Mohawk (MHK) to Buy Ceramic Tile Business Vitromex for $293M

Mohawk Industries, Inc. MHK inked a deal with Grupo Industrial Saltillo (GIS) to buy its ceramic tile business, Vitromex, for approximately $293 million in cash. The transaction is expected to close in the second half of 2022 and is subject to the approval of GIS’s shareholders and customary government approvals and closing conditions.

In this connection, Mohawk’s chairman and CEO, Jeffrey S. Lorberbaum, stated, “In the past decade, we have significantly increased our participation in the Mexican ceramic tile market, including developing a world-class organization and constructing a state-of-the-art facility in Salamanca. Ceramic tile is the primary flooring utilized in Mexico, and the market has grown approximately eleven percent in pesos per year over the past five years. Combined with Vitromex, we will offer our customers a complete array of residential and commercial products at all price points with enhanced service capabilities.”

Founded in 1967, Vitromex has four manufacturing facilities in Mexico. The company built a leading position in the $1.7-billion (2.9 billion square feet) Mexican ceramic tile market with a broad distribution network and a product offering, including glazed ceramic, porcelain, mosaics and decorative tiles. It generated revenues of approximately $204 million last year. Post completion, the buyout will enhance MHK’s customer base, manufacturing efficiencies and logistical capabilities.

Acquisition Strategy Bode Well

From 1992 to 2021, MHK has completed 48 acquisitions. These acquisitions broaden Mohawk’s product portfolio and expand its geographic footprint and market share. The company’s recent bolt-on acquisitions in Europe have enhanced its growing insulation and panels businesses. Sales of products remain strong and the design and features MHK brings to the market give it competitive advantages at all price points.

The company aims to increase its footprint in various ceramic tile market in the future. This apart, Mohawk has undertaken various strategic initiatives to improve profitability and combat inflationary pressure and labor shortages.

Mohawk’s shares have outperformed the Zacks Textile - Home Furnishing industry so far this year. Earnings estimates have also moved up to $15.52 per share from $13.93 in the past 60 days. This reflects 4.4% year-over-year growth in 2022.

This Zacks Rank #3 (Hold) company has been experiencing rising raw inflation, primarily in material, energy and transportation. Increasing product development costs and labor shortages are adding to the woes.

MHK remains cautiously optimistic about industry growth this year despite inflation and interest rate pressures and has initiated multiple expansion projects, reduced spending and improved efficiencies to offset the woes.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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