Masco Net Sales Decline Further In Q4
The company said the results were hurt by depressed home construction markets, as well as a continued decline in consumer spending for home improvement products. Masco's many home channel brands include Delta Faucet, Behr, Arrow Fastener, Milgard Windows & Doors and KraftMaid Cabinetry.
“Things really, really fell off late in the year,” said Timothy Wadhams, president and CEO, who called the fourth quarter “a continuation of what has been a very difficult period.”
The company does not expect any quick turnaround in 2009. As chief operating officer Donald Demarie put it, “Our view of ‘09 over the last 90 days has gotten progressively worse.”
To cope with the downturn, Masco since 2006 has cut about 40 percent of its North American workforce and closed 17 manufacturing plants. In 2008, it cut more than 13,000 jobs.
Nishu Sood, a Deutsche Bank-North America analyst who covers Masco, said the results of the last quarter were “a disappointment even against low expectations.” The company said it could achieve breakeven profit or a loss for 2009 as home building declines and consumers spend less on home improvement. Masco projects its 2009 free cash flow will be about $300 million.
Masco said that sales to “key retailer customers,” which includes Home Depot and Lowe’s, fell 14 percent in the fourth quarter. Wadhams said he expects sales in the U.S. will be down “low double digits” in ’09, and “mid-teens” down in Europe. Masco said quarterly sales fell 27 percent for cabinets, 22 percent for plumbing products, and 36 percent for installation and other services.
“We’ve seen a big decline on the consumer side of the business,” said Wadhams, noting that the company will look to preserve liquidity in ‘09 to fund its business operations “and position ourselves for potential growth opportunities.”
In the meantime, the company will continue to look at business consolidations, plant closures, headcount reductions, system implementations and other initiatives. For 2009, the company cut its quarterly dividend to 30 cents a year from 94 cents a year, citing the “extremely challenging” market for the next several quarters. It is the first time in Masco’s 50-year history that it has cut its dividend.
For the full year, Masco posted a loss of $391 million, compared to net income of $386 million in 2007. Sales for the year declined 17 percent to $9.6 billion.
Looking ahead, the company's outlook called for full-year 2009 sales to decline mid-to-high teens percent compared to the full-year 2008. While the next several quarters will be "extremely difficult," the company said it was confident that the long-term fundamentals for the new home construction and home improvement markets are positive.