Eagle Materials Inc (EXP)

[Democritus_of_Abdera]

USG Q4 2008 CC Comments Relevant to EXP...

In its Jan 28 2008 conference call USG addressed four issues that are relevant to EXP’s wallboard franchise:

1. Demand

Industry wallboard shipments were down 17% for the last calendar quarter of 2008. In addition to the weakness in housing starts, repair and remodeling utilization was down about 9% and commercial demand was down in the mid teen percentages.

In 2009, industry-wide wallboard demand is projected to be about 20.5 BSF assuming 650,000 housing starts and current remodeling/replacement and commercial utilization rates. Housing starts lead wallboard utilization by about 3.5 months. For every 100,000 housing starts there is about 0.8 BSF of wallboard demand. However, the demand is regional, being far different in the Southeast than it is in the far West.

2. Price

In these market conditions price is a more important financial lever to the wallboard business than volume. USG’s wallboard price was approximately $119/MSF in the fourth quarter up from $114.40 in the previous quarter.

3. Costs

Raw materials, inflation, and other cost pressures started to mitigate in the past quarter.

4. Industry Capacity

Industry-wide wallboard capacity utilization was probably running around 50-53% in 2008. Going into 2009, about 8 BSF net will likely have been closed down to yield a total capacity of 35 BSF. USG closed approximately 1.75 BSF in 2008 by shuttering the Boston and Fort Dodge plants and closing lines at Baltimore, Jacksonville, Stony Point, and Plaster City. Other wallboard producers took out approximately 3 BSF of capacity in 2008. Closure of an additional BSF has been announced for 2009. <note: these numbers do not add up, but that is what USG said>