and execute to reducing lower plant

categories. We are the faster-growing strategically LVT investing in to laminate premium share maximize our and

launched numerous mitigate productivity freight, have energy of inflation. to labor We and fuel, initiatives the impact

the the continued and products traction disruptions improve improvements Our our our gaining new LVT margins. furthered We in quarter, fewer with material benefited to experienced market. sales which in operational

throughput, West we has new to begun shipping material and Our to to LVT and processes productivity Coast customers, improve continue costs. plant refine

our operations improve our Coast West superior and provide service East Our to and will customers transportation efficiencies.

is centers impacted laminate remodeling, and home mostly the in sales Our in in premium inventory residential our quarter. used adjustments

new waterproof Our LVT. in laminate our as construction increasing to collections sales channels are alternative the specialty retail and an

line manufacturing increase levels have targeted to new our Our we ramp fulfilling raw prices, up to material raised continue laminate products. substantially. our next-generation Though is production to costs and continues for demand

the sales and expand growth All margins the well additional recovery that a on carpet, collections raw and our As transportation commercial Based to commercial Architectural activity the actions support inflation, costs most recent taking rebounds, business. as continued of tile sector improving. material remains the for are we and and across Index, LVT channels projects continue pricing with sales the Billing future. To sectors hospitality pipeline accelerating. in offset with are as the design of strong reducing commercial foreseeable corporate

carpet continued residential our energy inflation. demand, due volumes are and reductions to in and material with softening increases declined price inventory markets additional the aligning to due announcing capacity and channel, reducing As expenses we

retailers. reduce all quarter, national And forecast inventory major with they concentrated is business sales cut dramatically weaken. orders rug to Our during their the as

punch, existing a July, category million. improve the sales to DIY To With the complements our current have that rate manufacturer our acquisition versus cost strong lines year. rug have restructure a million. approximately actions needle artificial of includes of and the taking approximately run would Foss' turf. results. new Foss present rugs, Foss we a closed XXXX and sales for $XX adds enterprise portfolio to carpet, tile a adapt the prior our $XXX non-woven million flooring been we in product of our are conditions, with impact to purchases, Floors, leading increased decline to across X.X% $XXX approximately In segment's

are cost and most Jeff. optimize reducing cost. are With million to Europe, of Ceramic, estimate rug total segment, with yarn our products plans in I'll manufacturing segment, estimated streamlining and $XX a an we lower simplifying administrative In cash consolidating organizations. We And and older, in million, actions and We organizations. our return World America $XX cost are million be The million these Flooring will by with million some assets including to the capacity. processes reduce efficient $XX initiatives call to $XX less million. to to cost our Rest we Flooring North finalizing that, will annually, our of significant $XX $XX of to rationalize insulation assets

Jeff Lorberbaum

Thanks, Chris.

we significant and rising as interest postpone and are rates is of discretionary their results first the rapidly homes. the inflation, the inflation spending. US, of pressure During sales, delivered causing softening rates upgrading half instability. XXXX, In consumers Residential remodeling consumer changes geopolitical rising in solid housing despite interest is impacting

New sector home are economic channels supply as multi-timely and interest rates the improve flooring new and and are constrained projects commercial dramatically gas natural Though prices deferred growth. higher initiated. and to strong, remain reducing in are lower continues Europe,

Material anticipate softening actions targeted We're these We're adjust to multiple to going We'll reduce company across price We're and Given and continue improvements. the across further implementing levels introducing demand higher-value changing implementing to expenses rise, the costs. we margins forward. we're enterprise sales. increased enhancing process our on and these in our new reducing to taking and service energy our response. products increases be expand initiating to projects market and conditions. costs pressure factors, restructuring

through dollar reduce of rising In our anticipate material the in that we rates we and will remainder strengthen results. translated supply the the go and improvements year. US, the interest expect also We as transportation

our anticipate be excluding any managed $X.XX, quarter we cycles successfully charges. times Mohawk through before. restructuring EPS adjusted third factors, these $X.XX to economic has Given to many

a the grows an take to the overall than in economy. Around estimated stock most in units regions. rate the supplied housing it exceeds faster Over In deficit housing satisfy. years a X long-term, by the demand US, flooring and requires will additional at world, construction million

are old XX need XX significant XX and and over in addition, renovation. years million In homes of between

in well business remodeling from commercial long-term Our home projects. is benefit residential and to growth construction, the positioned new

stock well as internal We the have sheet that business balance a and growing supports strong investments acquisitions as through buybacks.

We will and taking opportunities acquisitions, remain our geographies. about products are results. questions. the be continue and improve new actions enhance performance future, We we of optimistic now the we'll seek in to our Mohawk's today and We'll glad take to your will

Operator

Kim you. [Operator ISI. Stephen ahead. Instructions] from comes Our go Please Thank with first question Evercore

Stephen Kim

Yes. Thanks Kim very from Steve much guys. It's Evercore.

guide, the productivity? contribution how quarter. the has offset And assume the XXX think any it and inputs price maybe mix did to Regarding more fair hoping of lower without was than the this basis through exit you growth then, in that XQ your guidance, I'm that Is July? can worsened a moved that XQ as by whole? does And speak points from you are to as volume volume rate for fully

Jeff Lorberbaum

look Let's start normally seasonality. exited we order with quarter, trends. demand the we and part. slowed lower you slower historically with QX the to earlier through trends we the the order than due saw than it's at QX, order into as When The forward a went

it's impacting Inflation levels slow last our discretionary ran is the and year, have we service. remodeling down. world, going and addition, the to higher at we to business assumed and demand In across spending improve

is raise in pessimistic European of anticipate more having it view demand lower Our a with costs We the ago. as quarter, than quarter it align will third which our was production demand. much and we today cost

really results. since lower forget strengthened, addition, year against will US especially and In the euro last translated the our has don't dollar

Stephen Kim

Thank.

some to destocking. the could wondering, that I'm is portion but mean what in due management to -- to your to it least big it So of lean it million going reorganization, assuming that personnel, I'm stay savings you due in that's inventory then seems that's -- your you're is sounds of QX mostly ease mentioned was I $XX you describing in think wondering included And that fair that like seasonality. Mohawk's to But program. saw was? sort the low pretty volume some lastly, XQ, at million a $XX in it organization how partly XQ, already. also

take should for And I'm so might couple management the actually York next in a affect of company's of see demand meaningful advantage quarters? that how wondering the to rebound we the in ability

Jim Brunk

start your Let's again, Stephen. first with question

Stephen Kim

meaningful? was to the could And That in reasonable think that, inventory portion destocking. it ease that XQ? that Is is

Jeff Lorberbaum

think view possible. reduced them category, by it differs think We customers' And in is the part all the the our at the country. second more and we that reductions We we in second our clear levels quarter, believe there could don't and by some of be a restructurings. visibility it's but into quarter, inventory of best. it, product, they have by third But limited

any out taking the business. We of are not meat

taking are We that costs are -- that out in less. running anticipate we operations

in to in ceramic doing of be how the going organizational order is future to business we in changes our business some in Europe are see aligned with Europe. and We them World business both get Rest our

Stephen Kim

much, very guys. Thanks Perfect.

Operator

The comes Please with Susan go next question ahead. Goldman Maklari Sachs. from

Susan Maklari

and Thank thanks you. everyone morning, for taking the Good question.

Jeff Lorberbaum

morning. Good

Susan Maklari

of parts should look going about the of segments slowing performance into think past seasonality think question how just we with quarter, us this the the later the then year but first XXXX? And early factors we the of you is, combined be Jeff, macro? third can as about about the My help and some different thinking

Jeff Lorberbaum

and construction, before, let's same you. margins, in the Let's of we'll just said broader, all see softening haven't We with different get slowing change remaining businesses. seeing remodeling the our new at materials. commercial Europe most residential try in and The the -- a the of give our initiatives energy the impact products, methods by of each segment significant sales. we especially the the being businesses, higher-value will actions. implementing We're a We're can in and introducing anticipate affected every geography, on to significant as the margin service more again maximize bit? pressure business. the for ceramic geographies. across a slowing and our improving the have try demand, this the you environment. to pricing you talked just in we given to we're results, going businesses seen time we go And to a is have strong on changes forward minute we In increases all ago, about expenses -- then our We're the little reduce the on details as restructuring through. continued in help a see is we We

James Brunk

segment of mainly From standpoint, raw seeing Rest but in pressure a we're energy, to due obviously, ceramic the remember, also materials. segment, the employing

in environment current unpredictable the So really geopolitical somewhat Europe is with events.

rising We are are kind energy in decline spending. All some chemical-based are the and seeing materials of costly. consumer and

well. We we to Rest increases And have with of our made and segment prices. in U.S. advantage. Flooring Europe World mills some being push the the in and also waste do ceramic the have that business we and in advantages business the with helps also Flooring in in as energy an that North investments continue, strong, as I'd though, wind commercial say that American

Susan Maklari

come this of through get adding continuing how up Okay. carpet the the slowdown you cost invest about business helpful is and then production macro You where side as where you areas areas That's a are of out? you we it? to the where in and thinking are restructuring bit will the And you Jeff, other actions, are following the about to color. way think you're how capacity one some look taking very do on growing? to the reducing mentioned just relative places the And

Jeff Lorberbaum

for I Well, to term. Europe, about. And the It's largest Let's finalized near in see. environment. asked talked in the being order talked But are all. you of still a change The all that is America. about we them questions, in to conditions as adapt restructuring. can we the get The we lot to if expect a restructuring them the significant see we North Flooring in plans

We near-term. it as for so we're the that are also it for right changing

focused areas increasing and/ projects on expansion the opportunities expansion current capacity really where constraints. On pieces, have the we the are or sales

which the the there's we're where So areas focused, make. laminate we all in can we're States, United shipping

production it's a for. already new have committed We all in, and lining

We modify We also oversold We're the products Mexico businesses where business. have it. world to hoped. don't economy premium oversold a expansion expand to supplement in as believe up. have it. outside And then from have we we're importing And -- had much the as we LVT we we countertops use sourcing, we we sourcing from in which we slab around we and are have and a which The ceramic is business have people. starting can if have the that also the other business,

focused until visibility of are All There's the in technologies then of we in other are these investments used And costs each and limit the that product changes, everything lower improves. which start-up investments we've should some the past. no on the productivity significant one. And features. postponed have

Susan Maklari

good and color, the luck. for much very you Thank Okay.

Jeff Lorberbaum

Thank you.

Operator

comes Longbow ahead. Please David with Research. MacGregor question from next The go

David MacGregor

where an just And respect seeing you of this strength morning, with some question you're rationalization commercial to Jeff, Good right slower that Yes. area now. the everyone. My recollection is a during business times. is undertaken had that your

in of feet terms street require within us the investment additional dimension to that $XX this the context distribution or of able capacity? Are $XX million restructuring now to this would you some on program? for million So, savings

Jeff Lorberbaum

There is operation were it, one the along that announced the to to order and way. of well affecting productivity past, we the consolidate commercial going the in it's business. In that that's we nothing in improve

There coming the business a is see to increased, strong. delayed projects believe lot And to in. we in the in that salespeople, tile. We the point. are bottom on as We We the stay And the have look at our we hard going growing hospitality volume. worked products. from being margins there's with surface well that new whole retail recovering in improved continue And mix category, marketplace, faster still they're that and are reinstated. projects invest were still in and than carpet being category, as see are commercial the looks like expanding that

David MacGregor

what just And with my just second experiencing increases maybe or the price have far the Good announced to business so achievable much to that margin you're date? to is recovery been respect hear. question, there. How through residential

Jeff Lorberbaum

first. with out start Let's

Our ability to project the inflation is poor. really

The are time. current actions increased price Our quarter, at actions and announced prices improve this extraordinary taking to it energy we've mix, talked the about demand in remains We've businesses a of restructuring disruptions unknown as being to the we're the some how implemented to inflation, together. very increases, businesses The both We'll supply We're we're have are to are pricing control all and to costs. view we as in evolves. it's And in businesses will there. remains see improve quarter. businesses and it where trying We're in different the and taking appropriate. pressure our impact additional ceramic going still which it's that facing have managing The in we've limited other the Europe productivity. this business the margins, as during well second problem. a

Operator

Jefferies. Phil next go comes Ng, The Please from question ahead.

Phil Ng

Hey. Good morning, everyone.

gas Given have nat the prices and shortages in spiked. Europe, certainly

some you cost expect when separately, to cover the have do be caught of headwind? economical? are year? seeing of the incremental prices or pressure kind do ceramic gas enough risk of this it's you to months, in And since winter And later Assuming you some kind competitors rationing And Europe around in higher managing you in not that Alder cost facilities potentially flooring your how up?

Chris Wellborn

affecting substantial. use. that the of inflation in significantly and materials gas Europe demand. our chemicals first all, -- also is is natural the and we is is It's gas many energy cost of Natural Well, raising of volatility impacting

Phil Ng

Okay.

kind you comfort competitors getting around given shutting Your how currently? just imagine the gas, economics down that of are and

Chris Wellborn

the down. competitors of Italy cost some shutting of smaller I in are think because gas,

it we for And can't the able but get to been so predict future. far, gas, we've

Phil Ng

out Okay. has two calling last done the for million opportunity taking higher-cost some range that American on a the some where cost And And in we then look XXXX where the side it declining flat, North target an have remains productivity to $XX we how you're great globally, you million still obviously Is environment, in what's a it a cost in productivity? out, does of a standpoint, still pretty $XXX cost like When look pretty or in at outside out productivity be job of when look? the curve $XX and out and out demand great. is pretty restructuring, if you're depressed? to on million could team realistic it steep the million to years flooring, is outside beyond, that from of your stuff which $XXX that outliers

Jeff Lorberbaum

happen you volume it prepared it's take Usually, have not of deterioration. and the into thing would out have significant and recessions, out When for would costs be go margins we the to anticipate a and now. deteriorate, coming you same difficult

Phil Ng

you. Thank right. All Okay.

Operator

The next Cleveland from ahead. go Research. Bosshard, comes Please question Eric

Eric Bosshard

Thank things. you. Two

potentially on savings? the Is there of than sounds of restructuring. this is can It terms time. and this spend First working is? what or and where follow-up consider continue, all, just If -- going, this I more wanted you trends clarity. is outlined a like does scenarios in what you're through real see, today they're you've it this

Jeff Lorberbaum

go years, on we as happens, cut reduced replace as this back production. people business back, every XX leave, major I it any about business to the shrink plan We -- have ability eight we that the in don't which go staffing. We restructuring don't and investments back to downturn this. marketing We think, through on when a destroying just, without inventories. we is cut do we and We beyond our

James Brunk

-- strong is appropriately. demand of each in history, management and prepared well segments cost a team really has match out the the and their and the monitor to the Mohawk cost

the I before. gone And again. is well this prepared a through are so challenge on we've take And something teams to that think

Jeff Lorberbaum

The vacancy note, different. has The is system. out has and high at to that commercial been get and environment. thing And I really really overbuilt rates unusual exceeding the we've expanding, housing really just as this this Normally, markets are you rental at demand supply. low point, still it's a taken into mean, at of going been this is have employment levels. another

James Brunk

gives you in that balance with flexibility. I'd us of the remind leverage and a certainly strong that lot the of low sheet strength finds Mohawk liquidity itself

Eric Bosshard

put mix job easier today. you secondly, on is we'll relative four quarters brake? least the price we at question foot then an is to what And consumer expect and should pricing environment past done I mix of guess those And you've expect to or where see numbers in in regards raws. good is My a over the five where later one the

Jeff Lorberbaum

maximize bring everything mix that the and products trying businesses more. will with to the out We're customers do pay to

increasing However, material in, when the start as usually, different also costs go demand the slows, their the operate this you're players difficult the through prices environments assets. you that environment, declining. more in in gets trying slowing always -- all market And are to

typical. be would So those

Eric Bosshard

Thank you.

Operator

The from Research with next comes Thompson Please go Kathryn Thompson ahead. Group. question

Kathryn Thompson

weeks industry fourth you the earlier slowdown question last wanted question we're four we're in versus to quarter, price that inventory of ahead concern building of The that Hi. How cycles your categories. on retailers I saying the and on debate do in buying terms of starting And North versus in the from inflation share fundamental for the of naturally wait Flooring month my increases the variety tapping obscured continue implemented works the in in fundamental extended in balance and you be taking breaks to are, about partners of a last channel optics three, increases, see America. QX. demand? Thank construction what price hearing the a for in slowdown? focusing are to follow-up meaningful a Q&A, today. inventory to from And three more more the of has

Jeff Lorberbaum

their our levels when put You to us, the when of trying industry operation. where in they it service and have from, poor, to maintain perspective were they were came

on the couldn't the So their and at to rest last it, we, time depend inventories, they raised on of minute. the because they deliver industry

speak the raised last has our inventories. they I the quarter, better. can't gotten industry, that, supply In for through much So but

a they but have to our have need as in take and go to investments out, they last Remember, they the you those things through. is happen, they don't have of to things scratching like doesn't people owner you because don't when and and it it. doing you build the comes want it all walking in in home are, they it in, the the through So business, one flooring put

of things go last So the we're through. in, as that go you one

tail So it. of it's a

Kathryn Thompson

prior and restructuring you're focus has, faced with continuing of those U.S. a expansion how little Europe, how do current squaring the had Okay. do Helps how the a forward expansion you on forward, and you you projects uncertainty, I earlier little more bit expansion on string when with and lot course, of the pulling Between initiatives. much really that on mean, this which really why? touched bit those cutback? -- driven in really then, projects projects a do press putting you

Jeff Lorberbaum

the with, over have the for First, that you most been out ones, big we've expansion projects, of start to a year. discussing

Kathryn Thompson

Okay.

Jeff Lorberbaum

So orders the for coming to come -- later. for and the it now of equipment some even just in in, are won't

we take from months through, take been are baby. can't going So we're in them could quarters the to of Brazil these you different them have when at business but start We've pieces. them, end XX of that in these And smaller stages it? long-term stop other years postponed ones you to So take the is investments them more, or some when that ones, that the with. things we and in most big make three the moment. There are minimum postponed you are two all

Kathryn Thompson

luck. of you. Thank Yes. Best Understood.

Operator

go The ahead. next Rehaut Michael Please JPMorgan. with comes from question

Michael Rehaut

that terms basis, when be some could mix possible number you price I a or just point? than exercise an cost? in XQ it stability would worse, would it to of be or -- XQ And would materials where If assuming get positive XQ, you in expect Great. to you raw stance. review Thanks. to price versus for be you XQ, just better do or one segments comments a were not on that's cost. expect just clear specifically, during if across on whatever around, morning, around if Good three briefly wanted to everyone. just easier earlier consolidated is And your

James Brunk

we'll after the first said, Mike, all, call. Q the as of release Well, I

we'll all that. I But So the the have fact detail. share would

mix So in inflation. were that price at little about a million QX. we QX, We're behind in look than when $XX you bit total versus better

that versus closed price/mix gap, inflation. we've total So again,

of said, rise with look you both As little bit it's natural and a impacting consumption gas of in more Europe, energy our especially forward, our chemicals. the we've as unpredictable

considered and in expect a would we of all guidance. in bit was that spreading our QX, So that little gap

Michael Rehaut

of that. And also in the highlighted wanted top-line Okay. Appreciate that to circle just headwinds you to I a back XQ. couple

The in sales rug channel and sense be well I looking reductions, inventory kind rug XQ, what first, business. that could with well. the very of was of you I give the impact us curious from of type It rough terms growth, some inventory into if if the channel the hit forward caused? as And reductions then of the of growth could what headwind as an of possible, have would impact. what on assume, helpful, inventory of channel sales assumption type you reductions some you And type to share as if a us that

Jeff Lorberbaum

exact have you As don't would of suspect, we our customers. views

inventories, in they've service years. then them pullback significant because in many of inventories a the there and they it business, So differences pieces, escalated what's the -- intuitive their the lot fact-based. demand. channels. levels are had X.X And believe The given there's than going as is a of variation the we and most then of all and had And between where of retail those are lower of of see reducing on businesses inventories size rather last we

we So is to and believe they Where don't much how some believe out more as we have We are through. back. those are take go pulling exact we there's an view there, it. of

they're out because XX inventories back the reduce On the countries, read all about everything of inventory. things. things a you to rug in their in other cutting lot even top on the all they are are they're cutting all they're inventories, customers, and and side, things the back are over and those that cutting back line, do of -- They're can retailers

we of in decline chunk rugs a of it the others. was improvements the most moderate different a and is of expected So that -- than big forward we We think amount. out, huge think the one going

Michael Rehaut

you. Okay. Thank

Operator

Truist. The with next from Hughes question Keith ahead. Please comes go

Keith Hughes

there a then the is seeing I you. much in of some variation One, little you America, mix. was of seeing? had in how lot a in two by quarter, Europe that, pressure you're the Thank statement mix prepared positive are product bit on category, in North questions mix the said you pressure more. in And

James Brunk

We things mix the got in Europe.

Jeff Lorberbaum

last repeat was to you can sorry, you. hear question? I'm hard the It

Keith Hughes

of in uniform? Yes. by carry severity, North or it you're The pretty is category America, pressure mix it seeing does in terms product

James Brunk

part first The on mix, of especially Europe. the question in

we second again, good did countering energy piece So -- the a of job as the they quarter quarter. anticipated, the ceramic Europe, really inflation in in very of

ceramic in along commercial In the with we That terms ceramic profile and helps premium are the to increasing. product inflation. board, doing in side the the And you with is North is the the see the of of face products America, categories, trying cases, Europe. different many rising across margin what of what push in in

Keith Hughes

terms there is pressure, America, North of downward the in products deal in amongst any And pressure?

Jeff Lorberbaum

difference down there's I'm that not much carpet slowed point. sure industry more. the categories between at The this

probably got it's more So impact.

Keith Hughes

Thank you.

Operator

go next Patterson with question ahead. Please Truman The comes Wolfe Research. from

Truman Patterson

Hey morning my good Thanks for question. taking guys.

been competitors Ukrainian First, product clay, reformulated been hoping shutdown. just able get dynamics -- mining And to bring wanted business, have European for cetera? market, reformulate your product as update to your the to you well? to to the But all competitive the et ceramic an get have given on your to access able

Chris Wellborn

We're composition materials. not of the our the of changing the reformulated third over is, but and progress year. the a we've in of rest be we've the exactly with balance alternative products quarter where will will as material. our end in group changed body sure lot we into The change made the Truman, majority get of

Truman Patterson

out how you quarter? mentioned, the your have been it commercial and strong points and as retail you that the It during then up the R&R residential North were soft. has And data or sales America to in Perfect. retail could still. US been Okay. what sales like guys the But really break maybe commercial year-over-year compares we sounds US track in

Jeff Lorberbaum

and by care level. channels. and led strengthening don't said, construction it We workplace detailed We've channels. and as it hospitality remodeling, all health you retail increase, much. hasn't The down at commercial break the It's government, seen that as across is recovered

margin delayed grow a go projects that continue than In than businesses channels. business, other to seeing business. to think We're being the hard reinstated. the higher I our business. said we faster this a got our it's commercial were So versus residential earlier, lot tile the And more surface carpet has the

of mix. our part as So projects it's they use value higher mix which go the business, within tend to And it. on, these commercial our improving larger improves then products,

James Brunk

is would America concentration in a higher North sales. the I ceramic than percentage is And as Flooring say of the US in

Truman Patterson

Okay. Thanks coming guys. And quarter. good luck on

James Brunk

you. Thank

Operator

with ahead. The next Zelman. Adam from Baumgarten comes Please question go

Adam Baumgarten

-- Hey, could everyone. temporary maybe if shutdowns those products missed or you and Apologies, I America sorry, good morning color in this, guys the which but on World more were? Flooring give North Rest you noted of that

James Brunk

the more pull saw as in on lessen aligned. Well, quarter, we back demand We did inventory unpredictable. production keep becomes environment some and to the

Adam Baumgarten

there, that is board? Was or product in specific it out categories across the

Jeff Lorberbaum

I have during year, and tend having more think so build to time vacations. minimize all it we up, out downtime take will year. vacations build to remember the as coming was planning -- more the This period you we vacation downtime in we were trying to that more the go have the year, Last then frame. also, inventories But on downtime inventories. -- higher this in are the the to we category it. is We're flooring through

Adam Baumgarten

what an the in And And you Got us gas just Okay. maybe quarter. you can give then the natural it. headwinds you're that building XQ? on if saw ceramic update in European for

Chris Wellborn

prices XX% is at to energy to Recently, to best the market that, between XX%. see and look cost, in ceramic think gas historically, our we'll Europe spiked I But of have now evolves. again and way at and just XX% how have XX%

in market, We've a low little I where premium expect focused end energy and introduced of that percent. on less share end in the differentiated products, -- more environment the the have is the We we'll of market. lose we

Adam Baumgarten

Okay. Thanks a lot.

Jeff Lorberbaum

bigger impact thing, if prices the the other stay fourth quarter the in have will as that they On are, through. where gas flows inventory a the

Adam Baumgarten

Okay. Thanks. That’s helpful.

Jeff Lorberbaum

Thanks.

Operator

Matthew from go comes question Please with Barclays. ahead. next The Bouley

Matthew Bouley

for afternoon. competition Good I specifically. North you to Hey. questions. guess, wanted American, the I imports taking about versus ask Thank

you. little stronger. a loosening versus the the be for might is your of bit. Thank power versus sense imports evolving dollar shipping ocean pricing What's that importers? Clearly, sort getting there Now US and competitive landscape

Chris Wellborn

Ocean the energy but and still Well, in is the freight quarter, is availability elevated. increased costs. transportation pricing given improving, import cost

demand well premium positioned collections bit, with still but is manufacturing the freight We've little elevated. domestic improving. a our and decline is Our it's commercial the seen

Matthew Bouley

I flow Okay. the Got quarter. secondly, it. missed cash just then apologies this, the but in if result And free

You sort ability inventory through flow additional we to the the generate around year? building you. of just and Thank inflation as cash the capital of and mentioned to move on outlook speak sort that. working But free

James Brunk

of again, is with quarter times. liquidity the and the all, strong the of billion X.X balance First $X leverage finished about sheet, very

to projects, year due cash of positive anticipate really million, full the in approximately quarter. CapEx future certainly is we -- about increasing, In investment for inflation, now the have we've help along capital impacted as the with service the to mainly growth through strong flat year, in inventory flow, this inflation point do it And to by about cash terms with flow was the and sales, we're which two improving results. a some $XXX our of increase acquisitions It's some for go projects. We investment in our will $XXX remember, in and going at and forward committed million.

Matthew Bouley

All right. much. Thanks very

Operator

ahead. UBS. The Lovallo go next with from comes Please question John

John Lovallo

you Thank two my fitting Maybe in ones on guys. for here. Hey, me just quick end.

we rate the anticipate think restructuring about should And hitting million to million full is $XX that targeted when in The of of how cadence one costs? you savings? cash do the first run $XX the

James Brunk

plans So said, on we're as we completing that. the

hit with and see it and between to the QX will at full amount of up should XXXX. savings of ramp the QX end limited most then cost year, You the the during

John Lovallo

That's would given ramping the where helpful. the any And then did of here is? kind repurchase stock guys up you you anticipate And quarter? Okay. in the buybacks valuation

James Brunk

little opportunities But we buybacks previously, for about acquisitions and I we the of on very million. based be in that announcement that go over the purchased as the year. of We and two made stock end will QX the quarter talked acquisitions to of with sheet strength the through additional the $XXX balance continue the

John Lovallo

Thank Okay. you.

Operator

remarks. turn more Lorberbaum closing Mr. over to no conference are would there for to questions, Since like I the

Jeff Lorberbaum

joining taking our about improve our future, Have day. a actions for confident good We're you results. thank today. and Again, us to we're

Operator

now concluded. has attending today's presentation. you conference The Thank for

may now You disconnect.

Mohawk Industries (MHK) 29 Jul 222022 Q2 Earnings call transcript