Leggett & Platt ((LEG)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Leggett & Platt’s recent earnings call painted a mixed picture for investors. While the company has made commendable strides in debt reduction and restructuring, challenges persist in certain segments, leading to a decline in overall sales. The Bedding segment shows signs of stabilization, and there are promising improvements in cash flow. However, the sales decline and ongoing market pressures suggest a cautious outlook for the future.
Significant Debt Reduction
Leggett & Platt has made substantial progress in reducing its debt, cutting it by $296 million in the third quarter to $1.5 billion. This brings the total debt reduction for the year-to-date to $367 million. The company has also successfully reduced its commercial paper balance to zero, significantly strengthening its balance sheet.
Restructuring Plan Success
The company’s restructuring plan is nearing completion and has delivered better EBIT contributions with lower associated costs than initially planned. The restructuring is expected to realize an EBIT benefit of $60 million to $70 million annually, showcasing its success in streamlining operations.
Improved Cash Flow
Operating cash flow in the third quarter was $126 million, marking an increase of $30 million compared to the same period in 2024. This improvement is primarily driven by benefits from working capital, indicating a positive trend in cash management.
Stable Bedding Segment
Despite a 10% year-over-year decrease in bedding product sales, there was a 3% sequential improvement compared to the second quarter. U.S. spring unit volume remained consistent with mattress consumption and production, highlighting some stability in this segment.
Overall Sales Decline
The third quarter saw sales just over $1 billion, down 6% year-over-year. This decline is attributed to continued soft demand in residential end markets and sales attrition from divestitures and restructuring efforts.
Challenges in Specialty Foam and Adjustable Bed
Sales in the specialty foam and adjustable bed segments faced weakness due to customer and retailer merchandising changes, leading to volume declines.
Pricing Pressures in Furniture, Flooring, and Textiles
Aggressive competitive discounting, especially in the Flooring and Textiles segments, has led to pricing adjustments that negatively impacted the fourth quarter.
Specialized Products Segment Decline
Sales in the specialized products segment declined by 7%, with modest declines in automotive and hydraulic cylinders. The divestiture of Aerospace also significantly dragged on sales.
Forward-Looking Guidance
During the earnings call, Leggett & Platt reaffirmed the midpoint of its full-year sales and adjusted EPS guidance. The projected sales range for the year is between $4.0 billion and $4.1 billion, reflecting a 6% to 9% decrease from 2024. Adjusted earnings per share are expected to fall between $1.00 and $1.10, with an adjusted EBIT margin estimated at 6.4% to 6.6%. Operating cash flow is anticipated to be approximately $300 million, with capital expenditures projected at $60 million to $70 million.
In summary, Leggett & Platt’s earnings call reveals a company making significant strides in debt reduction and restructuring, with improved cash flow and some stabilization in the Bedding segment. However, the overall sales decline and ongoing challenges in certain segments suggest a cautious approach moving forward. Investors will be keenly watching how the company navigates these challenges in the coming quarters.