Post by wvhsparent on Oct 24, 2007 7:45:36 GMT -6
USG's profit takes big hit
By James P. Miller, Tribune staff reporter Bloomberg News contributed to this report
October 24, 2007
The U.S. housing market's steep falloff continues to take a heavy toll on USG Corp., the Chicago-based maker of building products, which reported a punishing 95 percent drop in third-quarter earnings Tuesday.
"Conditions in the housing market have deteriorated further as the inventory of unsold homes continues to build and the availability of mortgage financing has tightened," said Chairman and Chief Executive William C. Foote, adding that the residential repair and remodeling sector is softening as well.
"We do not expect a quick rebound in the housing market," Foote said, noting that market conditions suggest the sector "will remain weak for the balance of 2007 and at least through 2008."
As a leading maker of the gypsum wallboard used extensively in home construction, USG has historically been extremely sensitive to the ups and downs of the North American housing market. It also has managed to remain profitable, on an operating basis, throughout such down cycles.
When demand for the commodity product is strong, as it was during the years of the housing sector's earlier boom, wallboard prices, and USG's profit margins, surge dramatically. Now that process is working in reverse, and USG profits are falling almost to the vanishing point.
In the latest period net income fell to just $7 million, or 7 cents a diluted share, down from the year-ago quarter's hefty $153 million, or $1.71 a share, on fewer shares outstanding.
The latest quarter was burdened by special charges and adjustments that lowered per-share earnings by an aggregate 12 cents, USG said.
Excluding items, Wall Street was expecting earnings of 30 cents a share, according to Thomson Financial. Revenue fell 9.7 percent, to $1.34 billion.
Foote said USG is seeking to "optimize performance in two different time frames." In the near term, he said, the company is scaling back operations to cut costs during the current period of weak demand.
"We are prepared to make further adjustments to our operations as necessary," he said.
At the same time, Foote said, the company is "continuing to make strategic investments in new manufacturing and distribution capabilities" in order to be positioned to exploit the next upturn in demand for wallboard.
New housing accounts for about 40 percent of wallboard demand, Foote said. Residential repair and remodeling makes up 25 percent. He predicts that commercial construction, which accounts for remaining wallboard demand, will continue growing, though at a slower pace than last year.
Shares of USG gained 71 cents, to $36.76, on the New York Stock Exchange.
By James P. Miller, Tribune staff reporter Bloomberg News contributed to this report
October 24, 2007
The U.S. housing market's steep falloff continues to take a heavy toll on USG Corp., the Chicago-based maker of building products, which reported a punishing 95 percent drop in third-quarter earnings Tuesday.
"Conditions in the housing market have deteriorated further as the inventory of unsold homes continues to build and the availability of mortgage financing has tightened," said Chairman and Chief Executive William C. Foote, adding that the residential repair and remodeling sector is softening as well.
"We do not expect a quick rebound in the housing market," Foote said, noting that market conditions suggest the sector "will remain weak for the balance of 2007 and at least through 2008."
As a leading maker of the gypsum wallboard used extensively in home construction, USG has historically been extremely sensitive to the ups and downs of the North American housing market. It also has managed to remain profitable, on an operating basis, throughout such down cycles.
When demand for the commodity product is strong, as it was during the years of the housing sector's earlier boom, wallboard prices, and USG's profit margins, surge dramatically. Now that process is working in reverse, and USG profits are falling almost to the vanishing point.
In the latest period net income fell to just $7 million, or 7 cents a diluted share, down from the year-ago quarter's hefty $153 million, or $1.71 a share, on fewer shares outstanding.
The latest quarter was burdened by special charges and adjustments that lowered per-share earnings by an aggregate 12 cents, USG said.
Excluding items, Wall Street was expecting earnings of 30 cents a share, according to Thomson Financial. Revenue fell 9.7 percent, to $1.34 billion.
Foote said USG is seeking to "optimize performance in two different time frames." In the near term, he said, the company is scaling back operations to cut costs during the current period of weak demand.
"We are prepared to make further adjustments to our operations as necessary," he said.
At the same time, Foote said, the company is "continuing to make strategic investments in new manufacturing and distribution capabilities" in order to be positioned to exploit the next upturn in demand for wallboard.
New housing accounts for about 40 percent of wallboard demand, Foote said. Residential repair and remodeling makes up 25 percent. He predicts that commercial construction, which accounts for remaining wallboard demand, will continue growing, though at a slower pace than last year.
Shares of USG gained 71 cents, to $36.76, on the New York Stock Exchange.