Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Leggett & Platt Inc (LEG, Financial) is actively executing a restructuring plan, which is on track and expected to yield significant EBIT benefits by late 2025.
- The company has identified approximately $10 million in corporate cost savings, expected to be realized in 2025.
- Despite weaker than expected results, adjusted EBIT margin improved by 60 basis points sequentially in the third quarter.
- The automotive team has realized efficiency improvements and closely managed costs, resulting in improved EBIT margins.
- Leggett & Platt Inc (LEG) is prioritizing debt reduction, having reduced total debt by $124 million in the third quarter.
Negative Points
- Third quarter sales volumes were below expectations due to weaker demand in residential end markets and headwinds in automotive, hydraulic cylinders, and Geo Components.
- The company has reduced its full-year sales and earnings guidance due to persistent sluggish demand.
- The U.S. bedding market continues to experience negative volume comparisons, with domestic production likely down high single digits.
- Automotive market volatility across geographies, particularly in China and Europe, has led to production declines and program launch delays.
- Operating cash flow decreased by $48 million in the third quarter compared to the same period in 2023, driven by less benefit from working capital and lower earnings.
Q & A Highlights
Q: Can you discuss the impact of the unfavorable sales mix on margins, particularly in relation to steel rod sales?
A: Karl G. Glassman, CEO, explained that maintaining full operation of the rod mill is crucial despite lower margins from trade rod sales. Tyson Hagale, President of Bedding Products, added that while trade rod margins are lower, they help maintain scrap and conversion costs, which is vital for operational efficiency.
Q: How have the delays in automotive program launches affected your business, and what measures are you taking to mitigate these impacts?
A: R. Samuel Smith, Jr., President of Furniture, Flooring & Textile Products, noted that program delays have significantly impacted top-line expectations. The company is focusing on cost-saving measures, such as resizing headcount, using automation, and optimizing logistics to mitigate volume pressures.
Q: What are the expectations for CapEx in the fourth quarter, and what projects are driving this spending?
A: Benjamin M. Burns, CFO, stated that the fourth quarter will see significant CapEx due to regular maintenance at the rod mill, new bedding programs, and automotive launches. Tyson Hagale added that investments in manufacturing efficiency and product line refreshes in the bedding segment are also planned.
Q: Can you provide insights into the current state of the home furniture market and its impact on your business?
A: R. Samuel Smith, Jr. highlighted that the home furniture market is softer than bedding, impacted by retailer bankruptcies and inventory adjustments. The company is experiencing fewer orders compared to last year due to these industry-wide challenges.
Q: How is the steel rod business performing, and is there a strategic shift in your approach to this segment?
A: Tyson Hagale clarified that while there is no change in pricing strategy, the company is focusing on maintaining full capacity at the rod mill. The trade market is necessary for operational efficiency, but there is no intention to disrupt market pricing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
