Leggett & Platt LEG Business Risk Report

I. Market Risks

A. Competitive pressure in key markets: Leggett & Platt faces significant competitive pressure in the bedding and furniture markets where several large players and new entrants are constantly enhancing their product offerings. This situation pressures Leggett & Platt to continuously innovate and maintain competitive pricing to retain market share.

B. Fluctuations in demand for key products: The demand for Leggett & Platt’s engineered components and products for residential furnishings, bedding, and other markets tends to be cyclical, influenced by economic conditions and consumer confidence. A downturn in the economy can lead to reduced consumer spending, affecting sales of their core products.

II. Financial Risks

A. Foreign currency exchange rate fluctuations: As Leggett & Platt operates globally, it is exposed to foreign currency exchange rate fluctuations, which can impact earnings and cash flows. The volatility of currency exchange rates can significantly affect the company’s international revenues and cost structures.

B. Credit risk from customers or suppliers: Leggett & Platt extends credit to its customers and works closely with various suppliers. Financial instability in these relationships, especially in economically turbulent times, can lead to increased defaults and affect financial outcomes.

III. Operational Risks

A. Disruption in supply chain: Leggett & Platt relies on a global network of suppliers for raw materials such as steel and chemicals. Disruptions in the supply chain, whether from geopolitical issues, pandemics, or logistical challenges, can hinder production capabilities and delay deliveries.

B. IT system failures impacting operations: The company’s dependence on information technology systems for operations means that any IT systems failure can disrupt operations significantly. Ensuring system security and integrity is crucial for uninterrupted business processes.

IV. Regulatory Risks

A. Non-compliance with industry regulations: Leggett & Platt operates in various jurisdictions worldwide, making compliance with diverse and ever-changing regulations a significant challenge. Non-compliance could result in fines, penalties, and damage to reputation.

B. Changes in government policies impacting the business: Shifts in regulatory policies, particularly those related to tariffs, trade barriers, and environmental regulations, can materially impact Leggett & Platt’s operations and financial results.

V. Business Risks

A. Product recalls affecting brand reputation: Given the scale of Leggett & Platt’s manufacturing operations, any significant product recalls can adversely affect the brand’s reputation and consumer trust, potentially leading to a decline in market share.

B. Impact of natural disasters on manufacturing facilities: With manufacturing facilities in multiple global locations, Leggett & Platt is susceptible to the risk of natural disasters. Events like earthquakes, floods, or hurricanes can cause considerable damage to facilities, disrupt operations, and incur high recovery costs.

VI. Mitigation Strategies

A. Diversification of product portfolio: Leggett & Platt mitigates market and financial risks by diversifying its product offerings across various sectors, reducing dependence on any single market or demographic.

B. Implementing risk management protocols: The company employs comprehensive risk management strategies, including financial hedging and operational contingency planning, to manage and mitigate potential risks.

C. Regular monitoring of regulatory changes: Leggett & Platt stays abreast of regulatory changes by actively participating in industry associations and regularly consulting with legal experts, ensuring timely compliance with new regulations.

D. Investing in disaster recovery plans: To combat operational disruptions from natural disasters, Leggett & Platt invests in robust disaster recovery and business continuity plans, including site redundancy and emergency management systems.