Reflecting the declining health of the home building and home improvement industries as a whole, Masco Corp. reported a 15% sales slump and a modest second quarter profit on Tuesday, July 29.
The diverse and vertically integrated company, which does everything from manufacturing faucets to installing insulation in new homes, earned $72 million, or $0.20 per share, in its second quarter, a 59% decline from the same quarter last year.
In addition to slowing sales, an increased tax rate imposed on profits brought into the company from overseas impacted profits by $0.05 per share. The costs of downsizing operations and cutting employees sliced into profits by $0.03 per share.
Worst hit among the company's segments was its installation business, which started as a major installer of insulation in homes and branched out into other installations for new-home builders over the past few years. Sales were down 27%, the company reported, and profits fell 0.8% to $4 million--barely over breaking even compared to $58 million and 8.3% last year.
Its other specialty product segment, which includes windows and doors, also took a big hit, dropping to 22% of its sales volume in the same quarter of 2007. Profits there fell from 16.4% to 6.7%.
Its cabinetry division was another market casualty, dropping 18%. Decorative and architectural products, which would include its Behr paint line, fell 11%. Masco's plumbing division logged only a 2% drop in sales and even improved its profit margin to 12.5% from 10.9% last year.
Masco has been vigorously working to downsize its operations to meet the demand that it predicts will start 900,000 to 1.0 million homes this year compared with 1.3 million last year. Since late 2006, it has sliced 17,000 employees from its payroll, closed 11 manufacturing operations, and reduced its installation branches by more then 25%.
The company has tried to create more flexible manufacturing solutions so that it can easily scale operations up and down depending on demand, without having to take huge losses and costs from dumping capacity and then ramping up again as the market cycles.
"We are thinking about capacity differently," said COO Donald J. DeMarie. "What we don't want to do is save a dollar today and spend two or three dollars down the line."
That cycle is not likely to improve this year and maybe not even next, executives told analysts during the conference call.
"I think things will be so bad [in 2009] that we will see more action taken by the government," said executive chairman Richard A. Manoogian.
As to the housing bill recently approved by Congress, Manoogian said he doesn't expect it will help improve matters, but rather will merely avert a greater disaster.