This is the better late than never update to USG research. I will make the summary PDF download freely available to anyone who is registered to the site. Those who are not registered can do so for free here (be sure to choose a subscription option, even if it is the free one).

This is a follow up to the September 4th note on USG. Unfortunately, due to the turbulence of the markets I could not fit a detailed report in between now and then. The raw output from my valuation model is available for a very short time as a pdf download for professional subscribers in the downloads section.

The continuing collapse of the US housing sector has severely impacted building material manufacturers such as USG Corporation (USG). Construction of new home in the US have been literally falling off of a cliff, reaching its lowest level of the last 50 years with an annual rate of 791,000 units in October 2008 (down 4.5% from upwardly revised estimate of 828,000 in September 2008). The slackening housing activities coupled with continuing decline in repair and remodeling activities in the US has significantly impacted the demand for building materials including wallboards and gypsum products. As a result, USG and other building material manufacturers are confronted with tough task of maintaining their top line growth amid declining volumes and pressure from home builders inhibiting their ability to raise prices. Besides problems of revenue growth, margins have been squeezed due to volatile raw material prices and builder material manufacturers' inability to withhold any price benefits to home builders. USG, in particular, has also been faced with breach of some its loan covenants which contemplate increased interest rates on outstanding loans due to the Company's inability to maintain sufficient profit margins. Though the Company has recently taken up some cost reduction measures as part of its restructuring plan and has also garnered financing to replace its short-term obligations, adverse macro economic factors pose strong headwinds for USG to in improving its financial performance in the near-to-medium term.

The entire note, including valuation can be downloaded for free with registration here: USG Intelligence Note (141.07 kB 2008-12-03 19:56:41)