Mohawk sets new records by "investing aggressively in growth"

Jeffrey S. Lorberbaum

After closing the year 2016 with net sales of $9.0 billion (+11% with respect to the $8.1 billion of 2015), Mohawk Industries reported a further 2% growth in sales in the first quarter of 2017 (with respect to Q1 2016) to $2.22 billion. Global Ceramic Segment sales also increased approximately 2%, further underscoring its role as the world’s largest manufacturer and distributor in the sector. The segment includes American Olean, Dal-Tile, KAI, Kerama Marazzi, Marazzi and Ragno brand names, with facilities in the U.S., Mexico, Italy, Spain, Russia and Bulgaria.

Jeffrey S. Lorberbaum, chairman and CEO of the Calhoun, Georgia-based group, presented the 2016 results to the market and shareholders, underlining that the growth in 2016 had exceeded even the group’s own high expectations. The record figures for the year included sales of $9.0 billion, operating income of $1.3 billion (+24%), with an operating margin of 14.3 percent, net earnings up from $615 million to $930 million (+51.2%) and EBITDA of $1.7 billion. “From acquisitions to capital investments, strategic decisions made over the past few years have created a foundation for long-term growth from which we’re now reaping significant benefits.” said Lorberbaum.

From 2013 to 2015, Mohawk financed its growth strategy by investing $4.8 billion in capital expenditures, including about $3.4 billion in nine acquisitions across the world and $1.4 billion in capital expenditures. “In 2016, we increased internal investments to about $672 million, a figure that will rise again in 2017 to an estimated $750 million”.

  • The Global Ceramic segment

In 2016 the Global Ceramic segment saw its share of net sales of Mohawk Industries rise to 36%. Net sales increased from $3,012.9 million for 2015 to $3,174.7 million for 2016 (+5.4%). Operating income was $478.4 million (15.1% of net sales) for 2016, a 15.5% increase compared to the operating income of $414.2 million (13.7% of segment net sales) for 2015. The increase in operating income was primarily attributable to savings from capital investments and increased sales volumes, partially offset by costs associated with investments in new product development, sales personnel and materials.

The group completed a number of operations in 2016 to support the increase in sales in all markets.

One of these was the opening of the new greenfield plant in Tennessee, which became fully operational earlier than expected and has increased the range of large sizes.

Expansion work has also begun on the Salamanca plant in Mexico, which will become operational by the end of 2017 and will roughly double the facility’s capacity.

In Russia, as well as starting up the new Continua+ line for large-size panels, investments in owned and franchised stores have strengthened Kerama Marazzi’s presence in the distribution sector, allowing the company to outperform the challenging Russian ceramic market. An investment to increase production capacity in this market is planned for this year.

Lastly, the modernisation of Marazzi Group’s Italian facilities, with a new 30 million euro investment plan (launched last September) to equip the Sassuolo facility with cutting-edge technologies in terms of efficiency and consumption and to increase annual production capacity of porcelain to 10 million square metres. The work is expected to be completed this summer.

The first operation of 2017 was the acquisition of historic Italian company Emilceramica in January (concluded on 4 April following approval given by the Antitrust authorities). Emilceramica (Fiorano Modenese) has two facilities and a turnover of more than 150 million euros (2015 figure) generated by the Emilceramica, Viva, Provenza and Ergon brand names, 90% from exports.

One of the group’s priorities is to further expand its ceramic business, where along with the above-mentioned operations, a second acquisition was made in April in Poland where the Group acquired a smaller ceramic tile company (Polcolorit). Further increases in manufacturing capacity are planned in the bathroom and kitchen countertop segment both in Europe and the U.S.

  • Read the complete article published on Ceramic World Review 121/2017