Wallboard: Low to mid 60s capacity utilization, $92.42/MSF... that combination caused a dramatic reduction in EXP's operating cash flow as reported in today's Q4 2008 conference call. I don’t expect that this scenario will change much during the next quarter. Anyway, I plan to keep my position in EXP, and might add to it if the price drops another 20% (i.e below $30/share). But, I cannot in good conscience encourage anyone else to make an investment until the bottom of the housing market has passed.
EXP’s average net sales price for gypsum wallboard of $92.42/MSF in Q4 2008 was 35% less than the $142.39/MSF for the same quarter last year (per 8-K filed 5/6/2008). ..David Sachs of Trident Capital (I think) guessed that the average industry cost for wallboard is in the $110-120 range during the question and answer session.
One of the things that I like about EXP is that it is a low cost producer. It is remarkable that they are making money in this dismal market, largely from the cement side of the business (i.e. $0.07/share in this past quarter vs. $0.76/share in the same quarter last year). Even EXP’s Wallboard division is breaking even at today’s prices. ...And, EXP continues to actively lower its break-even point. During the last quarter they finished construction of the Georgetown Wallboard plant which will reduce their average wallboard costs. They reconfigured their Illinois Cement facility to process lower cost petroleum coal in the calciner. These changes should lead to increased profitability even on a modest uptick in the construction and housing markets.
EXP has paused its aggressive share buyback program to conserve cash for additional capital investments (primarily to enhance their Nevada and Mountain Cement facilities). In the first three quarters of FY2008, they had purchased 4.8M shares (10% of outstanding); no substantial repurchasing was done in the 4th quarter. EXP has board authorization to purchase an additional 0.7M shares should the cash flow become more certain. They expect FY2009 Capex to be about $115M, primarily for the Nevada plant with an 18-24 month build out. The Mountain Cement Capex will probably startup in FY2010. FY2008 Capex was $96.9M and FY2007 Capex was $152.1. So, the anticipated Capex expenses are nothing out of the ordinary.
