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Friday, July 29, 2011

Wells Fargo's Weekly Economic Financial Commentary - July 29, 2011

- The U.S. economy grew a sluggish 1.3 percent during the second quarter of 2011, after expanding only 0.4 percent in the first quarter.

. Personal consumption expenditures rose just 0.1 percent, the lowest since the second quarter of 2009 in the midst of the recession, suggesting that higher prices continued to weigh on consumers.

. Gross private investment climbed 7.1 percent due to improved nonresidential investment, while continued budget cuts at the state and local levels resulted in a 3.4 percent decline in government spending during the quarter.

- Factory orders fell 2.1 percent in June on news that nondefense aircraft and motor vehicles and parts orders fell on the month.

- Consumer confidence rose unexpectedly in July to a reading of 59.9 and is up 16.7 percent year-over-year.

- Given the weakness observed in the first half of the year, we continue to forecast subpar economic growth with a slight improvement during the second half of the year.

Lafarge Gypsum 2nd Quarter 2011 Results

Q2 2011 vs. prior year
- Global gypsum volumes up 5%, revenues up 4%
- Global gypsum EBIT decline of 5% (from 6.3% to 5.9%)
- Europe and Rest of World EBIT at 9.6% and 8.9%
- North American revenues down 10.4%, slight improvement in EBIT from -19.2% to -20.9%

6 months 2011 results vs. prior year
- Global volumes and revenues up 5%
- Global EBIT 5.4% (Europe 10.1%, ROW 7.7%, North America -24.4%)

For North America, EBIT of -20.9% in Q2 2011 improved from-27.9% in Q1 2011

Eagle Materials Inc. (American Gypsum) Reports 1Q11 Earnings

Eagle Materials Inc. (NYSE: EXP) today reported financial results for the first quarter of fiscal 2012 ended June 30, 2011. Notable items for the quarter include:
  • Revenues of $119.8 million
  • Earnings per diluted share of $0.07
  • Net earnings of $3.1 million
Industry demand for building materials and construction products remains weak and we continue to "right-size" our operations to respond to these lower levels of construction activity. Revenues decreased from the prior year primarily due to lower sales volumes across all of our major businesses. 

Gypsum Wallboard and Paperboard
Gypsum Wallboard and Paperboard's first quarter operating earnings of $4.3 million were down 53% over the same quarter last year. Lower Gypsum Wallboard net sales prices and sales volumes were the primary driver of the quarterly earnings decline. 

Gypsum Wallboard and Paperboard revenues for the first quarter totaled $70.3 million, a 9% decrease from the same quarter a year ago. The revenue decline reflects lower Gypsum Wallboard and Paperboard sales volumes and lower average Gypsum Wallboard net sales prices slightly offset by higher Paperboard net sales prices. The average Gypsum Wallboard net sales price was 8% less than the same quarter a year ago. Gypsum Wallboard sales volume for the quarter of 412 million square feet (MMSF) represents a 9% decline from the same quarter last year. The average Paperboard net sales price this quarter was $505.61 per ton, 5% higher than the same quarter a year ago. Paperboard sales volume for the quarter was 57,000 tons, 3% lower than the same quarter a year ago.

Friday, July 22, 2011

USG Corporation Reports Second Quarter 2011 Results

Consolidated Business Highlights

  • Sales decreased to $761 million compared to $769 million
  • Operating loss of $21 million compared to $25 million
  • Adjusted operating loss of $19 million compared to $18 million
Business Unit Highlights

  • U.S. Gypsum wallboard shipments totaled 986 MMSF vs. 1,070 MMSF
  • Worldwide Ceilings operating profit of $22 million compared to $23 million
  • L&W operating loss of $14 million compared to $22 million
USG Corporation (NYSE:USG), a leading building products company, today reported second quarter 2011 net sales of $761 million, an operating loss of $21 million and a net loss of $70 million, or $0.69 per share based on 103.6 million average shares outstanding. In last year's second quarter, the operating loss was $25 million and the net loss was $74 million, or $0.74 per share based on 99.5 million average shares outstanding. 

For the first half of 2011, the corporation reported net sales of $1.5 billion and a net loss of $175 million, or $1.70 per share based on 103.3 million average shares outstanding. For the first half of 2010, net sales were $1.5 billion and the net loss was $184 million, or $1.85 per diluted share based on 99.5 million average shares outstanding. The corporation's results for the first six months of 2011 included restructuring and long-lived asset impairment charges of $11 million, and its results for the first six months of 2010 included restructuring and long-lived asset impairment charges of $19 million.   

Temple-Inland Reports Second Quarter 2011 Results

 Doyle R. Simons, chairman and chief executive officer of Temple-Inland Inc., said, "We had another very good quarter, as our employees again delivered solid operating results. We also generated strong cash from operations of $121 million. Our net debt at second quarter end was $690 million, down $47 million from first quarter end net debt of $737 million. 

"In Building Products, we generated positive EBITDA in the quarter despite depressed housing markets.

Building Products

Second Quarter     First Quarter
                                         ---------------   -------------
                                         2011     2010          2011
                                         ----   -------    -------------

Segment Operating Income ($ in Millions) ($8)      $15          ($6)

Building Products operating results declined in second quarter 2011 compared with first quarter 2011 as lower lumber prices and gypsum volumes more than offset higher gypsum prices. Operating results declined in second quarter 2011 compared with second quarter 2010 primarily due to lower lumber prices and lower gypsum volumes.

Wells Fargo's Weekly Economic Financial Commentary - July 22, 2011

- The Leading Economic Index rose 0.3 percent in June, as 5 of the 10 components posted gains and contributions from financial indicators such as the money supply and steep yield curve more than offset declining stock prices and consumer expectations.

- Housing starts rose 14.6 percent to a 629,000 unit pace in June due to a 30.4 percent jump in multifamily starts, which reflects the firming in the apartment market and steadily declining vacancy rates.

. Single-family starts, meanwhile, rose 9.4 percent and seem to be recovering from the lows reached following the end of the homebuyer tax credit program.

- Existing home sales slipped 0.8 percent in June to a 4.77 million unit pace, as the National Association of Realtors reported that contract cancellations spiked 16 percent, the highest on record.

. The increase in cancellations likely reflects buyers and sellers increasingly running up against conservative appraisals and tight underwriting.

- Rating agencies have reported that the U.S. government’s AAA rating is not solely dependent on raising the debt limit, but also on fixing the longer-term funding gap.

. Our baseline expectation is that Congress will likely strike a last minute deal to raise the debt ceiling, and the ramifications on the financial markets will be neutral in the short term.

Tuesday, July 19, 2011

Mold Growth on Exterior Building Materials Is Subject of Proposed New ASTM Standard

Consumers who are purchasing building materials for homes want to be assured that the materials are mold resistant. A proposed new ASTM standard will allow for a mold-resistance rating to be given to specific materials, depending on how the materials perform to the test method. The proposed new standard, ASTM WK32079, Test Method for Determination of Mold Growth on Building Products Designed for Exterior Applications Using an Environmental Chamber and Direct Inoculation, is being developed by Subcommittee G03.04 on Biological Deterioration, part of ASTM Committee G03 on Weathering and Durability.

AIA to Develop Database of Stalled Projects Suitable for Investor Financing

The American Institute of Architects announced it will make available to potential investors a database of stalled building projects nationwide that make economic sense but that lack the financing to be completed.

The database should be available in the coming months. "We are committing to developing this database not just with the fortunes of architects in mind," said AIA President Clark Manus, FAIA. "In large part the fortunes of the entire U.S. economy rest on the jobs-creating potential of the design and construction industry, which accounts for $1 in $9 of U.S. Gross Domestic Product, according to the U.S. Census Bureau," he said.

"For months, our industry has continued to suffer solely because banks won’t lend," Manus said. "With this innovative, unprecedented commitment, the AIA has decided to step up and do something about that."

Monday, July 18, 2011

SFIA Technical Guide

The Steel Framing Industry Association has released “Technical Guide for
Cold‐Formed Steel Framing Products,” a comprehensive guide that provides technical
information for designing with cold‐formed steel framing members. The 110‐page book covers
both structural and non‐structural applications. The guide begins with section properties of
SFIA member product profiles, then provides complete load and span tables for most
applications. Designers will find all the information they need to accomplish code compliant
structural analysis. It is available free online at the SFIA website under “Technical Information.”

The direct address for this guide is:‐information.

Sunday, July 17, 2011

Wells Fargo's Monthly Economic Outlook - July 2011

- Our outlook projects moderate GDP growth of 2.3 percent during 2011, reflecting continued contributions from consumer spending, business investment in equipment and software, export gains, and the eventual emergence of the commercial and residential real estate markets.

- Structural issues are preventing improvements in employment, as skill and location issues remain significant barriers to finding new employment.

. Productivity gains have also limited hiring, as industrial production is up 10 percent since the recovery began, and employment in manufacturing is less than one percent above recessionary lows.

- Rising core inflation reflects the upturn in rents and in owners’ equivalent rent, but we do not expect core PCE inflation to reach the Fed’s two percent target.

. With modest economic growth and a sub-two percent core deflator, we do not expect the Fed to alter the federal funds rate this year.

- Corporate profit growth will moderate during the year ahead, and reflect the globalization of U.S. firms pushing to reach the growing middle and upper income demographics in emerging markets such as Brazil, Indonesia, China, and India.

Saturday, July 16, 2011

Wells Fargo's Weekly Economic Financial Commentary - July 15, 2011

- Retail sales were slightly better than expected during June, improving 0.1 percent month-over-month, as higher auto sales offset reduced spending on gasoline.

- The Producer Price Index fell 0.4 percent month-over-month in June, while the Consumer Price Index posted a 0.2 percent decline.

. Despite declines in overall inflation measures, core PPI and core CPI each rose 0.3 percent for the month.

- Declining commodity values caused import prices to fall in June, but prices remain 13.6 percent higher than a year ago.

- Industrial production grew at a 0.2 percent pace in June and is up 3.8 percent year-over-year, while manufacturing output was flat in June due to a two percent decline in motor vehicle production.

Sunday, July 10, 2011

Weekly Economic Financial Commentary - July 8, 2011

- Nonfarm payrolls rose just 18,000 during June and are clearly below the pace of the past six months, as government jobs fell by 39,000 for the month.

. We project job gains to average 170,000 per month during the second half of this year, as we believe the end of the soft patch will allow the economy to resume growth.

- For the second half of this year, we expect gains of 3 percent compared to GDP growth of 1.8 to 2.0 percent during the first half of 2011.

. Improved growth should be driven by equipment and software investment, structures and residential construction, net exports, and inventory spending.

- For 2011, our GDP growth estimate is 2.3 percent, compared to the FOMC estimate of 2.7 to 2.9 percent.

. Our estimate for the core PCE deflator is currently 2.1 percent, while the FOMC expects a reading between 1.5 and 1.8 percent.

Friday, July 8, 2011

AIA Finds Decreases in Home Sizes Nearing Bottom

SOURCE:  AIA Survey Finds Decreases in Home and Lot Sizes Nearing Bottom 07/07/2011

WASHINGTON, D.C. -- The collapse of the housing market resulted in greater interest in smaller homes and lot sizes, but that appears to be leveling off. There continues to be interest from homeowners in investing in their properties, particularly with regards to outdoor living space. Accessibility within the home remains a concern, especially for an aging population, along with ongoing demand for more flexible and open design within homes. Business conditions for residential architects are showing improving conditions with the highest billings score since mid-2007. These findings are from the American Institute of Architects (AIA) Home Design Trends Survey that focused specifically on overall home layout and use in the first quarter of 2011.

"Overall home and lots sizes showing signs of increasing slightly indicates that the housing market is stabilizing after being in a downward spiral since 2007," said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. "But consistent with the last several years, there remains a preference for open space layout allowing for more flexibility and less interest in formal spaces and rooms."

Specific residential segments (index score computed as % of respondents reporting improving minus % reporting weakening conditions)
--Kitchen and bath remodeling: 52 --Additions / alterations: 51 --First-time buyer / affordable home market: -22 --Move-up home market: -16 --Custom / luxury home market: -19 --Townhouse / condo market: -34 --Second / vacation home market: -51

Lafarge Announces LiftLite Gypsum Wallboard

Lafarge North America announces LiftLite, its new family of lightweight wallboards formulated to be significantly lighter than standard gypsum wallboard allowing for easier and faster installation as well as reducing strain and fatigue on the jobsite. LiftLite has excellent sag resistance and can therefore be used on both walls and ceilings eliminating the need to inventory two different types of wallboards.

LiftLite is made with 99% recycled content and is designated as a low volatile compound (VOC) emitting product through the achievement of the GREENGUARD® Children and SchoolsSM certification. As a result, LiftLite can assist with the attainment of credits for projects seeking LEED certification. LiftLite offers building professionals the same great performance as traditional wallboard but with improved transportation and installation cost savings. It is easier to score and snap and produces less dust on the jobsite.

"Health and Safety is a top priority at Lafarge and we are proud to offer a lightweight wallboard that reduces strain and fatigue of drywall contractors and allows our customers to achieve increased operational efficiencies" said Stephen DeMay, Vice President of Sales. "LiftLite does just that".

"This addition to our line of recycled gypsum boards helps us offer our customers a wide variety of products that contribute directly to more efficient and sustainable buildings" adds Isabelle Shiffrin, Vice President of Marketing.

Tuesday, July 5, 2011

Construction Employment Up in 120 Metropolitan Areas

Construction employment increased in 120 out of 337 metropolitan areas between May 2010 and May 2011, declined in 162 and stayed level in 55, according to a new analysis of federal employment data released by the Associated General Contractors of America. Association officials noted that the local employment data reflects the fact that overall construction employment has been unchanged for much of the past year.

Saturday, July 2, 2011

Wells Fargo’s Weekly Economic & Financial Commentary – July 1, 2011

-     Ward’s Auto is estimating an annual motor vehicle assembly rate of 9.5 million units in July, an increase of nearly 20 percent from the 7.9 million unit rate in May, as the impact of supply chain disruptions from Japan are reduced.

-     West Texas Intermediate crude oil prices are trading near $95.00 per barrel, about 17 percent lower than two months ago, while average retail gasoline prices have fallen nearly 10 percent to $3.63 per gallon.

.     The drop in gasoline prices alone could save U.S. consumers around $40.0 billion dollars if maintained over a year’s time.

-     Personal spending contracted at a 0.1 percent pace in real terms over the past two months due to negligible growth in real disposable income.

.     The Conference Board’s Consumer Confidence Index fell to 58.5 in June from 61.7 during the previous month, as both the present situation and expectations components declined.

Certainteed Launches New GlasRoc Roof Board

CertainTeed Launches New High-Performance Roof Cover Board with Enhanced Moisture, Mold, Fire Resistance

(Valley Forge, Pa.) – Through the introduction of GlasRoc® Roof Board, CertainTeed Corporation is offering commercial roofing contractors a high-performance alternative to fiberboard and perlite roofing cover boards. Certified by FM Approvals, a leader in certification and approval of roofing products, GlasRoc Roof Board is designed specifically for mechanically attached roofing systems and offers enhanced moisture, mold and fire resistance.

GlasRoc Roof Board features patented Embedded Glass Reinforced Gypsum™ (EGRG™) technology, which combines reinforcing glass mats, fully embedded into a water-resistant gypsum core. This unique technology provides superior durability by preventing delamination of the glass mat facers and offers easy handling with less skin irritation as compared with other glass mat gypsum cover boards. The performance-proven technology is also featured in the company’s existing GlasRoc sheathing and shaftliner products as well as Diamondback™ Tile Backer.

“GlasRoc Roof Board contributes to the overall success of commercial roofing projects through the prevention of moisture and mold damage and enhanced fire resistance,” says Ashwin Himat, director of marketing at CertainTeed Gypsum. “This next generation product also features exceptional compressive strength, which provides superior resistance to damage caused by foot traffic and hail.”

GlasRoc Roof Board offers improved physical performance in comparison to perlite insulation and fiberboard and meets UL Class A and FM Class 1 fire-resistance ratings. The board is lightweight, easy to handle and install, and cuts like regular gypsum board.

GlasRoc Roof Board can be used with various commercial roofing systems, including those from CertainTeed Roofing.

“GlasRoc Roof Board is an excellent addition to our commercial roofing product line,” adds Mark Stancroff, general manager of commercial roofing for CertainTeed Roofing. “By expanding our product portfolio, CertainTeed is strengthening its position as a single resource for commercial roofing contractors.”

GlasRoc Roof Board is being rolled out across the United States and Canada during 2011. For more information on GlasRoc Roof Board, visit

Worthington Reports Fourth Quarter and Fiscal Year Results

COLUMBUS, Ohio--(BUSINESS WIRE)--Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $675.7 million and net earnings of $51.9 million, or $0.70 per share, for the fiscal 2011 fourth quarter ended May 31, 2011. In last year’s fourth quarter, the Company reported net earnings of $33.1 million, or $0.42 per share.

“We believe we will continue to see a slowly improving yet uneven economy for the rest of this calendar year and on into 2012”

.For the fiscal year ended May 31, 2011, the Company posted net earnings of $115.1 million, or $1.53 per share, driven by a strong fourth quarter. Sales were up 26% from the prior year to $2,442.6 million, primarily due to the increase in sales volumes in the Steel Processing and Pressure Cylinders segments and a 24% increase in the average market price of steel. Current year earnings included a net gain of $3.4 million, or $0.03 per share, driven largely by the Joint Venture Transactions which are explained in more detail below and partially offset by current year impairment and restructuring charges. Prior year earnings were reduced by goodwill impairment, restructuring and certain legal charges totaling $31.0 million, or $0.39 per share.
The results for the three- and twelve-month periods ended May 31, 2011 were as follows:
(U.S. dollars in millions, except per share data)

Quarterly Results – Consolidated
As described more fully below under Fiscal 2011 Highlights, the Company closed on two significant transactions during the fourth quarter. These transactions resulted in the contribution of the majority of the net assets and all the operations of the Metal Framing and Automotive Body Panels segments into two separate joint ventures (“the Joint Venture Transactions”) effective March 1, 2011 and May 9, 2011, respectively. From the effective date of these transactions the results of these segments are no longer included in consolidated operating income. Instead, the percentage of ownership in the results of the newly formed joint ventures is included in the equity in net income of unconsolidated affiliates in the consolidated statement of earnings.

Net sales for the fourth quarter ended May 31, 2011, were $675.7 million, an 8% increase from the comparable quarter last year. Excluding the impact of the Joint Venture Transactions, net sales actually increased 17% with the Pressure Cylinders and Steel Processing segments reporting a 27% and 10% increase in sales, respectively. The Worthington Global Group also reported an increase of $15.0 million in net sales over the prior year quarter, primarily due to its activity in Mozambique.

Gross margin for the current quarter was $119.2 million, or 18% of net sales. This represents a $13.4 million increase over the prior year quarter’s gross margin of $105.8 million, or 17% of net sales. Excluding the impact of the Joint Venture Transactions, the gross margin increased $21.9 million versus last year’s quarter. An improved spread, primarily in Steel Processing, between the average selling price and the cost of steel, improved the margin by $22.6 million. While volumes were up substantially in both the Steel Processing and Pressure Cylinders segments, the favorable impact was more than offset by the impact of the Joint Venture Transactions. SG&A expenses were $1.0 million lower than the prior year quarter primarily due to a $6.4 million reduction in expenses due to the Joint Venture Transactions partially offset by higher profit sharing and bonus expenses, associated with improved earnings, and increased wages.

Operating income for the quarter was $62.3 million, up $19.7 million or 46% versus last year. Better spreads between average selling prices and the cost of steel were the main drivers for the increase in operating income.

Interest expense was $4.7 million in the quarter, up from $3.1 million in the prior year mainly due to the higher interest rate on the $150.0 million, 6.5% unsecured notes, issued in April 2010 to lock in long-term financing.
Equity in net income from unconsolidated joint ventures was $24.9 million, an increase of $6.1 million from the comparable year-ago quarter, on sales of $408.9 million. Worthington Armstrong Venture (WAVE) contributed $16.1 million of earnings, a 7% increase from last year's fourth quarter, and paid dividends of $12.3 million. Four other joint ventures, TWB Company, Worthington Specialty Processing, Serviacero Worthington and Samuel Steel Pickling all were profitable and showed a combined improvement of $3.0 million over the prior year quarter. In addition, the new ClarkWestern Dietrich Building Systems joint venture contributed $2.1 million of earnings.

For the quarter, income tax expense was $28.9 million compared to $22.8 million a year ago. The current quarter expense reflected an effective income tax rate of 35.8%, excluding earnings from the non-controlling interests in the two consolidated joint ventures. The effective income tax rate for the year was 33.7%, while the prior year rate was 37.1%. The change in effective income tax rate was primarily driven by changes in the mix of income among the jurisdictions in which we do business and tax law changes.
Balance Sheet

At quarter end, total debt was $383.2 million, up $52.2 million from the third quarter, as an increase in working capital raised short-term borrowing needs. As of May 31, 2011, the Company had utilized $90.0 million of its $100.0 million trade accounts receivable securitization facility, and $41.6 million had been drawn on the $400.0 million revolving credit facility.

Cash provided by operating activities for the quarter was $10.4 million, compared to cash used by operations of $9.6 million in the year-ago quarter. During the current quarter, the Company invested $6.1 million in property, plant and equipment.

Quarterly Segment Results
Metal Framing’s net sales of $6.6 million were down 92%, or $80.5 million, as a result of the contribution of its operations into the new ClarkDietrich Building Systems joint venture effective March 1, 2011. Worthington retained a 25% interest in this unconsolidated joint venture, with its results reported as equity in net income of unconsolidated affiliates. Net sales in the current quarter relate to assets that were not contributed. These retained facilities continued to produce product to assist the new joint venture during the transition period. These facilities will be shut-down by the end of the next fiscal quarter. The joint venture purchased this product from Worthington at standard cost.

“We believe we will continue to see a slowly improving yet uneven economy for the rest of this calendar year and on into 2012,” McConnell said. “We intend to continue to capitalize on opportunities to grow and deliver sustainable earnings. We have made significant improvements in our businesses over the past years in how we respond, deliver and perform. While we stay focused on those areas, we also plan to integrate new businesses into our platform for growth.”
Fiscal 2011 Highlights/Activities

•On March 1, 2011, the Company closed an agreement with Marubeni-Itochu Steel America Inc. (MISA) which combined certain assets of Dietrich Metal Framing and ClarkWestern Building Systems in a newly-formed joint venture. In the transaction, Worthington received a 25% interest in the new joint venture, ClarkWestern Dietrich Building Systems LLC, as well as the assets of three MISA Metals Inc. steel processing locations. The joint venture is unconsolidated and the steel processing assets and locations are reported under the Steel Processing segment.

•On December 28, 2010, Worthington acquired 60% of the net assets of Nitin Cylinders Limited, which is now Worthington Nitin Cylinders Limited. This consolidated joint venture manufactures high pressure, seamless steel cylinders for compressed natural gas storage in motor vehicles and cylinders for compressed industrial gases