CHICAGO -- USG Corporation, a leading building products company, reported third quarter 2008 net sales of $1.2 billion and a net loss of $40 million. For the same period a year ago, the corporation reported net sales of $1.3 billion and net earnings of $7 million.
The corporation's results included restructuring charges totaling $5 million ($3 million after-tax) primarily related to manufacturing plant shutdowns and the closure of distribution locations.
"Our core wallboard business continued to be affected by the sharp drop in the residential housing market and high raw material and energy costs compared to last year," said William C. Foote, USG Chairman and CEO. "The distribution business is being impacted by lower product shipments and tighter margins. The ceilings business continued year-over-year sales growth again this quarter; however, the commercial market has begun to exhibit signs of weakness.
Core Business Results
North American Gypsum
USG's North American Gypsum business recorded third quarter 2008 net sales of $610 million and an operating loss of $48 million, which included restructuring charges of $4 million and start-up costs for new manufacturing facilities totaling $3 million.
United States Gypsum Company reported third quarter 2008 net sales of $494 million and an operating loss of $58 million.
The gypsum wallboard market was impacted by the continued weak demand for new housing during the third quarter of 2008. U.S. Gypsum shipped 1.71 billion square feet of wallboard during the third quarter of 2008, down 27 percent compared with last year's third quarter. U.S. Gypsum's plants operated at approximately 65 percent of capacity during the third quarter of 2008 compared with 80 percent of capacity for the same period a year ago. The company estimates that the industry as a whole operated at 61 percent of capacity during the third quarter of 2008.
Third quarter 2008 profit for the company's non-wallboard products, including joint treatment and performance substrates and surfaces, was 20 percent lower compared to the third quarter of 2007.
Building Products Distribution
L&W Supply Corporation and its subsidiaries, which comprise USG's building products distribution business, reported third quarter 2008 net sales of $526 million, down 14 percent compared to the third quarter of 2007. Third quarter 2008 net sales reflect lower gypsum wallboard selling prices and shipments as a result of weak residential construction demand.
Due principally to the decline in the housing market, third quarter 2008 gypsum wallboard shipments fell 28 percent. Overall sales of other products were down slightly compared with last year's third quarter, although L&W Supply's sales of ceiling and construction metal products rose over the same time period due to its relationships with large commercial contractors. During the first nine months of 2008, L&W Supply closed 24 center locations in response to weak market conditions. These closures have been widely dispersed geographically, and L&W Supply continues serving its customers from 228 center locations.
Operating profit was $4 million in the third quarter of 2008, which included a $1 million restructuring charge. In last year's third quarter, operating profit was $22 million. The decline in operating profit was largely attributable to significantly lower shipments and lower profit margins for wallboard due to the weak residential market.
Worldwide Ceilings
USG's Worldwide Ceilings business recorded third quarter 2008 net sales of $227 million, an increase of 10 percent compared to last year's third quarter. Operating profit was $22 million in the third quarter of 2008 compared with $23 million reported in the same period a year ago.
USG Interiors reported third quarter 2008 net sales of $146 million and operating profit of $16 million. Net sales rose $10 million due to higher average realized selling prices and shipments of ceiling tile and grid. Operating profit was negatively impacted by high raw material costs for ceiling tile and grid. The commercial market began to show signs of weakening demand during the quarter.
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