Mohawk Wood Flooring  Sales Up 37 Percent on Pergo Acquisition CALHOUN, GA - Laminate and wood flooring sales at Mohawk Industries (NYSE:MHK) rose 37% in the third quarter to $451 million, up 37% over the year ago period.

Overall Mohawk reported $2 billion in net sales, and net earnings of $119 million, up 33%. For the nine months ending September 28, 2013, net sales were $5.4 billion, up 25% versus the prior year.  

"As the U.S. housing industry recovers, the flooring industry results are improving," CEO Jeffrey Lorberbaum said. During an analyst's session transcribed by Seeking Alpha, Lorberbaum said, "New housing construction has not yet risen to its historical average. The National Association of Home Builders projects a significant gain in new home starts next year, with volume rising 25% to 1,150,000 units.

"During the next few years, we anticipate housing will grow faster than the overall economy as the market expands to satisfy pent-up demand from the recession. In August, home prices rose for the 18th consecutive month, which should positively impact remodeling and lead to improved industry product mix as homeowners select more premium flooring options.

"For some time, remodeling spending has lagged its historical average, but we're seeing signs of improvement in Harvard's LIRA index, which forecasts stronger residential remodeling for the remainder of this year and 2014.

"Leading construction management consultants project commercial construction will grow by 5% in 2014, with hospitality strong and retail trailing," Lorberbaum noted.

Higher U.S. volumes, efficiency improvements and the performance of the Pergo flooring, Marazzi and Spano acquisitions drove growth, Lorberbaum said.  

Laminate and wood segment net sales of $451 million, up 37% over last year, saw most of the increase from the acquisitions of Pergo and Spano in Europe, and growth in North America. 

"In North America, the integration of Unilin and Pergo is yielding improved productivity and efficiencies and new capacity is being added to satisfy increased demand for single planks," Lorberbaum told analysts. In Europe, the Pergo manufacturing assets have been closed and production was moved to the Company's more efficient Belgium operations to improve the product offering and manufacturing costs. In both Russia and Australia, price increases of 4 to 8% were implemented on laminate and wood to offset currency changes.  

"The U.S. management team is focused on improving productivity and efficiencies across the combined Unilin and Pergo organization, optimizing flexibility to be more responsive and adding new capacity to satisfy demand for single plank laminate products," Lorberbaum told analysts. The in-sourcing of raw materials, maintenance services and boards was executed during the period. We have integrated Pergo's freight and distribution with the Mohawk logistics system to deliver improved service and greater efficiencies.

Lorberbaum also said a Malaysian wood plant is running at full capacity, and efficiencies are improving with new automation to offset increased labor costs in the region.

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