Gypsum industry news

Australia: USG Boral’s earnings have been hit by competition in Indonesia, Thailand and Vietnam, higher input costs including paper and a one-off cost. Earnings before interest, taxation, depreciation and amortisation (EBTIDA) were negatively affected by a one-off cost of US$8m associated with a three-month closure of the port of Thevenard in South Australia and an unfavourable operational reserve adjustment in India. Its EBITDA fell by 6% year-on-year to US$196m in the financial year to 30 June 2018 from US$207m in the same period in 2017.

However, despite this its sales revenue rose by 7% to US$1.15bn from US$1.08bn. This was attributed to continued adoption of its Sheetrock products and technical board in Australia, Korea, China and Thailand. Overall board volumes increased by 3% year-on-year and technical board, which represents 20% of volumes, grew by 20%. Gypsum wallboard volumes grew in Australia and China, and ‘strong’ price gains were achieved in South Korea and China.

“This long-term growth business has delivered impressive and uninterrupted year on year growth since the formation of the joint-venture in 2014, with FY2018 being a consolidation year. Australia, Korea and China delivered strong top line growth in FY2018, offsetting pressures in countries such as Indonesia, Thailand and Vietnam and some unexpected one-off cost impacts,” said chief executive officer and managing director Mike Kane. He added that the company is currently considering an expanded joint-venture with Germany’s Knauf in relation to its proposed acquisition of USG. However, Boral is also considering a return to 100% Boral ownership.

US: USG has blamed falling operating profits on costs relating to its ‘Customer-First’ strategy and rising general costs, including those from transportation. Its operating profit fell by 32% year-on-year to US$121m in the first half of 2018 from US$179m in the same period in 2017. Its net sales rose by 6% to US$1.67bn from US$1.58bn.

For its wallboard and surfaces business the company said that its wallboard price increased by 2% from the second quarter of 2017 due mostly to a price increase in January 2018. Wallboard sales volumes increased by 2% compared to the second quarter of 2017. However, wallboard costs were US$12m higher than the previous year primarily due to rising input and transportation costs.

The building materials producer confirmed that its merger with Germany’s Knauf is expected to complete in early 2019, subject to shareholder and regulatory approval.

Uzbekistan: Knauf holds a 70% share in the gypsum wallboard market. The German building materials producer sold 22.8Mm² of wallboard in 2017, according to the Trend News Agency. It increased the production capacity of its Bukhara wallboard plant in mid-2018 by 30% with an investment of US$22m. Knauf is also planning to build another wallboard plant in the country with an investment of over US$20m. This project is currently at the design stage.

Uzbekistan: On 7 July 2018 German wallboard producer Knauf will launch courses in Uzbekistan to teach construction workers how to use dry mixtures and plasterboard. The courses will be held in Knauf’s specialised training centre in the capital Tashkent.

Nezom Saidmakhmutkhujaev, a Knauf representative, will show the audience how to finish walls with plasterboard, build interior partitions, insulate main walls, work with different types of metal profiles, use dry mixes for plastering concrete, brick, cement and expanded polystyrene surfaces and how to avoid common mistakes when using finishing materials.

The courses will be held in an interactive form with the opportunity to ask questions and the opportunity to apply knowledge in practice during demonstrations.

Belarus: Construction of Belgips new 30MM2/yr gypsum wallboard plant in Gatovo, Minsk District is expected to be completed in October 2018. The plant will then take another six months for start-up and commissioning before it starts commercial operation in mid-2019, according to Belarus Daily News. The unit is a joint venture between Russia’s Volma Corporation and Germany’s Knauf.

US: German building materials company Gebr. Knauf KG is set to acquire Chicago-based USG Corporation in a US$7bn deal, following months of discussion and heated exchange between the two companies. USG shareholders will receive US$44/share, according to the terms of the agreement. This consists of US$43.50/share in cash payable and US$0.50/share in a special dividend after shareholders approve the deal, which is expected to close in early 2019.

Knauf intends to continue operations from USG’s headquarters in Chicago.
Berkshire Hathaway and its subsidiaries, which own a collective 31% of USG, have agreed to vote in favour of the acquisition. The deal allows Berkshire to leave what CEO Warren Buffet deemed a ‘disappointing’ investment, according to Bloomberg.

In 2001, USG filed for bankruptcy protection and was later saved by an investment from Berkshire in 2006. Knauf has been pursuing USG since November 2017. In March 2018, USG rejected an offer by Knauf to purchase the construction materials company for US$5.9bn.

“We are excited to enter into an agreement to acquire USG,” said Alexander Knauf, general partner of Knauf, in a company statement. “As a long-term USG shareholder, we greatly admire USG's strong brands, leading market positions in North American wallboard and ceilings and highly talented employee base."

Jennifer Scanlon, president and chief executive officer of USG, added, “Our Board has worked diligently to evaluate all strategic options to maximise value for our shareholders, and we are pleased to have reached this agreement, which provides our shareholders with significant and certain cash value. We believe this transaction will create new opportunities for both companies' customers and will benefit USG's employees who will be part of a truly global building products company.”

US: The board of directors of USG has authorised its management to commence negotiations with Germany’s Knauf regarding a potential sale of the company. USG has advised Knauf that it is prepared to agree to a customary confidentiality agreement to facilitate sharing appropriate due diligence information. The board added that it, “…remains committed to acting in the best interests of all shareholders and will evaluate all options to do so.”

Knauf made a US$5.9bn bid for USG in March 2018 that was rejected. It then urged shareholders to vote against director nominees at USG’s annual general meeting. Warren Buffett, the chief executive officer Berkshire Hathaway, subsequently agreed to back the opposition to the directors. Berkshire Hathaway holds a 31% stake in USG and Knauf holds a 10.5% stake.

US: Knauf has complained about USG’s decision to block its request for the company’s current stocklist materials that would allow it to communciate with other USG shareholders. The German competitor to USG and minority shareholder said in a letter to the board of USG said, “Questioning Knauf’s ownership of USG stock and whether we have ‘proper purpose’ for requesting these materials are the tactics of an entrenched management trying to thwart our right to communicate with fellow stockholders in connection with the annual meeting.” Knauf also threatned legal action in Delware if USG failed to provide with the information it desired.

USG rejected a US$5.9bn bid by Knauf to take it over in late March 2018. Knauf subsequently sent a letter to USG’s shareholders asking them to vote against director nominations in protest against the rejection.

Tunisia: Prime minister Youssef Chahed has met with Alexander Knauf, the chairman of Germany’s Knauf. Knauf plans to invest Euro80m and create over 300 jobs in gypsum projects based in the governates of Tataouine and Sidi Bouzid, according to African Manager. Knauf has operated a plaster business in the country since 2004.

US: Warren Buffett, the chief executive officer Berkshire Hathaway, plans to oppose the election of four board nominees at USG. The move places pressure on USG to accept a hostile takeover bid for US$6.6bn by Germany’s Knauf, according to the Financial Times newspaper. “Berkshire’s present intention is to vote against the four directors proposed by management,” said Debbie Bosanek, an assistant to Buffett. The talks between USG and Knauf were enabled in March 2018 by Berkshire Hathaway offering to sell its 31% stake in USG to Knauf. The German company holds a 10.5% stake in USG.