Masco Corp., the diversified building materials maker whose top brands include KraftMaid and Merillat cabinets, Delta and Hansgrohe faucets, Behr paint, and Milgard windows, reported today it had swung to a $5 million loss from continuing operations attributable to Masco from a $28 million profit in the year-earlier period on a 6% drop in sales to $1.96 billion.
Operating profit worldwide for the Taylor, Mich.-based company fell to $102 million from $138 million. North America contributed $79 million in operating profit, down sharply from the year-ealier $123 million, on a 6% decline in net sales to $1.53 billion. (See financial summary) This year's third quarter included $64 million in other expenses, up from $49 million a year earlier, and $31 million in income tax expense, up from 2009's $26 million.
Among key LBM-related groups, the cabinets and related products segment recorded a $61 million loss in the July-September period compared with a $16 million loss in the year-earlier period. Sales fell 18% to $357 million. Similarly, the "installation and other services" segment posted an operating loss of $22 million; that's an improvement from its $34 million loss in 3Q2009, even though net sales fell 12% to $292 million.
Meanwhile, plumbing products--a segment not nearly as dependent on new-home construction--sale operating profit roughly unchanged at $97 million vs. a year-earlier $95 million and sales up 1% to $686 million. And the operating profit in the decorative architectural products segment slipped only to $104 million from $122 million on a 2% decline in sales to $463 million.
The other major business segment, known as "other specialty products," said a one-third decline in operating profit to $11 million on a 4% sales decline to $159 million.
Charges. rationalizations, and spending on initiatives appeared to be a big factor in some of other segment results. Excluding them, the cabinet segment would have had a loss of just $27 million rather than $61 milliion. (See information for analysts)
"The slowing economic activity related to our markets, particularly consumer spending and new home construction in North America that we experienced late in the second quarter, continued into the third quarter of 2010," Masco chief executive officer Tim Wadhams said. "Four of our five product segments had sales declines compared to the third quarter of 2009. Our plumbing products segment was up modestly in sales, principally due to continued strong international results, as Hansgrohe continues to expand globally. Given the decline in sales, we were pleased with our performance from a profitability standpoint, as cost reductions partially offset the impact of volume declines and a less favorable relationship between selling prices and commodity costs compared to third quarter 2009."
Masco predicted U.S. would total roughly 575,000 to 625,000 units in 2010 and that expenditures on repair and remodel activity "will be challenged in the near-term, and that big-ticket items will continue to be deferred until general economic conditions, unemployment, consumer confidence, credit availability and home prices improve."
"We are confident that the long-term fundamentals for the new home construction and home improvement markets continue to be positive," Wadhams said. "However, it appears that the recovery in certain of our markets will be slower than previously anticipated. Given that, we will continue our intense focus on the things that we can control including driving the Masco Business System and aggressively managing our cost structure."