Gypsum industry news

Australia: Boral says that it may be ready to announce its plans with its USG Boral joint venture in August 2019. It is currently conducting due diligence on the joint venture’s operations in Asia following Knauf’s acquisition of USG in early 2019, according to the Australian newspaper. Forward options include established a new Asian joint-venture with Knauf or buying USG Boral’s gypsum wallboard business in Australia, New Zealand, Papua New Guinea and islands in the South West Pacific. However, Boral’s chief executive officer (CEO) Mike Kane said that there might not be enough time to arrange a deal by the publication of Boral’s full year results in August 2019.

US: Germany’s Knauf has completed its acquisition of USG. The company said that the purchase would create, “a global building materials industry leader that will be even better positioned to meet customers' needs by leveraging two highly complementary businesses, product portfolios and global footprints.”

"We greatly admire USG's strong brands, leading market positions in North American wallboard and ceilings, and highly talented employee base,” said Alexander Knauf, General Partner of Knauf. He added that the transaction was the largest acquisition in Knauf’s history.

Knauf agreed to buy USG in mid-2018 for US$7bn. The Australian Competition and Consumer Commission has approved the deal in late March 2019 subject to asset divestments relating to its Boral-USG joint venture.

Australia: Senex Energy has agreed a deal with CSR Gyprock to supply natural gas to its gypsum wallboard plant at Coopers Plains in Queensland. The agreement also covers gas supplies to CSR’s brick and insulation plants in the state. Under the initial three-year agreement, Senex will supply CSR Building Products, a subsidiary of CSR, with 0.65PJ/yr of gas, starting on 1 January 2020. CSR can extend the agreement by up to a further two years, taking the total contract quantity to 3.25PJ. Gas will be supplied at the Wallumbilla Gas Hub in Queensland at a fixed price in line with current market levels, indexed annually.

Australia: The Australian Competition and Consumer Commission (ACCC) has approved Knauf’s acquisition of USG subject to asset divestments. The ACCC’s review focused on competition for the supply of wallboard, joint plaster compounds and treatments, metal profiles, fixed and modular suspended ceilings and insulation.

USG has a presence in Australia through its USG-Boral joint venture, which the ACCC says competes with Knauf and with Armstrong World Industries. The commission requires Knauf to divest USG’s interest in the joint venture, either entirely or just in Australasia, to a buyer approved by the ACCC. If divestiture of the joint venture interest is not achieved within a certain period, Knauf has agreed to divest certain other assets.

“The transactions raised some significant concerns as it would lead to Knauf owning a 50% in the joint venture, which is a significant competitor in several markets, including markets with limited alternatives for customers,” said ACCC Commissioner Roger Featherston.

Each acquisition is subject to review by different international competition agencies given the global nature of the Knauf’s acquisition of USG.

Australia: USG Boral’s earnings fell in the first half of its financial year due to a slowdown in South Korea. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 16% year-on-year to US$89.3m in the half-year to 31 December 2018 from US$107m in the same period in 2017. Its revenue grew by 2% to US$594m from US$583m. This was attributed to sales volumes growth in Australia, Indonesia, Vietnam and India.

Australia: Boral has warned that its USG Boral joint venture has suffered from market decline and competition in South Korea. It operations in the country were also negatively affected by Typhoon Soulik in August 2018. However, the company reported ‘strong’ results in Australia. Overall, Boral expects that USG Boral will contribute less earnings to the company in the first half of its financial year to the end of 2018.

Australia: Ord Minnett, a financial services company, estimates that Boral could pay as little as US$0.5bn to buy the other half of USG-Boral, the joint venture it runs with USG. The financial company has made the forecast following the on-going acquisition of USG by Germany’s Knauf, according to the Australian newspaper. It believes that Boral is in a strong position given falling value of the joint venture and problems with Knauf’s geographical asset base following its purchase.

Australia: Boral’s chief executive officer, Mike Kane, expects that its USG Boral joint venture’s earnings will grow by 10% in its financial year to the end of June 2019. He told shareholders at the company’s annual general meeting that improvements in markets in China, Indonesia, Thailand and India would counteract slowing residential construction in Australia and South Korea, according to the Australian newspaper. He also said that Boral is conducting two valuations of USG Boral following the merger of USG and Knauf. The company is considering whether to buy the other half of the joint venture or whether to find another partner.

Australia: Australia’s competition watchdog is investigating Knauf”s proposed US$7bn takeover of Boral’s US-based joint venture partner USG for potential breach of its merger rules. The Boral-USG joint venture is the biggest gypsum wallboard supplier in Australia, followed by CSR. Knauf is third largest, meaning that the takeover would combine the number three and number one providers in Australia.

Boral CEO Mike Kane said that he had formally served a notice of default to Knauf, triggering an automatic review of the value of the joint venture. When the valuation is completed Boral will then decide whether to exercise its right of first refusal over the Asian and Australian joint venture operations. This is expected to be finalised during October 2018.

Australia: USG Boral’s earnings have been hit by competition in Indonesia, Thailand and Vietnam, higher input costs including paper and a one-off cost. Earnings before interest, taxation, depreciation and amortisation (EBTIDA) were negatively affected by a one-off cost of US$8m associated with a three-month closure of the port of Thevenard in South Australia and an unfavourable operational reserve adjustment in India. Its EBITDA fell by 6% year-on-year to US$196m in the financial year to 30 June 2018 from US$207m in the same period in 2017.

However, despite this its sales revenue rose by 7% to US$1.15bn from US$1.08bn. This was attributed to continued adoption of its Sheetrock products and technical board in Australia, Korea, China and Thailand. Overall board volumes increased by 3% year-on-year and technical board, which represents 20% of volumes, grew by 20%. Gypsum wallboard volumes grew in Australia and China, and ‘strong’ price gains were achieved in South Korea and China.

“This long-term growth business has delivered impressive and uninterrupted year on year growth since the formation of the joint-venture in 2014, with FY2018 being a consolidation year. Australia, Korea and China delivered strong top line growth in FY2018, offsetting pressures in countries such as Indonesia, Thailand and Vietnam and some unexpected one-off cost impacts,” said chief executive officer and managing director Mike Kane. He added that the company is currently considering an expanded joint-venture with Germany’s Knauf in relation to its proposed acquisition of USG. However, Boral is also considering a return to 100% Boral ownership.