We commend Leggett's consistent endeavors to keep itself on the
growth trajectory through acquisitions that would help augment its
top-line performance. Further, we remain impressed by the company's
strong financial base, which enables it to make profitable ventures
as well as return value to shareholders. We believe that the
company's sustained focus on launching new products and divesting
low-performing businesses bode well for growth. However, we are
concerned about rising raw material costs, which have adversely
impacted the company's margins over the past few quarters.
Moreover, intense competition from global and regional players as
well as exposure to foreign exchange rates may undermine the
company's performance going forward. Thus, we are maintaining our
long-term Neutral recommendation on the stock.
Headquartered in Carthage, Missouri, Leggett and Platt Inc. is a
global manufacturer that conceives, designs, and produces a wide
variety of engineered components and products found in many homes,
offices, retail stores, and automobiles. The company's most
important product lines include components for residential
furniture and bedding, retail store fixtures and point of purchase
displays, as well as office furniture. In addition, Leggett makes
non-automotive aluminum dye castings, drawn wire steel, automotive
seat and lumber systems, as well as bedding industry machinery. The
company has more than 140 production facilities located in 18
countries. The company reports its operating results under the
Residential Furnishings manufactures a range of components used
by bedding and upholstered furniture manufacturers in their
finished products. This division also supplies carpet cushions,
adjustable beds, ornamental beds and geo components. In
second-quarter 2013, this segment contributed approximately 42% to
total external sales.
Specialized Products division produces lumber systems and wire
components used by automotive seating manufactures. This segment
also manufactures racks, and shelving and cabinets used to outfit
service vans. In the quarter, this segment contributed nearly 20%
to external sales.
Industrial Materials segment produces and provides steel rods,
drawn steel wires, steel billets and welded steel tubing to its
customers. In the second quarter, this segment contributed about
16% to external sales.
Commercial Fixturing & Components segment manufactures
retail store fixtures and point of purchase displays. The segment
also produces chair controls, bases and other components for office
furniture manufacturers. In the last reported quarter, this segment
contributed approximately 13% to external revenues.
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