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USG Corporation Message Board

  • ngujraji ngujraji Feb 10, 2013 4:36 PM Flag

    USG will be $40.00 by end of april. BUY...BUY...BUY

    USG will be $40.00 by end of april. BUY...BUY...BUY

    Sentiment: Strong Buy

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    • At some point investors will realize that the home builders are profitable while USG is still losing money. The reason for this is very simple, there are fewer builders today to divide up the business. While in the drywall business, the same suppliers are in business today as were at the peak to divide a lower total number of houses being built. And these suppliers have greatly added to their debt as reflected in their large interest expense. USG is going to need to pay off a good part of this debt in order to become profitable again.

      • 2 Replies to w999surf
      • w999surf; you make some good points. Unfortunately you make no sense and are so far off base it is doubtful you know what sport you are playing.

        Drywall capacity in north America is off some 40% from the peak in '07. Sure, the suppliers are all there, but half their plants are either off line (not just stopped, but power off, no employees, gates locked) or have been scrapped entirely. See Empire Nevada, for example. In 2004 capacity was over 35 billion sq. ft, by 2010 is was 26.5 bsf, today that number is just over 20bsf. That is roughly 43% of peak capacity, gone. About half of that is never coming back; it's been scrapped. Of the other half it would take a year or more to bring most of it back online.

        As to the notion that USG's debt is somehow a barrier to earnings; what, were you born yesterday with all those clothes on? I suggest you go study the history of USG and the drywall industry before making such foolish pronouncements. It is possible, likely even, that USG will cashflow their entire debt in the next 10 years. Not just pay it down, but pay the interest and have enough additional cash left over to pay it off. At that point they'll probably choose to finish the project on rough and ready island rather than pay off the debt. Nevermind if CA actually gets its act together and starts building houses again; Imagine a source of drywall so close to the Pacific you can cover everything from Panama to Anchorage as the least cost provider. Hmm . . . didn't occur to you, did it.

        Then there's the lightweight drywall USG invented. Apparently its being spec'd by everybody and Nat. Gyp and Temple Inland are going to end up paying USG a whole bunch of money for copyright infringement. They didn't even try to hide the fact that they bought USG product, studied it and started manufacturing it using USG's proprietary process.

        USG has the best management in the industry, bar none.

        Now, tell me again how the same suppliers producing the same drywall are going to prevent USG from becoming profitable.

        Oh; and WB will be buying USG out somewhere north of 60 in 2014. If he's lucky.

      • "USG is going to need to pay off a good part of this debt in order to become profitable again".

        That makes no sense.. They are not profitable because housing has been in a depression for the last 5 years and of course demand for drywall followed.. not because they have debt.. It does not matter if you have 300 builders or 30,000 builders it's all about the size of the pie....and the pie is getting larger. There are pockets of strength in the US but still inconsistent..but give it time it will be back.

        Its not a secret that USG is still losing money and I think most investors that can read know that.

        Household creation has not stopped just the buildiing to meet these needs. As jobs return housing will only get stronger.

        Bernanke still has housing as his bullseye so it will get better.. unless they pull the QE plug. .

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