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Mohawk Industries warns of profit shortfall, will raise prices

March 14, 2003
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CALHOUN, Ga., March 14 (Reuters) - Mohawk Industries Inc., the No. 2 U.S. maker of flooring products, on Friday warned that its profit in the first half of 2003 will fall short due to weak demand and higher raw material costs.

For the first quarter, the company projected earnings per share of 60 cents to 63 cents, well below the current average Wall Street estimate of 82 cents, as compiled by research firm Thomson First Call. Second-quarter EPS was forecast at $1.05-$1.15, compared with the $1.18 First Call estimate.

Mohawk, based in Calhoun, Georgia, said flooring demand has declined due to geo-political circumstances, harsh winter weather conditions in the northeast and central United States and falling consumer confidence. The company also said its costs have been negatively affected by lower soft surface plant utilization and unabsorbed overhead costs.

In addition, a drop in carpet sales volumes of about 5 percent and more aggressive product promotions have impacted operating margins. The company said sales in its Dal-Tile segment sales are up about 5 percent.

To improve its financial performance, Mohawk said it will raise carpet prices by 5 percent to 8 percent at the end of the month. The company also said it is reducing direct labor costs, selling, general and administrative expenses and lowering capital expenditures.

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