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Wednesday, February 29, 2012

Pending Home Sales and the Recovery

The National Association of Realtors (NAR) Pending Home Sales Index rose 2.0% to 97.0 in January, according to data released yesterday.

According to NAR chief economist Lawrence Yun, the numbers inspire hope for an active home-buying season this spring.

"Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year," he said. "With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations."
Regionally, the index rose 7.6% in the Northeast, declined 3.8% in the Midwest, increased 7.7% in the South and fell 4.4% in the West.

"Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery," Yun added. "If and when credit availability conditions return to normal, home sales will likely get a 15% boost, speed up the home-price recovery, and thereby significantly reduce the number of homeowners who are underwater."

Pending home sales are defined as a sale that has been signed, but the transaction has not closed.
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Sunday, February 26, 2012

Wells Fargo's Weekly Economic & Financial Commentary- February 24, 2012

- Existing home sales rose 4.3% in January to a 4.57 million unit pace, although December sales figures were revised downward to show a 0.5% decline.

. Inventories of existing homes fell again in January to 6.1 months, although the downward trend is unlikely to continue given the backlog of foreclosures that should hit the market over the next few months due to the end of the moratorium on home foreclosures.

- New home sales pulled back slightly in January, declining 0.9% to a 321,000 unit pace, while the December data was revised upward to a 1.9% increase.

. The inventory of new homes fell to 5.6 months from 5.7 months in December, as builders have little incentive to begin new construction projects due to the price differential between new and existing homes.

- Initial jobless claims continued to trend downward last week, declining to 351,000, while the four-week moving average fell to 359,000, suggesting sustained declines in layoffs.

Thursday, February 23, 2012

January Sees Gains In Sales of Existing Homes

Total existing-home sales, defined as completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 4.3% to a seasonally adjusted annual rate of 4.57 million in January from a downwardly revised 4.38 million-unit pace in December and are 0.7% above a spike to 4.54 million in January 2011.

"The uptrend in home sales is in line with all of the underlying fundamentals -- pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents," said Lawrence Yun, NAR chief economist.

Total housing inventory at the end of January fell 0.4% to 2.31 million existing homes available for sale, which represents a 6.1-month supply at the current sales pace, down from a 6.4-month supply in December.

Sunday, February 19, 2012

Wells Fargo's Weekly Economic & Financial Commentary- February 17, 2012

- Industrial production was flat in January, as utilities production plunged 2.5 percent while manufacturing expanded at a 0.7 percent pace.

. Nondurable consumer goods production remained robust, with strong gains in autos, appliances, furniture, and carpeting production, while business equipment production was driven by gains in information processing, industrial equipment, and transit.

- Warm weather and higher gas prices weighed heavily on clothing sales, which were flat during January.

- The NFIB Small Business Optimism Index rose just 0.1 percent in January, with slightly fewer businesses planning to hire and fewer seeing positive earnings trends.

- Homebuilders have been helped by the warm weather and low mortgage rates, as the NAHB/Wells Fargo Housing Market Index improved again in early February to 29, the highest reading since May 2007.

. Solid gains were seen in both the present and future single-family sales components, and buyer traffic continued to recover.

Thursday, February 16, 2012

Owens Corning Reports Fourth-Quarter and Full-Year 2011 Resul

Adjusted EPS Growth Exceeds 35 Percent for Second Consecutive Year

  • Achieved Full-Year EBIT and Revenue Improvement in All Businesses versus 2010
  • Delivered Strong Improvement in Insulation, Break-Even Q4 2011
  • Acting to Improve Composites’ Competitive Cost Position and Address Current Oversupply
  • Expect 2012 Adjusted EBIT Growth and Strong Cash Flow Performance

Owens Corning (NYSE: OC) today reported consolidated net sales of $5.3 billion, a 7-percent increase from net sales of $5.0 billion in 2010.

Full-year adjusted earnings were $276 million, or $2.23 per diluted share, compared with $199 million, or $1.57 per diluted share, in 2010.  Net earnings were $276 million, or $2.23 per diluted share, compared with net earnings of $933 million, or $7.37 per diluted share, in 2010.  Fourth-quarter 2011 adjusted earnings were $48 million, or $0.40 per diluted share, compared with $29 million, or $0.23 per diluted share, one year ago.  Net earnings in the fourth quarter of 2011 totaled $50 million, or $0.41 per diluted share, compared with a net loss of $110 million, or $0.89 per diluted share, in 2010.  See Tables 1, 2 and 6 for a discussion and reconciliation of these items.

“Owens Corning delivered another outstanding year in 2011.  We achieved growth in revenue and EBIT in all of our businesses amid challenging market conditions,” said Chairman and Chief Executive Officer Mike Thaman.  “These results reflect excellent execution by our portfolio of market-leading businesses.
“Looking forward to 2012, we anticipate improved housing starts in the U.S. and modest growth in the global economy,” Thaman added.  “Strong performance from our Building Materials segment will more than offset the impact of near-term market challenges in our Composites segment resulting in growth in adjusted EBIT and strong cash performance for Owens Corning.”

Consolidated Fourth-Quarter and 2011 Results
  • Owens Corning’s primary safety metric improved by 27 percent over the company’s full-year 2010 performance, marking a tenth consecutive year of safety improvement.
  • Full-year adjusted earnings before interest and taxes (adjusted EBIT) were $461 million in 2011, compared with $381 million in 2010.  Full-year EBIT in 2011 was $461 million, compared with $206 million in 2010 (see Table 2).  
  • Adjusted EBIT in the fourth quarter of 2011 was $88 million, compared with $64 million in 2010.  EBIT for the fourth quarter was $88 million, compared with an EBIT loss of $71 million during the same period in 2010 (see Table 2).  
  • Gross margin as a percentage of net sales was 19 percent in 2011 and in 2010.
Outlook
Owens Corning expects adjusted EBIT growth in 2012 based on an anticipated improvement in U.S. housing starts and modest global economic growth.

Despite weakness in the European glass fiber reinforcements market, the company believes that global reinforcements demand will continue to grow in 2012.

The company is taking actions in its Composites segment to balance supply, to enable its assets in Europe to operate at a sustainable competitive cost position, and to leverage low-cost assets by year-end 2012.  In conjunction with these actions, the company anticipates incurring approximately $130 million in charges in 2012 through early 2013, of which approximately half represent cash expenditures.
In the Building Materials segment, Owens Corning expects that the factors that have sustained Roofing margins in recent years will continue to drive profitability.  The company believes Insulation will significantly narrow losses in 2012.

Cash taxes are expected to be about $30 million in 2012.  The company estimates a long-term effective tax rate of 25 percent to 28 percent based on the blend of effective tax rates for its U.S. and non-U.S. operations.  The effective book tax rate for 2012 is expected to be about 25 percent on adjusted earnings.
The company expects that general corporate expenses in 2012 will be between $110 million and $120 million.  General corporate expenses include corporate staff and other activities that support the operations.

 Expenses will be higher in 2012 primarily due to increased pension expense and higher year-over-year incentive compensation costs.

Depreciation and amortization expenses are expected to be about $320 million in 2012.
Capital expenditures in 2012 are expected to be about $350 million. 

Saturday, February 11, 2012

USG 4Q2011 Earnings Highlights


Fourth Quarter 2011 vs. Fourth Quarter 2010
Consolidated Business Highlights
          ·    Sales increased 7.8 percent to $750 million
          ·    Operating loss of $42 million compared to $95 million
          ·    Adjusted operating loss of $37 million compared to $39 million
Business Unit Highlights
          ·    U.S. Gypsum wallboard shipments totaled 1.09 BSF vs. 945MMSF
          ·    Worldwide Ceilings operating profit increased $6 million, or 50 percent
          ·    L&W same store net sales increased 8 percent
          ·    SHEETROCK®Brand UltraLight Panels accounted for 38 percent of all USG wallboard shipments in the United States
CHICAGO--(BUSINESS WIRE)--February 6, 2012--USG Corporation (NYSE:USG), a leading building products company, today reported fourth quarter 2011 net sales of $750 million, up nearly 8 percent from fourth quarter 2010 net sales of $696 million. USG’s fourth quarter operating loss was $42 million compared to a $95 million loss in the fourth quarter of 2010. The fourth quarter 2011 net loss after-tax was $100 million or $0.95 per share. This compares to a $121 million net loss in 2010 or $1.17 per share.
“While some markets remain at or near historically low levels, all of our businesses continue to benefit from the strategic actions we have taken to reduce costs and strengthen our operations,” said James S. Metcalf, Chairman, President and CEO. “United States Gypsum Company and L&W Supply Corporation, our two largest businesses, reduced their reported operating losses in 2011 compared to the prior year, while many of our other key units achieved an operating profit in 2011.”
“The success of our SHEETROCK® Brand UltraLight wallboard products in 2011 was one of the highlights of the year,” Metcalf continued. “Market acceptance and customer feedback regarding both the 1/2 inch product and the newer 5/8 inch products have been outstanding. We foresee significant opportunities to extend the proprietary lightweight technology to other product categories, including our market-leading family of joint treatment products.”
The corporation’s adjusted operating loss was $37 million in the fourth quarter of 2011, which compares to an adjusted operating loss of $39 million in the fourth quarter of 2010. The adjusted operating loss for the fourth quarter of 2011 excludes $5 million of restructuring and asset impairment charges. The adjusted operating loss for the fourth quarter of 2010 excludes $56 million of restructuring and asset impairment charges.
The Corporation recorded full year 2011 net sales of $3.0 billion, an operating loss of $197 million and a net loss of $390 million. For the full year 2010, net sales were $2.9 billion, the operating loss was $260 million and net loss was $405 million.
Looking ahead, Metcalf said, “Our goal is to continue taking the actions necessary to achieve an adjusted operating profit as soon as possible. We will remain focused on strengthening our core businesses, diversifying our earnings and differentiating USG though innovation.”

Wells Fargo's Weekly Economic & Financial Commentary- February 10, 2012

- Consumer credit surged by $19.3 billion in December, the second consecutive monthly increase, with the growth in credit reflecting increases in credit cards, student loans, and car loans.

- The labor market is showing strength, as jobless claims fell to 358,000 for the week ending February 4, and the four-week moving average fell by 11,000 jobs to 366,000.

. Jobless claims have been below 400,000 for 12 out of the last 14 months.

- The Job Opening and Labor Turnover Survey showed the number of job openings in December rose 2.5 percent, with openings in manufacturing and professional and business services leading the way.

. The ratio of unemployed job seekers to the number of job openings fell to 3.9 in December from 4.3 during the previous month.

- The NFIB Small Business Optimism Index increased 1.8 points to 93.8 in December, the fourth consecutive monthly gain.

- The nominal U.S. trade deficit widened 3.7 percent to $48.8 billion in December, as exports rose just 0.7 percent while imports grew 1.3 percent.

. Based on the Bureau of Economic Analysis’ conservative estimate for trade, however, we now expect that trade made a modest contribution to economic growth in the fourth quarter.

Thursday, February 9, 2012

Metal Trucks Ready To Go

BIOGEN - Durham, NC

Wells Fargo's Monthly Economic & Financial Commentary- February 2012

- Real economic growth of 2.0 to 2.5 percent is expected, as gains in personal consumption, equipment and software spending, and residential investment will outpace weakness in structures and government spending.

- We remain cautious about the recent decline in the unemployment rate, as the degree of improvement may reflect a seasonal adjustment issue and a decline in the labor force participation rate.

- Inflation will slow down in the year ahead as commodity and producer prices moderate and unit labor costs rise slowly.

- We expect short-term interest rates to remain low for most of the year, while longer-term borrowing rates should rise as the search for yield continues and investors seek better investment opportunities.

- We believe a European recession is currently underway, which should lower export growth and earnings for some U.S. companies, at least in the near term.

- Tensions in the Middle East could lead to a spike in oil prices, and possibly an extended period of uncertainty that might limit the supply of oil in a pattern reminiscent of the 1970s.

Sunday, February 5, 2012

Wells Fargo's Weekly Economic & Financial Commentary- February 3, 2012

- The unemployment rate declined for the fifth straight month to 8.3 percent in January, as the economy added 234,000 jobs.

. Jobs gains were concentrated in the professional and business services, leisure and hospitality, and manufacturing sectors, while job losses continued in the federal and local sectors.

. We remain skeptical that job growth in excess of 200,000 jobs per month will continue in the near term, as recent gains may have been helped by unseasonably warm weather.

  Our forecast calls for average gains of 155,000 jobs per month during 2012.

- Personal income rose 0.5 percent in January, the largest gain in ten months, while the savings rate rose to 4.0 percent as consumers cut back on spending.

- The ISM manufacturing index moved further into expansionary territory during January, increasing to 54.1, as rising export orders signaled that the effects of a Eurozone slowdown have yet to impact U.S. manufacturers.

Eagle Materials Inc. (American Gypsum) Reports Third Quarter Results

DALLAS--(BUSINESS WIRE)-- Eagle Materials Inc. (NYSE: EXP) today reported financial results for the third quarter of fiscal 2012 ended December 31, 2011. Notable items for the quarter include (all comparisons, unless noted, are with the prior-year quarter):
  • Revenues of $123.6 million, up 19%
  • Cash flow from operations of $16.2 million, up 45%
  • Adjusted earnings per diluted share of $0.20 and EPS of $0.07 (which includes Non-routine Items of $0.13) compared with $0.12
    • Adjusted earnings per share is a non-GAAP financial measure calculated by excluding non-routine items in the manner described in attachment 5
    • Total loss from non-routine items (including the after-tax effect of a loss on debt retirement, certain tax and interest benefits and loss on arbitration ruling) was $5.8 million
Eagle's low cost operations continued to execute well during this challenging environment for U.S. construction activity. Segment operating earnings increased 30% reflecting improved sales volumes in our cement, wallboard and paperboard businesses and higher wallboard and paperboard net sales prices as compared to the prior year. Operating cash flow was strong during the quarter, further strengthening our financial position.

Cement, Concrete and Aggregates
Operating earnings from Cement for the third quarter were $15.5 million, a 2% increase from the same quarter a year ago. The earnings increase primarily reflects improved sales volumes offset by $2.5 million of additional maintenance costs incurred this quarter versus the prior year quarter. Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $61.5 million, 12% higher than the same quarter last year. Cement sales volumes for the quarter were 700,000 tons, 13% above the same quarter a year ago. The average net cement sales price this quarter was $80.02, generally flat with the same quarter last year.

Concrete and Aggregates reported an operating loss of $0.6 million for the third quarter compared to operating earnings of $0.2 million from the same quarter a year ago, primarily due to reduced sales volumes.


Gypsum Wallboard and Paperboard
Gypsum Wallboard and Paperboard reported third quarter operating earnings of $5.4 million compared to an operating loss of $0.4 million in the same quarter last year. Gypsum Wallboard and Paperboard revenues for the third quarter totaled $73.5 million, a 24% increase from the same quarter a year ago. Higher wallboard and paperboard net sales prices combined with improved paperboard sales volumes were the primary drivers of the quarterly earnings and revenues increase.

Gypsum Wallboard sales volumes for the quarter of 421 million square feet (MMSF) increased 9% from the same quarter last year. The average Paperboard net sales price this quarter was $527.42 per ton, 10% higher than the same quarter a year ago. Paperboard sales volumes for the quarter were 57,000 tons, 21% greater than the same quarter a year ago.