Global Gypsum Newsletter

Issue: GGM18 / 05 December 2014

Headlines


UK: A waste company has been ordered to pay Euro18,968 in fines and costs for illegally handling, storing and depositing wallboard. The case was brought by the Environment Agency.

In October 2012 approximately 60t of broken wallboard from Tawmix Timber Products Ltd was found tipped on a site known as Poppy's Field beside an old airfield at Winkleigh, Devon. The material was contaminated with construction and demolition waste. A special permit is needed to treat and store this type of waste. In July 2013 similar wallboard was illegally used to construct a new fence at Tawmix Timber Products' business premises at Unit 2, Winkleigh Airfield.

North Devon Magistrates' Court heard that Tawmix Timber Products was permitted to store, sort, separate, screen or crush waste wood at its site in Winkleigh. However, it did not have permission to accept gypsum based construction material such as wallboard, which requires specialist handling, treatment and disposal. The company had received advice and guidance from the Environment Agency on plasterboard and was aware it needed a 'variation' to its permit before it could accept this material.

"Wallboard should only be recycled and recovered by specialist companies," said Environment Agency spokesman Sue Smillie. "Tawmix Timber Products did not hold the necessary permits to store, shred and deposit this material. By accepting wallboard on Poppy's Field and depositing wallboard at its main site, the company was in breach of its permit."

Tawmix Timber Products Ltd was fined a total of Euro15,167 and ordered to pay Euro3713 costs for two offences under the Environmental Permitting Regulations 2010, including the illegal storage and use of chipped wallboard at Poppy's Field and Unit 2, Winkleigh. The company pleaded guilty to both charges at an earlier hearing.


Honduras: Gypsum wallboard manufacturer Gypcen is seeking to secure its position in Honduras as a pioneer in the export of this product by doubling its production from 2m sheets to 4m. The company competes with large suppliers from the US and Mexico and has invested over US$5m in order to streamline its current processes.

In 2015 Gypcen hopes to increase its product portfolio with the introduction of gypsum fertiliser and is currently in talks with a number of clients. It also plans to expend to Brazil and other Caribbean countries. Gypcen currently exports 70% of its volumes to Cuba, El Salvador, Nicaragua, the Dominican Republic, Guatemala, Panama, Costa Rica, Venezuela and Surinam, as well as the US in small quantities.


US: Eagle Materials has announced the appointment of Michael Haack as chief operating officer (COO), reporting to Steve Rowley, president and CEO. The COO position is a newly-created one in response to the company's significant growth and continued strategic expansion in construction and energy-related markets.

Michael joins Eagle from Halliburton Energy Services, where he enjoyed a 17 year career with successively important operating positions, most recently with the management of Global Operations for Sperry Drilling, a company in the drilling and evaluation division of Halliburton with operations in every major global oil and gas market. He was awarded a Master of Business Administration degree from Rice University and holds a Master of Science degree from Texas A&M University and a Bachelor of Science degree from Purdue University, both in Industrial Engineering.

"We are proud to have such a high-calibre and experienced individual as Michael joining the Eagle team," said Rowley. "His placement in this newly created position is timely given our growth progress and strategic aspirations. Haack's experience will be especially valuable given our growth into energy-related markets, most notably in frac-sand and specialty oil well casing cement. This represents a significant step in the expansion of our strong operating leadership team and is aimed at ensuring the long-term continuity of Eagle's enviable performance track record."


US: US LBM Holdings has acquired Wallboard Supply Company of Londonderry, New Hampshire from the Filion family and its investors. President John Filion will continue to lead the company along with Vice President Ryan Filion and all members of the management team.

"Expanding our strong presence and capabilities along the East Coast, Wallboard Supply Company represents a great addition to the US LBM family of companies," said LT Gibson, President and CEO of US LBM. "Our commitment to partner with specialty distributors in the wallboard category ensures US LBM's top place as one of the most diverse providers of building materials in the country."

Wallboard Supply Company is a third generation, family-run business that has operated in New England since 1970. Its product line includes gypsum wallboard, metal framing, insulation, lumber and ceilings. The company has its headquarters in Londonderry, New Hampshire with four locations in Braintree in Maryland in Portland, Maine Hermon in Maine and Williston in Vermont.


US: Continental Building Products (CBP) has announced its results for the third quarter that ended 30 September 2014. CBP's net sales grew by 8.6% year-on-year to US$114m, adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 32% year-on-year to US$33.7m and operating income was up from US$0.3m in the same period of 2013 to US$20.2m. Its wallboard sales volumes grew by 3.8% year-on-year to 590Mft2 and sales prices rose by 6.3% year-on-year.

"Our focus on operational excellence and maximising our returns from our low cost base was evident in our third quarter results," said Ike Preston, CBP's CEO. "As we finish 2014 and look to the new year, we remain focused on realising the full potential of our business. We are confident that the long-term fundamentals for construction growth remain strong and we remain focused on delivering value to our customers while actively managing our costs and continuing to deploy our capital in a disciplined manner to drive shareholder value."


Bulgaria: Bulgarian gypsum producer Gips has announced that its consolidated loss widened by 33% to Euro1.6m in January - September 2014. Consolidated revenues decreased by 5.0% year-on-year to Euro2.45m in the first nine months of 2014. Its operating loss widened to Euro431,239 during the period, from Euro88,500 in 2013.


US: Continental Building Products (CBP) has announced that its secondary public offering of 7,000,000 shares of common stock, which was announced earlier this week, will be priced at US$14.75/share. All of the shares are being sold by its largest stockholder, an affiliate of Lone Star Funds. The underwriters have a 30-day option to purchase up to an additional 1,050,000 shares of common stock from the selling stockholder. The offering is expected to close on 25 November 2014.


US: Continental Building Products (CBP) has announced the launch of a secondary public offering of 7,000,000 shares of common stock to be offered by the company's largest stockholder, an affiliate of Lone Star Funds. The underwriters will have a 30-day option from the date of the offering to purchase up to an additional 1,050,000 shares of common stock from the selling stockholder. CBP will not receive any proceeds from the sale of the shares.


India: FRBPL, a joint venture of Fertilisers and Chemicals Travancore Limited (FACT) and Rashtriya Chemicals and Fertilisers Limited (RCF), has launched the world's largest load-bearing gypsum wallboard panels, which measure 12m x 3m and 124mm thick. The panels are lightweight and waterproof. According to Ananth Kumar, the Union minister for Chemicals and Fertilisers, the panels could revolutionise India's infrastructure sector.


Belarus: According to Volma's chairman of the board of directors, Yuri Goncharov, a contract with Germany's Grenzebach for the supply of modernisation equipment for the Belgips plant in Minsk has been concluded. The plant will be operational by the middle of 2015.

Under presidential decree No.34, which was signed on 16 January 2014, Volma was required to invest Euro43m to modernise the Belgips plant by 1 July 2018, including Euro24.7m by 30 June 2016. Within the funding, Volma had to transfer at least Euro2.5m to Belgips. "We will meet the investment project deadline, " Goncharov noted.

According to local media, Belgips' business is being threatened by multiple factors. The supply volumes to Russia haven't changed, but the product prices have fallen by 20 - 25%. There's also a negative effect on Belgips' position by the Polish companies that, according to Goncharov, offer their products on the Belarusian market at much cheaper prices than their domestic ones. There are also challenges regarding the procurement of raw materials.

In response, Volma plans to improve the quality of products through modernisation of the operating facilities. It will also decrease its prices. However, according to Goncharov, prices cannot get much lower. Volma also plans to improve its raw materials supply chain via imports. Goncharov expects to see Belgips in profit in 2015.


Peru/Chile: Chilean building materials importer and trader Novochile plans to export to Peru. The company recently opened a 16Mm2/yr capacity gypsum wallboard and timber boards plant in Chile.


Australia/New Zealand: The Australian and New Zealand chiefs of Knauf's wallboard operations have resigned. Additionally, the New Zealand business is under review, having posted a loss in its first nine months of operations.

The head of the New Zealand wallboard unit, John Russ, has confirmed to local media that he has resigned and will leave the company in two weeks. Meanwhile Mark Norris, managing director of Knauf Plasterboard in Australia, resigned with immediate effect on 6 November 2014.

Knauf has struggled to gain traction in the New Zealand building market, which is dominated by Fletcher Building and it took Knauf longer than expected to gain approval for its products from BRANZ, a local independent research and testing institute, before it could start to sell to consumers. Even then, the company said that it faced resistance getting its products into stores, which had established relationships with Fletcher.


US: The Fifth Federal Reserve District member banks have elected CEO Tom Nelson to serve as a director of the Federal Reserve Bank of Richmond. His three-year term begins on 1 January 2015.

The Federal Reserve Bank of Richmond is one of 12 district banks that work with the Federal Reserve's Board of Governors to strengthen the economy and communities served by the banks. The Richmond bank includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia.

Nelson will be one of nine board directors of the Richmond institution. He has been chairman, president and CEO of National Gypsum since 1999. He also serves as a director of Belk Inc, Carolinas HealthCare System and Yum! Brands Inc.


Australia: A wet winter has delayed construction activity in key east coast markets as New South Wales experienced its wettest August in 16 years. Boral's CEO Mike Kane has told shareholders that more heavy rain could buffet earnings in its construction, materials and cement division during the rest of 2014 and 2015.

"Expectations could be dampened if we are unable to realise potential property sales and some level of price increase in this very competitive market and if we experience extended periods of adverse weather," said Kane. However, he added that Boral expected to more than double earnings in its building products division in 2014 and 2015, which made US$8m in earnings before interest and tax in the 2013 – 2014 financial year. Kane said that rising energy and labour costs remained a concern across the group.

Chairman Bob Every said that Boral expects a resources industry slowdown, particularly in Queensland. "We are expecting continued softening in roads and infrastructure activity for most of fiscal 2015 before a solid multi-year pick-up from fiscal year 2016," said Every.

"In our 2015 financial year we continue to expect ongoing strong results from construction materials and cement, improvements from both the building products and Boral USA divisions and improvements in the underlying USG Boral business," said Kane. "We anticipate return on funds employed to improve, despite the shift to equity accounting on Boral's 50% interest in the Gypsum joint venture." Boral made a net profit of US$173m in ist 2014 financial year, an improvement on a US$212m loss suffered during the previous financial year.

Every also announced his intention to stand down in 2016: "I was re-elected by shareholders at Boral's annual general meeting last year and at the time I intended that, if I was re-elected, that this would be my last term on the board. My intentions are unchanged. Therefore, I will not stand for re-election in 2016. I will work with the board to identify the best possible candidate for a successor for the role of chairman and I will help to ensure an orderly transition process."


Indonesia: Saint-Gobain has inaugurated its first wallboard plant in Indonesia, near Jakarta. With a production capacity of 30Mm2, the new plant will enable Saint-Gobain to respond better to local demand and continue the group's growth on the rapidly-growing Indonesian wallboard market. Saint-Gobain has four other plants in south-east Asia, in Malaysia, Thailand and Vietnam.


US: Eagle Materials has reported its financial results for the second quarter of its 2015 fiscal year, which ended 30 September 2014. Second quarter earnings before interest and income taxes (EBIT) increased by 24% year-on-year to US$78.5m, as both second quarter sales volumes and sales prices improved in nearly all businesses.

As previously announced on 17 October 2014, Eagle entered into a definitive agreement to acquire CRS Proppants and its subsidiaries, including Great Northern Sand, an established supplier of high-quality northern white frac-sand to the energy industry. The cash purchase price of US$225m is subject to customary post-closing adjustments. The acquisition is expected to close during Eagle's third fiscal quarter, subject to receipt of required regulatory approvals.

Gypsum wallboard and paperboard reported second quarter operating earnings of US$45m, up by 22% from the same quarter of 2013. Improved wallboard net sales prices and increased wallboard and paperboard sales volumes were the primary drivers of the quarterly earnings increase. Wallboard and paperboard revenues for the second quarter totalled US$133m, an 11% increase from the same quarter of 2013. The revenue increase reflects higher average wallboard net sales prices and higher wallboard and paperboard sales volumes. Wallboard sales volumes for the quarter of 567Mft2 are 2% higher than the same quarter of 2013.


India/Oman: UltraTech Cement Middle East Investments, a wholly owned subsidiary of India's UltraTech Cement, has acquired a majority stake (51%) in Omani gypsum mining firm Awam Minerals LLC.

Awam Minerals has a license to mine substantial gypsum deposits in the south of Oman. It's gypsum mining license will serve as a captive mine for the network of cement plants owned by UltraTech Cement in India, two grinding units and a cement plant in the UAE, as well as a grinding unit in Bahrain through its Middle East subsidiary.