Gypsum industry news

US: USG has sent a letter to its shareholders urging them for their support for its director nominees as its forthcoming annual general meeting. The move follows a letter by Germany’s Knauf to USG’s shareholders asking them to vote against the nominees in protect against its failed bid for the company.

In its letter USG described Knauf, a 10.5% shareholder in the American company, as a competitor in the global gypsum market. It then outlined what it says was its interaction with Knauf over the proposed bid.

On 29 November 2017, Knauf first proposed to acquire USG for US$40.10/share. The board rejected this proposal and USG management subsequently spoke with Knauf to explain the board’s rationale and elements that impacted upon its ‘intrinsic value.’ It says that Knauf representatives attended its Investor Day on 8 March 2018.

On 12 March 2018, at Knauf’s request, Steven Leer, the non-executive Chairman and Jennifer Scanlon, the chief executive officer, met with Alexander Knauf and Manfred Grunke, Knauf’s Managing Partners, in person. Three days later, Knauf submitted its revised proposal of US$42/share, which was then only a 2% premium to USG’s recent 52-week high. The board says that it ‘carefully considered and rejected’ this revised proposal on the basis of USG’s ‘intrinsic value’, which had been increased by the positive impact of the reduction to US corporate tax rates, which had been signed into law after the initial Knauf proposal.

Subsequently, a letter from USG to Knauf on 26 March 2018 outlining the reason for its latest rejection suggested a telephone call with Knauf’s leadership. This call took place on 29 March 2018 and the board directed USG’s financial and legal advisors to meet in person with advisors from Knauf, which took place on 5 April 2018. On 10 April 2018, Knauf issued its letter to USG stockholders.

US: USG has said that Knauf has misinterpreted its rejection of US$5.9bn bid following a letter from Knauf to USG shareholders asking them to vote against director nominees. Knauf sent a letter to its fellow shareholders asking them to send a ‘clear message’ to the board of USG to ‘engage in discussions with Knauf’ regarding its offer.

"Knauf's letter mischaracterises our board's actions. Our board has clearly demonstrated that it is willing to evaluate any opportunity to deliver value to all of our shareholders. We have engaged with Knauf in good faith on multiple occasions since November 2017. Jenny Scanlon and I met in person with Alexander Knauf and Manfred Grundke on 12 March 2018. Additionally, at the direction of our board, our financial and legal advisors met with Knauf's advisors as recently as last Thursday. The fact is their proposal is wholly inadequate, opportunistic and does not reflect the intrinsic value of the company," said Steven Leer, USG's non-executive chairman of the board.

Jennifer Scanlon, the president and chief executive officer of USG, added that she had met with and spoken to Knauf's senior management ‘multiple times’ but that it had not indicated any willingness to pay ‘full value’ for the company.

US: USG has rejected a proposal by Germany’s Knauf to buy all of its shares for US$42/share in cash or for around US$5.9bn. Jennifer Scanlon, president and chief executive officer of USG, described the offer as ‘wholly inadequate’ and said that it ‘substantially’ undervalued the company. She added that USG had discussed the proposal on the telephone with Knauf in December 2017 and met in mid-March 2018. Knauf submitted a revised proposal around the same time.

US: Underwriters Laboratories (UL) has completed fire performance evaluation on some of USG’s Sheetrock Brand EcoSmart Panel products. The testing concluded that 15.9mm USG Sheetrock Brand EcoSmart Panels Firecode X (UL Type ULIX) and USG Sheetrock Brand EcoSmart Panels Mold Tough Firecode X (UL Type ULIX) is specified in more than 260 fire-rated wall, column, and floor- and roof-ceiling UL designs in which Type X or Type C panels are required.

“Quickly and accurately identifying gypsum panel types in the field – especially after the panels have been hung and the joints are finished – can be challenging. Consequently, fire performance may be compromised if Type X panels are inadvertently hung as the ceiling membrane, whether in steel or wood construction, when Type C panels are required,” said Nestor Sanchez, senior manager, building science at USG.

US: USG has submitted a purchase application to the Michigan Department of Natural Resources (DNR) to expand its operations for its gypsum quarry at Alabaster, Michigan. The wallboard producer wants to buy 580 acres of state property adjacent to the sitem according to the Associated Press. The DNR says it will study the company's plan, considering issues involving forestry, wildlife, fisheries, recreation and minerals. It also will consult with tribal governments and host a public meeting.

USG founded the Alabaster quarry in 1902 and it employs 20 workers at the site. Customers for gypsum from the mine include LafargeHolcim cement plant in Alpena, Michigan and St Marys Cement’s cement grinding plant in Detroit. It says it wants to expand the quarry in order to extend its life span.

US: Ann Franzen, the plant manager of USG’s gypsum wallboard plant in Rainier, Oregon has been recognised by the Manufacturing Institute as part of its annual Science, Technology, Engineering and Production (STEP) Ahead Awards. This marks the fourth consecutive year a USG employee has received this honour for her contributions to the manufacturing industry. The STEP Ahead Awards honour women who have demonstrated excellence and leadership in their careers and represent all levels of the manufacturing industry, from the factory-floor to the executive level.

Franzen, a STEP Ahead Honouree, joined USG more than 20 years ago. She became USG’s first female plant manager and has played a role in USG’s lean management initiative. Franzen is also a founding member of USG’s Women in Manufacturing group, which connects female plant employees across the USG network and promotes career advancement.

The STEP Ahead Awards are part of the larger STEP Ahead initiative, launched to examine and promote the role of women in the manufacturing industry through recognition, research, and leadership for attracting, advancing, and retaining strong female talent. In five years, STEP Ahead Award winners have impacted more than 300,000 individuals — from peers in the industry to school-aged children. The Manufacturing Institute will recognize all 130 recipients of the STEP Ahead Awards on 10 April 2018 at a reception in Washington, DC.

US: USG’s operating profit fell by 7% year-on-year to US$367m in 2017 from US$394m in 2016. Its net sales rose by 6% to US$3.2bn from US$3.02bn. In the fourth quarter the company reported that wallboard volumes in the US increased approximately by 14% while prices declined by 4% year-on-year. It made a net loss of US$95m in the quarter, in part due to a US$138m income tax expense resulting from the Tax Cut and Reform Bill.

“We had an outstanding close to a solid year for USG. The combination of focused operational performance by our manufacturing facilities and a high level of service to our customers enabled us to profitably grow our business, with net sales increasing by 13% and adjusted operating profit by 10%,” said Jennifer F Scanlon, president and chief executive officer of USG.

US: USG plans to upgrade its Jacksonville gypsum wallboard plant in Florida. As part of the investment, a new production line will be added to manufacture USG’s Securock ExoAir 430 panels. Investments will be made at the site to improve overall plant efficiency, including upgrades to modernise process mill equipment.

Construction and plant updates are expected to be completed by the end of 2018. The company also plans to add approximately 20 new jobs as a result. The addition of the high-speed, automated production line in Jacksonville is intended to allow USG to distribute Securock ExoAir 430 to more customers throughout the US and Canada.

US: USG’s operating profit for its gypsum business has fallen by 4.5% to US$85m in the third quarter of 2017 from US$88m in the same period in 2016. The gypsum wallboard producer blamed this on falling prices, rising input costs and poor weather. It said that the average realised selling price for US wallboard decreased by approximately 2% sequentially and was impacted by freight costs and changes in wallboard product mix due to hurricanes Harvey and Irma. US wallboard manufacturing costs also increased by US$10m due, primarily to increased waste paper costs. Despite this, overall net sales for the quarter increased.

“We had positive momentum in the third quarter, with increased net sales and wallboard volume,” said Jennifer Scanlon, president and chief executive officer (CEO) of USG.

Gypsum segment net sales rose by 5.4% to US$2bn for the first nine months of 2017 from US$1.9bn in the same period in 2016. Operating profit fell by 14% to US$266m from US$310m.

Colombia/Mexico: Mexican gypsum wallboard producers including USG Mexico and Abasteco Maxima (Abamax) will have to pay anti-dumping duties on imports to Colombia following an investigation by the Committee on Trade Practices. USG Mexico will be required to pay a 25% tariff, Abamax will have to a pay a 7.15% tariff and all other importers will face a 42.86% tariff, according to the Sentido Común website. The government will implement the tariffs over the next two years and will then reassess the situation.