Eagle Materials Inc (EXP)

[Democritus_of_Abdera]

No relief in the foreseeable future (i.e. for the next 6 months). That is the take home message from the 2011 Q2 EXP CC (Oct 28, 2010)...

Reducing costs is EXP’s primary focus at this time. But unit costs are inexorably rising due to fixed costs in the face of decreasing volume.... Nevertheless, EXP’s financial position continues to improve due to positive cash flow and judicious capital spending.

There might be an upcoming problem with receivables, for the industry in general if not for EXP in particular...

Selected quotes:

Demand for building materials and construction products remains at historic low levels. In fact, it has continued to deteriorate, albeit at a much slower rate...

Based on the current pace of wallboard shipments, we do not expect sales opportunities to increase significantly in the remainder of fiscal 2011...

We do anticipate strong, continuing paper revenues, because our paper mill remains sold out for the year....

Cement is not near as volatile. While we don’t go down as rapidly ..., we also don’t go up as rapidly. But the deterioration continues...

So I am not sure where we are going, but we clearly know that structurally there is an issue with Wallboard capacity in the U.S. We understand that. We know that there is a problem, and that problem is irrespective of anyone’s view on a housing recovery. Even the most robust view of a housing recovery right now still leaves us with a lot of excess wallboard capacity, and primarily East of the Mississippi. So with that said, that means there is going to be a highly competitive marketplace for many years to come, both in the Wallboard business as well as the Wallboard distribution business. We can’t control the market, but we can control costs, and we are going to continue to drive costs down. So regardless of what happens, we know we are the most competitive player in the industry.

...as you go downstream. There are more and more people requiring maybe a little bit of help as far as receivable. And that’s something in this environment we really send the bird dogs out and watch it very closely. We try to be – we try to understand the marketplace and our customers and understand what’s available. But it doesn’t take too much if you’re not watching it to get in big trouble in receivables in this kind of environment. So that’s something we’re very cognizant of and we watch very closely.