Q3 2022 Leggett & Platt Inc Earnings Call
Greetings and welcome to the Leggett <unk> Platt third quarter, 2022, Webcasts and earnings conference call.
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Question and answer session will follow the formal presentation.
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At this time I will now introduce your host Susan Mclain, Vice President of Investor Relations. Thank.
Thank you Ms. Mccahon, you may now begin.
Good morning, and thank you for taking part in like getting watched third quarter conference call.
On the call today are Mr Allott, President and CEO .
Jeff Tate Executive Vice President and CFO .
Henderson Executive Vice President and president of specialized products and furniture flooring and textile products segments.
It shouldn't Hegel senior Vice President and President of the bedroom product segment, and Cassie Branscum senior director of IR.
The agenda for our call. This morning is as follows.
Mitch will start with a summary of the main points, we made in yesterday's press release and discuss operating results and the main trends.
Jeff will cover financial details and address our outlook for the.
2022.
And the group, we'll answer any questions you have.
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A replay is available from the IR portion of like its websites.
We posted to the IR portion of the website yesterday's press release.
Set of Powerpoint slides that contain summary financial information along with segment details.
Those documents supplement the information we discuss on this call, including non-GAAP reconciliations.
I need to remind you that remarks today concerning future expectations events objectives strategies trends or results constitute forward looking statements.
Well results or events may differ materially due to a number of risks and uncertainties and the company undertakes no obligation to update or revise these statements.
For a summary of these risk factors and additional information. Please refer to yesterday's press release and the section in our most recent 10-K and subsequent 10-Q entitled risk factors and forward looking statements.
Now I'll turn the call over to Mitch.
Good morning, and thank you for participating in our third quarter call.
The current global economic environment, and its impact on the consumer negatively impacted our third quarter results save.
Sales were $1.29 billion EBIT was $113 million and earnings per share was <unk> 52 sets.
Sales in the quarter were down 2% versus third quarter 2021, primarily from lower volume and currency impact, partially offset by raw material related price increases.
The volume decline was driven by continued demand softness in residential end markets, partially offset by growth in automotive and industrial end markets.
EBIT decreased 21% versus third quarter 2021, primarily from lower volume lower overhead absorption from reduced production and operational inefficiencies and specialty foam, partially offset by metal margin expansion.
Earnings per share decreased 27% versus third quarter 2021.
We lowered our full year guidance on October 10th to reflect lower demand levels and the increasingly challenging macroeconomic environment.
Third quarter earnings per share were slightly better than expected, primarily due to incentive compensation adjustment.
At the midpoint of guidance fourth quarter is now expected to be slightly lower than the third quarter, primarily due to further reductions in steel rod production in response to the slowing steel market.
We completed two acquisitions in August and one in October .
Late August we acquired Tacoma hydraulic technology, a leading global manufacturer of hydraulic cylinders, primarily for the heavy construction equipment industry.
With sales of approximately $65 million in 2021 and operations in Germany, China and the U S to come as the next step in executing our strategy to pursue profitable growth in the engineered hydraulics component industry.
Yeah.
In August we also acquired a small textiles business that converts and distributes construction fabrics for the furniture embedding industries.
In early October we acquired a small Canadian based distributor of products used for erosion control storm water management and various other applications.
We welcome the employees from all three businesses to Leggett and Platt.
Now moving on to the segments.
Yeah.
Sales in our bedding products segment were down 12% versus third quarter of 2021.
Volume declines for soft demand in the U S and European bedding markets, along with currency impacts were partially offset by raw material related selling price increases and trade sales growth in our steel rod and drawn wire businesses.
Demand in the U S betting market was fairly stable versus second quarter, but remains a relatively weak levels as macroeconomic impacts on consumer spending persist.
Our specialty foam business has experienced larger demand impacts as a result of previous pandemic related supply issues and channel specific pressures.
Demand in European bedding has declined more significantly amid geopolitical disruptions being seen energy crashes and the related impact on consumer spending.
Yeah.
Commodity costs have been more stable, although at historically high levels.
Other manufacturing inputs, including energy costs continue to increase.
We are carefully managing these costs and the impact to our business and customers.
We are reducing inventory across the segment to levels needed to support demand, while maintaining focus on our ability to service customer requirements.
Sequential softening in trade demand for steel Rod drove third quarter steel inventory levels higher given the bedding demand environment and the slowing steel market, we're cutting production days in our steel rod business during the fourth quarter to reduce those inventories.
Okay.
EBITDA margins in this segment were lower versus third quarter 2021, primarily from lower volume and lower overhead absorption as production levels were adjusted to meet reduced demand and the operational efficiencies and specialty foam, which are being addressed by continuing integration work.
These decreases were partially offset by expanded metal margins in our steel rod business.
Sales in our specialized products segment increased 24% versus third quarter 2021 for strong volume growth in all three businesses raw material related price increases and the Docomo acquisition in late August .
These improvements were partially offset by currency impact.
While improving year over year automotive industry production forecast remain dynamic and supply chain geopolitical impact spurring continued volatility.
The current industry forecast for global production. She was just over 5% growth in the major markets. This year, reflecting relative strength in North America, and China and weakness in Europe .
Consumer demand remains strong and vehicle inventories, while continuing to recover still remain at record low levels.
Our supply chain continued to stabilize industry production should further improve.
Yeah.
In our aerospace business demand also is improving however, raw material and labor shortages are creating some volatility across the industry.
End market demand in hydraulic cylinders is strong and order backlogs in both the material handling and heavy construction equipment market segments remain at elevated levels.
Our OEM customers generally are seeing some improvement in production levels. However, elevated order backlogs are expected to remain into 2023.
Well EBITDA margins decreased EBITDA dollars increased primarily from higher volume, partially offset by currency impact higher raw material costs and labor inefficiencies.
Cost recoveries, improving in automotive, but at a slower rate than expected.
Sales in our furniture flooring and textile products segment were flat with third quarter 2021, as raw material related selling price increases and higher volume in Geo components and work furniture were offset by lower volume in our home furniture flooring and fabric converting and currency impact.
Home furniture demand has softened significantly in the last few months, particularly at mid to lower price points with slower consumer demand and excess inventory at retail.
This is also impacting volume in fabric converting.
Work furniture sales continue to grow in the third quarter largely from improved contract demand. However, overall order rates are beginning to soften reflecting the economic uncertainties.
In flooring products residential demand has softened modestly with lower home improvement activity.
Hospitality demand is slowly improving but remains well below pre pandemic levels.
G O component demand remains solid, particularly in the civil construction market and to a somewhat lesser extent in retail.
EBITDA margins in the segment decreased versus third quarter 2021, primarily from lower volume, partially offset by pricing discipline.
We continue to focus on the things we can control and are taking actions to mitigate the impact of this challenging environment by aligning cost production levels and inventory with demand.
We also are evaluating near term opportunities with our customers and are working with them on new product development.
And we are continuing to build out our existing businesses through acquisitions.
Our strong balance sheet and cash flow gives us confidence in our ability to navigate challenging markets, while investing in long term opportunities.
Finally, I would like to thank our employees for your dedication commitment and strength.
Collaboration and agility enables us to rapidly assess and respond to dynamic dynamic circumstances in our various end markets around the world.
Your efforts are very much appreciate it.
I'll now turn the call over to Jeff.
Thank you Mitch and good morning, everyone and third quarter, we generated cash from operations of $65 million up $15 million as compared to $50 million in third quarter 2021.
Reflecting a much smaller use of cash for working capital, partially offset by lower earnings working capital increased significantly last year due to restocking efforts. Following the inventory depletion in 2020, but increased to a lesser extent. This year as we continued to return to inventory levels more reflective of current demand.
This improvement was partially offset by a decrease in accounts payable as purchases slowed due to lower volume and our efforts to reduce inventory levels.
We ended the third quarter with adjusted working capital as a percentage of annualized sales of 16, 6%.
Our priorities for use of cash are unchanged. They include in order priority funding organic growth paying dividends funding strategic acquisitions and share repurchases with available cash.
Capital expenditures in the third quarter were $25 million.
In August our board of directors declared a quarterly dividend of 44 cents per share <unk>, <unk> or 5% higher than last year's third quarter dividend.
At an annual indicated dividend of $1 76 at the yield is five 3% based upon Fridays closing price one of the highest among the dividend kings.
We used $63 million during the third quarter for two acquisitions, I hydraulic cylinders business and a textile business that Mitch previously mentioned.
With the deleveraging we have accomplished over the past few years share repurchases have returned to one of our priorities for use of cash.
The level of repurchases will vary depending on various considerations, including alternative uses of cash and opportunities to repurchase shares at an attractive price.
During the third quarter, we repurchased 90000 shares at an average price of $38 42 per share for a total of $3 million.
This brings year to date repurchases to one 7 million shares or $60 million.
Yeah.
During the quarter, we used our commercial paper program to repay $300 million of three 4% 10 year bonds that matured in August .
We ended the third quarter with net debt to trailing 12 month adjusted EBITDA of 2.63 times.
And total liquidity of $1 billion.
Our strong financial base gives us flexibility, when making capital and investment decisions.
We remain focused on cash generation, while maintaining our balance sheet strength and deploying capital in a balanced and disciplined manner that positions us to capture near and long term growth opportunities, both organically and through strategic acquisitions.
Now moving to guidance.
On October 10th we lowered our full year guidance for sales earnings per share and cash from operations.
2022 sales are now expected to be $5 1 billion to $5 $2 billion.
Roughly flat to up 2% over 2021.
Guidance reflects volume down high single digits with the bedding products segment down mid teens specialized products segment up low double digits, and furniture flooring and textile products down low single digits.
The guidance also assumes raw material related price increases net of currency impact to mostly offset volume declines.
And acquisitions net of small divestitures should add 1% to sales growth.
2022 earnings per share are now expected to be in the range of $2 30 to $2.45.
The decrease versus second quarter guidance, primarily reflects lower expected volume reduced production slower than anticipated cost recovery in automotive and operational inefficiencies and specialty foam.
Based upon this guidance framework, our 2022 full year EBIT margin range should be nine 5% to 10%.
Earnings per share guidance assumes a full year effective tax rate of 23% depreciation and amortization to approximate $180 million.
Net interest expense of approximately $80 million and fully diluted shares of 137 million.
Cash from operations is now expected to be 400 million to a $450 million for the year.
This is below second quarter guidance, primarily due to lower expected earnings and higher expected working capital as we continue to balance inventory levels.
For the full year of 2022, we expect capital expenditures of approximately $115 million and dividends of approximately $230 million.
In closing Leggett, and Platt remains well positioned to navigate the challenging economic environment and capitalize on long term opportunities in our various end markets.
Our enduring fundamentals give us confidence in our ability to continue creating long term value for our shareholders.
With those comments I'll now turn the call back over to Susan.
Thank you Jeff that concludes our prepared remarks, we thank you for your attention and I'll be glad to answer your questions.
Greater we're ready to begin the Q&A session.
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One moment. Please so we pull for questions. Thank you.
Thank you and our first question is from the line of Susan Mcclary with Goldman Sachs. Please proceed with your questions. Thank.
Thank you good morning, everyone.
Good morning.
My first question is focusing a little bit on the some of those inefficiencies that youre seeing in the specialized segment of bedding can you talk a bit about the efforts that you're undertaking there to move past some of them.
Sorts on the timeline and how that could come together over the next couple of quarters.
Yes, Great question, Susan Tyson I'll pass that over to you are deeply involved in that Sherri good morning, Susan.
Well, you'll recall when legacy acquired ECS. It was four companies that were being brought together and that was in 2019. So our integration efforts are underway and then really had to be pause. Once we entered the pandemic and the biggest headwind of course, we have is demand and we've we've documented those that channel of the of the bedding market has been.
More challenged and the rest due to the customer acquisition costs and a bit of a shift away from direct to consumer back to brick and mortar over the last 12 months or so but specifically during the pandemic like everybody else. We were really struggling with labor and also had a difficult time, obtaining chemicals and our priority really.
Became to service as much business as we possibly could during that time and frankly, we developed some production inefficiencies during that time with those efforts and primarily that's around our labor usage and efficiency and then also our material scrap and while business has been slow we are working through those issues and we've invested in our equipment in automd.
<unk>, we're also working to stabilize our labor force and improving our processes and controls around material.
Are you, making some progress it is going to take us a bit of time I would say it'll take us into next year to really get.
Our footing underneath us there, but the good news is these are fixed.
Fixable problems. These aren't things that are out of our control and we can definitely address them and already have those underway.
Okay. That's very helpful color and then perhaps shifting to the specialized segment you obviously saw a really nice lift in those automotive volumes are actually the volumes across all three of those businesses. This quarter can you just talk a little bit about the outlook, there and how youre thinking about the rate of production in those three businesses and.
Perhaps with that to any commentary on how youre thinking of the pricing piece of that the ability to catch up on some of the inflation that you've been hit with.
Sure season, there's a lot to in fact, there so I'll dive in a little bit and then Steve I will turn it over to you, but from an auto side I think we continue to see production increases chip shortages start to soften a little bit, but it's still relatively volatile.
But improving I'll remind you that the third quarter of last year was really the lowest point of production for the industry. Overall, so that big you know, 25% or so increase year over year was a bit of it is a bit of an outlier, but we do expect continued sequential improvement across the industry and in our business as well. So you know the industry forecast for the fourth.
<unk> is up about five or 6% year over year and I think it's about the same sequentially. So we would see that growth as well and we continue to make progress on the cost recovery in automotive body was taking a little bit longer than expected that the industry. As I've commented before just works on fixed pricing with cost downs over the life of those programs. So.
It really takes.
The time for pressured a mountaintop across the supply chain that Oems are really forced you can see it on the price changes that is taking place, but it's a really complicated.
Process that takes quite a bit of time, so again, making progress confident in our ability to continue to make that progress, but it will probably take us to through this year and maybe into the even the first quarter or so but hard to predict that which is part of what what changed from our previous guidance and remind you that that that.
Because the recoveries can take multiple forms whether it's just price changes or one off payments or.
Value engineering or delayed costs down so I think that for us.
Outlook for the automotive industry remains very strong might be a little bit dynamic as we navigate the geopolitical or macroeconomic times that are out there, but that backlog and demand is there the inventories.
Inventories remain at very low levels and the average age of vehicles is also extended so I think there's a long term tailwind there for us to benefit from.
Also very positive dynamics in in aerospace and hydraulic cylinders, probably even stronger growth there in the in the near term, but Steve I'll turn it over to you to add more comments there.
Yeah.
Alright. Thank you good morning, Susan So I'll start maybe with aerospace up 26%. So demand is is.
It is improving.
Really being driven still by the single aisle planes.
Consumer travel travel is at or exceeding our numbers prior to the pandemic field costs are driving the need for more efficient planes, but really the challenges and cost of making the planes airworthy after sitting three years as a as a challenge. So that's really what's driving the growth.
As a result, our TL had T L, which is the company that forecast in that industry.
They've reviewed reduced 2022 slightly to about 82% of 2018 levels, but have increased their 'twenty 'twenty three forecast by 8%. So basically offsetting the 22 a reduction in getting to a 100% of 2018, so pretty significant forecast.
Increase.
Airbus is recovering faster than Boeing which would probably have heard.
So as that demand is improving raw material and labor shortages are creating a little bit of volatility across that industry somewhat similar to what we've seen in.
And the automotive, but it's very very positive as they work through that.
You mentioned pricing purchase price price cost changes were largely able to pass those on to our to our customers.
And the hydraulic cylinders area as Mitch mentioned that the industry backlogs are at high levels for both material handling and heavy construction.
We'll probably do that well into 2023.
So if our customers like caterpillar significantly beat their third quarter earnings.
You know it remains healthy across most of our end markets during the quarter. So that's a positive for us.
Hello.
I would be remiss, if I didn't talk a little bit about the acquisition of <unk>.
That we made in late August , which fits really well with our hydraulic strategy for technology as well as the macro trends towards emission reduction in autonomous equipment in that area.
Leading manufacturers of hydraulic cylinders primarily.
Sorry, heavy construction equipment industry as such as you know like large excavators and.
And wheel loaders operations in Germany, and China and distribution in the U S and have 2021 sales of about 65 million. So it represents our next step to pursue profitable growth in the.
Engineered hydraulic components space.
You know increases our participation in industrial markets, which is also very positive bring some scale in all of the total business will be around $200 million.
And that group has been able to largely pass pricing on as necessary as well, so pretty exciting things going on in that in that business unit.
Great that was a great overview, thank you and I'll get back in the queue.
Thank you Susan.
Thank you. Our next question is from the line of Bobby Griffin with Raymond James. Please proceed with your questions.
Good morning, everybody. Thank you for taking my questions.
Good morning, Bobby.
First off for me just kind of the earnings power of the business and in today's economic environment, clearly tough to predict what's going to happen going forward. So when we look at the back half year of 2022 and kind of take that you know imply it's going to earn maybe a dollar a dollar or two and we annualize that out is the right way for us to think about that.
Today's economic environment, it's a two to $2 $10.05 earnings business in order for that to grow we need the economic environments in Peru, or theres. Some other levers that you would tell us to keep in mind is as we're thinking about the underlying earnings power of this business in and in 2023.
Yeah, Great question Bobby.
Ill make some initial cabinets and Jeff maybe ask you to jump in as well as some of the maybe financial details, but probably I think it is.
That'll be a dynamic environment has been for quite a while we all we all know that Titan talked about some of the improvement efforts that we have underway at ECS, Yeah, we mentioned that.
Cost recovery that we're making in automotive also improving some of the operational execution, there, but beyond that I think that there is more that we can do to control that business. Those businesses. I mean first off do you see the stronger performance in the industrial markets and automotive. So we expect that to continue to benefit from the diversity of our portfolio.
We've also seen while maybe a little bit lower.
So the furniture flooring and textile business is still relatively stable.
But beyond that we can move to really balance our variable cost structure and inventories with demand. We've been doing that I think very actively but we can also really actively assess our fixed cost across the whole business and our corporate structure, you'll remember that in 2020.
Reduced fixed costs by about $90 million and kept most of that in place.
If we could I think to me, that's a really valuable asset and that we continue to really.
Eliminate lower value historical fixed cost to support investments that we need to drive key capabilities and infrastructure in our business to prepare us for the future. So yeah. I think that will continue to do that I know that we'll continue to do that and.
To help us benefit in the future at both the business unit level and the corporate level. We also think as we mentioned that portfolio diversity, our strong cash flow will allow us to continue to make those investments. So I think its dynamics, we're not just a contempt with sitting here waiting for the economy.
To improve.
We're very focused on continuing to grow grow and improve our capabilities and across our businesses and.
Prioritize the opportunities that these volatile times present for us.
Okay, Yeah absolutely.
Turning to turn it over to you anything you would add from that.
<unk> a financial perspective.
I think you've covered it well Mitch and good morning, Bobby I think the things that we definitely want to emphasize here is that as we look at the agility and the flexibility that we have around a number of those levers that Mitch just mentioned, we will continue to take action on those because we've already started to execute on a number of those actions into.
Generally and we will continue to move forward in that regard.
And Bobby you know our company well you know and in challenging times. We continue to have very strong cash flow generation as we worked through some of that demand softness and really manage our working capital extremely well as we go through quarter to quarter dynamics.
Thank you that's helpful and I guess two quick follow up questions for me both betting related one if we're if we're looking at the volumes here implied for the year I think it does imply a modest acceleration in <unk> betting volumes is that correct and maybe unpack that if that's the case and then secondly can you just give a little bit more detail on the <unk>.
Gration ECS is it is it new systems, combining manufacturing plants, you know, adding a new manufacturing plant somewhere just anything there about what type of integration is taking place.
Tyson Ali.
Sure Bobby So on your first question around demand, we've seen things remained relatively stable fairly stable still a weak levels and into the fourth quarter I think we'd see things remaining pretty consistent with the third quarter. You remember we started to see the slowdown last year late third quarter early fourth quarter. So our comparisons a little different than the rest of the market, but generally right now we're still.
Planning on things to remain pretty consistent.
At ECS with the integration work, we are working on new it systems trying to bring that business more together and having better visibility into our into our data inventory et cetera.
It's not a combination of plants, it's more around our equipment, our automation like I mentioned and just our process processes and controls that we generally use to manage our business like our U S spring business.
Thank you I appreciate it best of luck here on the fourth quarter and into 2023.
Thank you Bobby.
Thank you as a reminder to ask a question today you May press star one from your telephone keypad.
The next question comes from the line of Keith Hughes with Truest. Please proceed with your question.
Thank you you've referred in the prepared comments too and building inventory.
<unk> markets and cutting production as a result of that.
Is there any indication thats affecting the metal margin I know it was a positive in the third quarter or is that going to turnaround given that dynamic in the fourth and into next year next year.
Yes, great question, Keith Thanks, Tyson I'll handle that one as well sure Keith.
It's not so much about the metal margin actually I think we'd say, we although we've seen some softening in rod pricing of late we've also seen some declines in scrap, but rod pricing not declining as much as scrap and I think thats attributable to the conversion cost and the increase that we've seen and the market has seen.
<unk> utilities, the consumables and everything goes into into producing steel.
<unk> seen sequentially softening in our trade Rod business, and that's really where we've seen some of our inventories increase and that's why we're being proactive in trying to take some days out and kind of just looking at what we've seen in the fourth quarter and making sure. We don't build our steel inventory and it might be a bit confusing normally I don't think the business is quite this dynamic but.
When you look at the mix of our business and steel probably the bigger impact has been of late.
Our mix has been more towards bill it so more of a semi finished steel products and getting into full rod and while that helps us cover overhead cost in the melt shop. It doesn't provide the same type of profits that we get from either internal rod production or selling right to the trade.
And the volume and Rod was up really big in the third quarter is that a decision to sell more into the trade because you just didn't need as much given what's going on in the mattress industry is that the right interpretation of that number.
Yes year over year it is.
Lower utilization for internal Rod production, but really the bigger volume impact that youre seeing there is the large increase in billet sales rather than even trade rod okay.
Okay.
If we switch over to that any real quick.
Adjustable number on a year over year default rate into the third quarter in.
In terms of units had been up slightly in the first half of the year down 22% here in the third can you talk about what happened and what the outlook on adjustables are.
Adjustable held up better than our direct mattress related businesses over the last three quarters or so.
But we did see as you noted some slowdown in the third quarter and it's mostly as things have held up its been just where we've been partnered with our customers.
We have seen some more supply chain related impacts in the third quarter and some slowdown in consumer activity around adjustables I think as we kind of look look forward, we'd probably see more consistency there some improvement at some of those things get better but.
But it's getting more in line with where we were seeing the rest of our mattress related business.
Just to clarify from a supply chain standpoint, I think our team has been tough, but they've been navigating its more impacts further hasn't changed right.
Okay alright, thank you.
Our next question is from the line of Peter Keith with Piper Sandler. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions.
The first question I just had was on your U S spring business and I think you know, we and others have struck me a thought about this U S spring businesses like and having a very dominant position.
But just looking now that the sales on a three year basis are down a negative is the competitive landscape with springs changed at all whether it's from increased imports or maybe.
Some other a domestic production.
Good morning, Peter Yes, Thanks, Thats a good question I mean, I think the answer is to some degree yes, as we've gone through the dynamic situation that the last few years, but I would say that not.
Really meaningfully and I think that it's stabilizing to a large degree, but Tyson, let me turn it over to you for more detail sure. That's right. It recently I think it has has stabilized we certainly saw impacts that we've talked about during the pandemic from when we had customers on allocations and really just did not have production available for the market demand and did see impacts for our.
Having to go find import sources and did see some pick up in some.
Merchant and maker user activity in the U S. Recently, we have seen imported and inner spring activity to decline even more than the market in our estimation them year over year down more than 30% in imported activity.
I think another thing for us to keep in mind is what we sell is a little different now in our U S. Spring business, we do focus more on content with some of our products and especially in comfort core than historically, we've done as well so while the unit picture has been changing our content is also a little different yeah I'd add to that just may be that credit profile out there we're very cognizant.
Not only the profitability of the business, but making sure that we're able to get paid.
Okay Alright.
How about if we were just now pivot over to the European side, which obviously remains very dynamic maybe if you could just talk a little bit more of a what you're seeing there has gotten weaker sequentially kind of month over month.
And and is there any difference between the higher end or lower end.
Betting that youre seeing in Europe today.
Sure I'll jump in on that one too Peter so.
Yes, we would see that the European business is.
It's facing more challenges than we are here in the U S. Over the last couple of years things are tracking pretty closely between the European market and here in the U S. But just with what's been happening with energy cost availability the impact of consumers, we have seen things slow down more of late and in our European activity and it is a little bit mix between some of our finished product.
Activity, there with Cape home, and our inner spring business, but generally yes, we feel like it is being impacted more than the U S.
On your question just generally about high end versus low end, we feel like that's still been a pretty consistent.
Trend over time that the high end being impacted a little less or less than that it's been low and that's where you've seen the slowdown have the biggest.
Pat you mentioned this but just to emphasize on that the energy issues and the.
Impact of that in chemical production and clinical supply right and that's.
Somewhat of a challenge there is also and also impacting pricing in the U S rate, whereas book, albeit a softer market the export to some of those chemicals is holding pricing now.
Very helpful. Thanks, so much guys.
Alright, Thank you Peter.
Thank you at this time there are no further questions I would like to turn the floor back over to Susan Mccoy for closing comments.
Thank you for joining us today, we will speak to you again on February seven absolutely right report our fourth quarter results.
If you have questions. Please contact us.
Formation in yesterday's press release, thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.