Armstrong lowers 2014 guidance on Q2 earnings
Armstrong World Industries fell short of its stated goals in the second quarter, leading in turn to a lowered full-year guidance for 2014.
"Despite soft sales, we delivered second-quarter adjusted EBITDA in the middle of our guidance range," said CEO Matt Espe. "The softer-demand environment we experienced in the quarter and first half of 2014 has tempered our outlook for the back half of the year."
Net sales did increase slightly year-over-year — by 0.5% — to $710.0 million during the three months ended June 30. This was driven by price and mix offsetting lower volumes.
However, both operating income and net income declined. Net income was down 31.4% to $21.0 million for the quarter, and operating income fell 14.5% to $57.8 million.
Full-year guidance pinpoints sales in the $2.7 to $2.8 billion range, and adjusted EBITDA was between $370 and $400 million.
The company owed approximately $8 million in severance and other charges associated with the closing of the resilient flooring plant in Thomastown, Australia, and the engineered wood flooring plant in Kunshan, China.
Market Recap: RISI Crow’s Construction Materials Cost Index
A price index of lumber and panels used in actual construction for July 25, 2014
*Western – regional species perimeter foundation; Southern – regional species slab construction.
Crow’s Market Recap — A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report.
Lumber: Mill shutdowns in eastern Canada and order files extending into early August at western mills left SPF prices flat in both regions. Buyers looked to secondaries for moderate discounts. Smaller mills in the West showed a willingness to back off quotes a bit to keep orders coming their way. Southern Pine lumber pricing continued to follow recent trends. Narrow widths continued to carry a degree of strength while wides remained weak. Sluggish 2×8 through 2×12 #2 sales prompted producers to seek orders a little more aggressively. Coastal species lumber mills continued to sell enough volumes to keep most prices at levels established the week prior or gently raise them. Buyers often looked for quick shipping volumes to fill in inventory gaps, guarding against any potential weakness in the market. Inland dimension lumber producers report steady business, but more and more say that sales are “tally dependent.” Both producers and buyers are frustrated by mills’ frequent inability to generate specific items or volumes being sought. Availability of New Zealand-derived Radiata Pine or Chilean stock is, and has been, consistently predicated on the consistency of demand. Ponderosa Pine #3 Shop has shown no real market action that would justify any downward adjustment. The available volume of wood has increased, and the market should further clarify within a week or two, according to sources. Ponderosa Pine board mills continue to see modest weakness in the #2 Commons, notably in 1×12. Idaho White Pine is stable and firm at current levels. Eastern White Pine producers continue to report a balanced market. The flow of Western Red Cedar through the distribution chain continued at a seasonal pace. Producers reported moderate sales activity. Excess inventory was limited at both mills and yards.
Panels: OSB continued its sideways slide this week, with mills drawing lines in the sand on pricing. Spot deals were to be had on multiple truckloads, but there is still no urgency to buy. Having run inventories low, buyers aggressively purchased strong volumes of Southern Pine plywood in response to a western U.S. mill fire the week prior. Producers experienced moderately slower sales activity as order files moved into the week of August 18. Western Fir plywood mills sold volumes rapidly early and again exited the market before again reentering at higher prices. By Friday morning, many CDX prices had increased $50 to $60. Canadian Plywood mill and distribution reps watched pricing gain another five points from last week’s level, putting benchmark Toronto 3/8-in. at close to $500. Inquiries continued to come in fast and furious all week. A few particleboard producers described the market as “uneventful,” and others varied little from that narrative. Particleboard producers continued to sell volumes at a pace close to weekly production, with some modest variances. Several MDF producers reported that sales did not keep up with production. Producers often pointed to the calendar, having expected summer sales to slow.
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