Collateral Damage To The Housing Slowdown
Today in separate reports two construction supply companies are reporting much lower earnings as new construction is finally slowing. Both Norbord, who make oriented strand boards (OSB) and USG, maker of wallboard, are showing significant earning decreases.
While this is tough for the companies and their employees it can not be much of a surprise. They loaded up during the housing boom knowing that the trend would not last forever. Now that we are absorbing the excess inventory sales will dip. If the budget guys upstairs at these companies have not accounted for the boom and bust cycle it is their own fault.
We are clearly in a steep recession that will continue for some time,” USG Chairman William C. Foote told analysts during the earnings announcement Tuesday. The weak market caused wallboard prices to drop 35 percent, to $122 per thousand square feet, from a year ago. USG’s net income in the third quarter ended Sept. 30 fell to $7 million, or 7 cents a share, from a year-ago $153 million, or $1.71. Sales dropped 9.7 percent to $1.34 billion.
Norbord reports loss as US housing market worsens
Norbord, which makes products such as oriented strand board (OSB), which is used in construction, reported a loss of $1 million, or nil cents per share, compared to a year earlier profit of $7 million, or 5 cents a share.
The company said it does not expect near-term relief from housing market pressures in North America.
“Without question, the North American OSB industry is facing a period of prolonged weakness due to the combination of much lower U.S. housing starts, tighter mortgage lending conditions and the addition of new OSB capacity to the market,” said Chief Executive Barrie Shineton in a statement.
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Comment by Darren Kittleson on 24 October 2007:
Great post. I’ve been a high end custom home builder for the past 13 years and have NO sympathy for these businesses. They virtually raped us in pricing increases during the boom years. They restricted supply to the point that we had no choice but to pay their outrageous prices. Unfortunately who’ll get hurt the most in this is their employees. These men and women, I’m sure, gave it their all during the BOOM times. Now they may find themselves jobless.