Shaw earnings down

By Jamie Jones
Dalton Daily Citizen

May 03, 2008 09:48 pm

— The economic outlook continues to be grim for the floorcovering industry.
Earnings for Dalton-based Shaw Industries plunged 44 percent in the first quarter of 2008 compared to the same period last year, from $91 million to $51 million, shedding more light on the struggling housing industry and its effect on the floorcovering industry.
Revenues for the world’s largest tufted broadloom carpet manufacturer during the first quarter were down 5 percent, or $61 million, from $1.285 billion in 2007 to $1.224 billion in 2008. In 2007, Shaw Industries had more than $5 billion in revenues.
Berkshire Hathaway, which is based in Omaha, Neb., released its first quarter financial results on Friday. Shaw Industries is a subsidiary of Berkshire Hathaway. Officials with Shaw Industries were unavailable for comment on Saturday. Earlier in the week, a company spokesman said “slowing business conditions” caused the closing of a carpet finishing line in Ringgold and elimination of 67 jobs. And as many officials in the floorcovering industry have predicted, the housing slump should continue through 2008.
“Management expects residential housing and real estate activities to remain depressed for the remainder of 2008,” according to a Berkshire Hathaway statement. “Consequently, Shaw’s earnings over the remainder of 2008 are likely to be lower as compared to 2007.”
In 2007, Shaw Industries’ earnings were $436 million, down from $594 million in 2006.
The fall in first quarter revenues was tied to an 8 percent reduction in carpet sales volume. The overall carpet sales dip was driven by a 10 percent drop in residential carpet volume, but “partially offset” by an increase in commercial carpet volume and “slightly” higher average selling prices.
“The decrease in residential carpet volume reflects the significant downturn in residential real estate activity that began in 2006 and which has been exacerbated by the continuing mortgage lending crisis,” according to the statement.
First quarter profits were hurt by the decline in volume and higher product costs, which were caused by “lower manufacturing efficiencies from decreased production as well as the negative impact of rising raw material costs.”
Overall at Berkshire Hathaway, profit dropped 64 percent to the lowest level since 2005. First quarter net income decreased to $940 million, or $607 a share, from $2.6 billion, or $1,682, in 2007. The housing recession and accompanying mortgage crisis had an impact during the first three months of this year on all of Berkshire Hathaway’s construction-related companies, including Acme Brick, Benjamin Moore paints, Johns Manville and MiTek.
“Demand for certain building products continues to be low as a result of the general slowdown in housing construction,” according to the statement.
The housing market slide has hit many floorcovering manufacturers. On Tuesday, Chattanooga-based Dixie Group announced plans to cut 8 percent of its 1,400-person work force. Last month, officials with Calhoun-based Mohawk Industries said the company will lay off 366 workers and close a plant in Dahlonega.