(Reuters) - Construction materials maker Armstrong World Industries Inc (AWI.N) said it would spin off its flooring business to create two separate publicly traded companies.
Shares of Armstrong World, which will be left with its ceiling business, rose as much as 6 percent in morning trading on Monday on the New York Stock Exchange.
Sales in the company’s ceiling business rose 2.3 percent to a record $1.29 billion in 2014, but sales in the flooring business fell 3.3 percent to $1.26 billion.
Armstrong World expects total sales of $2.53-$2.63 billion this year, but that is short of analysts average estimate of $2.70 billion, according to Thomson Reuters I/B/E/S.
The tax-free spin-off of the floorings unit is expected to close in the first quarter of 2016.
“There is little existing overlap between the businesses, and we expect the separation to create minimal incremental operating expenses,” Chief Executive Matthew Espe said in a statement on Monday.
The stripped down Armstrong World will be led by Vic Grizzle, the head of the ceiling business, the company said.
The spun-off Armstrong Flooring will be led by Don Maier, current head of the flooring business.
Armstrong World did not specify what role, if any, its current chief executive, Matthew Espe, would play after the spin off.
The company also reported a smaller-than-expected fourth-quarter revenue, hurt by lower sales in the Americas as well as a stronger dollar.
Armstrong forecast 2015 adjusted earnings of $2.05-$2.45 per share, compared with analysts’ average estimate of $2.34.
“We anticipate improving market conditions in the U.S. will support modest sales growth despite some anticipated pressure from foreign exchange in our international operations,” said Chief Financial Officer Dave Schulz.
Armstrong World exited its European flooring business in December due to cooling housing demand on the continent.
Evercore Partners is advising the company on the separation process.
The stock was up 2.3 percent at $56.05 on Monday. Through Friday, the stock had fallen nearly 8 percent in the past 52 weeks.
Reporting by Sagarika Jaisinghani and Ankit Ajmera in Bengaluru; Editing by Savio D'Souza