Leggett & Platt(LEG) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Second quarter sales were $1.1 billion, down 6% compared to 2024, primarily due to soft demand in residential end markets, automotive, and hydraulic cylinders, along with restructuring-related sales attrition [16][20] - Adjusted EBIT for the second quarter was $76 million, up $4 million from the previous year, driven by metal margin expansion and disciplined cost management [19] - Adjusted earnings per share (EPS) for the second quarter was $0.30, a 3% increase from $0.29 in the same quarter last year [19][25] - Total debt was reduced by $143 million to $1.8 billion, leading to a decrease in net debt to trailing twelve-month adjusted EBITDA to 3.5 times [20][21] Business Line Data and Key Metrics Changes - Bedding product sales decreased by 11% year-over-year, with weakness in mattresses and adjustable bases offsetting strong trade rod and wire sales [16][17] - Specialized products segment saw a 5% decline, with aerospace growth of 6% year-over-year offset by declines in automotive and hydraulic cylinders [18] - Furniture, flooring, and textile products sales were down 2%, with positive growth in work furniture and textiles but declines in home furniture and flooring products [19] Market Data and Key Metrics Changes - The U.S. mattress market production was down mid to high single digits, with total mattress consumption estimated to be down low single digits year-over-year [17][18] - Tariff impacts varied across businesses, with the recent tariff changes being a net positive overall, although concerns about inflation and consumer demand persist [10][12] - The company is actively shifting production and sourcing to mitigate tariff impacts, particularly in the bedding segment where steel tariffs have led to expanded metal margins [11][14] Company Strategy and Development Direction - The company is nearing completion of its restructuring plan, which is expected to strengthen profitability and balance sheet [26] - Future cash flow will be directed towards organic growth investments, strategic acquisitions, and potential share repurchases [27][22] - The company is focused on enhancing operational efficiency and profitability while navigating macroeconomic uncertainties [15][26] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer health, noting an uptick in demand as consumer confidence improves, particularly around holiday periods [50][51] - The company anticipates continued challenges in the bedding segment due to customer changes and promotional dynamics [66] - Management remains confident in the company's position to leverage improvements once consumer demand fully reengages [27][26] Other Important Information - Restructuring costs are now expected to be between $15 million to $25 million for 2025, down from previous estimates, with total restructuring costs projected at $65 million to $75 million [23] - The company maintained its full-year 2025 sales guidance, expecting sales in the range of $4 billion to $4.3 billion, reflecting a decline of 2% to 9% compared to 2024 [24][25] Q&A Session Summary Question: Insights on bedding business consumption numbers - Management explained that U.S. spring volume was down 9%, with a third of that attributed to sales attrition from restructuring, indicating that they are not losing market share [31][37] Question: Metal margin acceleration and tariff impacts - Management confirmed that metal margins are expanding sequentially and year-over-year, positively impacted by steel tariffs [38][40] Question: Changes in restructuring plan and facility retention - Management noted that the decision to retain certain facilities was based on updated market assessments and customer relationships [41][43] Question: Consumer health and macro uncertainty - Management indicated that consumer confidence has improved, leading to a more optimistic outlook for the third quarter compared to the first quarter [50][52] Question: Pricing strategies to offset tariff impacts - Management stated that they are working with suppliers to absorb tariff costs and are passing through pricing when necessary, maintaining pricing power across segments [55] Question: Segment guidance and operating margin expectations - Management provided guidance indicating expected sales and volume declines across segments, with varying margin expectations [56][57] Question: Home furniture performance and market dynamics - Management discussed the bifurcation in the home furniture market, with higher price point furniture performing well while mid-price point customers faced volume declines due to tariff impacts [79][81]