USG posts 5th straight quarterly loss on slump in home building

USG Corp., North America's largest maker of gypsum wallboard, recorded its fifth straight quarterly loss as U.S. home construction fell to the lowest level in at least 49 years.

The fourth-quarter net loss widened to $172 million, or $1.74 a share, from a loss of $32 million, or 32 cents, a year earlier, Chicago-based USG said today in a statement. Sales fell 18 percent to $981 million.

Chief Executive Officer William Foote cut about 1,750 jobs through 2008 and announced plans in November for 900 more as he also shuttered production lines to reduce costs. USG has also sought financing from investors including Warren Buffett. A glut of home inventory and a dearth of buyers caused housing starts in December to plummet to an annual rate of 550,000, the lowest since the government began keeping records in 1959.

USG faces "historically unprecedented negative industry fundamentals," James Barrett, an analyst with CL King & Associates, wrote before the results were released. "For the fourth quarter, the industry experienced a 24 percent drop in shipments, which probably represents a record."

Excluding costs for restructuring and impairment charges, USG posted a loss of $1.32 a share. The average of 13 analysts' estimates in a Bloomberg survey had forecast a loss of 49 cents a share. Analysts, on average, projected sales of $1.06 billion.

USG fell 27 cents to $7.98 at 10:29 a.m. in New York Stock Exchange composite trading. The shares dropped 75 percent in the 12 months before today.

Impairment Charge

The net loss doesn't include a goodwill impairment charge, which the company said it is in the process of determining along with possible additional non-cash charges from other intangible assets. USG had $226 million of goodwill at the end of last year, and expects all or a "substantial amount" of it to be written down.

The decline in wallboard demand will continue this year and possibly extend into 2010, USG said. Without further production capacity reductions in the industry, plants are expected to operate at less than 60 percent of capacity, the company said.

"We are prepared for another very challenging year in 2009 and intend to take whatever additional actions we see as appropriate if demand for our products and services weakens further," Foote said in the statement.

To shore up its finances, USG in November sold $300 million of convertible debt to Buffett's Berkshire Hathaway Inc. and $100 million to Fairfax Financial Holdings Ltd. The company agreed to reduce the amount of a credit line by $150 million to $500 million and secure it with assets in exchange for banks relaxing debt covenants USG was likely to break.

Berkshire Hathaway is USG's largest shareholder, owning 17 percent of shares.

Foote has reduced USG's wallboard production capacity by about 3.5 billion square feet, and in November announced plans to reduce capacity by 1 billion more.