Mohawk Industries, Inc. Q1 2009 Earnings Call Transcript

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2009-04-24 17:15:22.0

Tags: Raw Material, J.P. Morgan Chase & Co., Call Transcript, Earnings, Mohawk Industries Inc., 2Q, Commodity Cost, Benefits, Human Resources, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Michael Rehaut - J.P. Morgan.

Michael Rehaut - J.P. Morgan

First question - and this is something, Frank, we've talked about before - I was wondering if we can just hit on this again. In terms of the raw material flow through on the Mohawk line, consistent with your expectations last quarter you had about a $60 million as you worked through some of the higher cost inventory.

With that, I guess, done and 2Q reflecting more current inventory or raw material prices I was wondering if you could, in looking towards 3Q and 4Q perhaps, with oil where it is right now, with nylon and polypro where they are right now, do you expect any incremental benefits from raw materials headed into the back half or from the cost side, given the current environment and pricing, the 2Q guidance that you've given, does that largely reflect the recent coming down in commodity costs?

Frank Boykin

The commodity costs during the quarter remained relatively stable from the end of last year. As we look out in the future, as far as a guess, but we believe that going forward the material costs should remain relatively stable through the year. There are some indications it may go up, so the projections aren't perfect and the last two years they haven't been any good at all. But assuming that they're relatively stable, that's good with it. And we don't perceive that there's significant benefit from a decline over the second half of the year.

Michael Rehaut - J.P. Morgan

I'm just talking about relative to the 2Q, your guidance in 2Q, the assumptions that you're building into there in terms of material costs. My question more is that there's not like a continued drag from the higher costs of last year affecting 2Q, but rather 2Q is more reflective of the improvement in commodity costs that we saw in the back half of '08.

Frank Boykin

That's correct. I mean, if anything there might be a slight - there's some timing, possibly, of some inventory to a little more or less that drag over or not, but for the most part we'll operating on the costs from the lower cost structure.

Michael Rehaut - J.P. Morgan

The second question, just as it relates to Unilin, you know, that's been an interesting story from a margin standpoint over the last couple of years. Initially when you acquired it, given that the volume was better than expected, you got some great through put or follow through on the margin side. Now we're in the mid 7 percentage range the last couple quarters.

 

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