Flooring producer Mohawk Industries Inc announced an adjustment to its earnings forecast for the third quarter of 2005 due to the impact of Hurricane Katrina on raw materials and energy costs. Katrina has severely disrupted the petrochemical industry causing significant cost increases in carpet raw materials and possible supply disruptions.
These cost increases reflect higher oil prices and shortages of refining capacity raising chemical costs used in their raw materials. At this point, these chemicals have not stabilized and may continue to escalate in price. Additionally, energy costs have increased substantially in the third quarter with natural gas going up more than 50 percent. Internal and external transportation cost increases have not been fully recovered in their prices and surcharges.
They expect raw material costs and chemical supply disruptions to stabilize. However, to mitigate these increases, Mohawk has announced a price increase on October 3rd for its carpet products of 5 percent to 8 percent and higher freight charges. They are also increasing their ceramic and other hard surface product prices to recover higher gas and transportation costs.
The Company is concerned that Katrina and rising energy costs will have a short-term negative effect on consumer confidence and the overall economy. Their product mix has shifted to offset some of the rising costs.
As a result of all these factors, they are adjusting their third quarter forecast to range from $1.60 to $1.63 diluted earnings per share (EPS) and their fourth quarter EPS forecast is $1.49 to $1.58. The impact, if any, of Hurricane Rita on the Company's fourth quarter results has not been included in this forecast.
marketing@alchempro.com
