Inflation played a big role in Leggett & Platt Inc.’s financial results for the first quarter of 2018, which ended March 31.
Net sales of the Carthage, Missouri-based supplier rose 7% to $1.03 billion for the first fiscal quarter, compared with the same period a year ago. Raw material-related price increases and currency impact accounted for a 5% gain in the sales figure, while volume grew 1%, the company said. Acquisitions also contributed 2% to overall sales growth but were partially offset by divestitures.
Earnings per share in the first quarter dropped slightly to $0.57, a decrease of $0.05 or 8% versus 2017, primarily due to higher raw material costs, according to the company. As expected, earnings before interest and tax and EBIT margin declined due to a pricing lag the company experiences when passing along commodity inflation.
“We are pleased to have started the year with 7% sales growth, benefiting meaningfully from inflation and currency,” said Karl Glassman, L&P’s president and chief executive officer. “Volume growth reflected continued strength in automotive and adjustable bed, but these gains were largely offset by soft demand in several other businesses. We continue to be encouraged by opportunities we have developed in our bedding business and expect market improvement as 2018 progresses. We are benefiting from increased content as we continue to place higher value components in more of the mattresses that our customers produce.”
Inflation continues to be a significant margin headwind, Glassman added. “Steel costs increased in late 2017 and have further accelerated this year. We are implementing price increases (with our normal 90-day lag) in the majority of our steel-
consuming businesses to recover the higher costs,” he said.
First-quarter sales in the Furniture Products Segment, which includes adjustable beds and the Fashion Bed Group, increased 5%. Same-location sales increased 3% from raw material-related price increases and currency impact. Volume was flat, with strong growth in adjustable bed offset by declines in home furniture and Fashion Bed Group. EBIT decreased $2 million, primarily due to higher steel costs in home furniture.
Total sales grew 13% in the Industrial Products Segment, which includes steel rod and wire, primarily due to raw material-related price increases. EBIT was flat, with improved margins at the company’s steel mill offset by higher LIFO (last in, first out) expense and other costs.
In the Residential Products Segment, which includes bedding components, foam, other bedding-related products, Spuhl AG wire-forming machinery and Global Systems Group, total sales grew 2% due to a slight increase in same-location sales and a small acquisition completed in 2017. Volume decreased 3%. EBIT decreased $8 million primarily due to higher raw material costs and lower volume.
L&P has raised its full-year sales guidance to reflect continued steel inflation. The company now anticipates 2018 sales growth of 9% to 12%, for a total of $4.3 billion to $4.4 billion, and $100 million above the prior range. Volume growth is expected to be in the midsingle digits, from strength in bedding, adjustable bed and other business segments. Profit margins will continue to be under pressure in the second quarter due to steel price hikes, and L&P has lowered its full-year earnings per share guidance by $0.05, to $2.60 to $2.80, to allow for this impact. Assuming costs stabilize, margins should improve in the second half of the year, the company said.