Building Product Makers Struggle as Residential Construction Continues to Slow
- Feb 08, 2008
Nashville– As fourth quarter reports filter in, it’s becoming clear that companies providing building materials ranging from lumber to concrete–such as Nashville-based Louisiana-Pacific Corp.–are still suffering because of the housing decline.Many of residential building’s biggest companies–whose stocks are still at or near 52-week lows–have seen severe profit drops; some have seen large losses. None have indicated a housing recovery will happen this year, according to CNNMoney.com.However, contractors are finding it difficult to cut expenses on current projects because costs for raw materials including metal and wood are increasing.Louisiana-Pacific Corp., which sells a number of different building materials, blamed the decreased value of the dollar for raising the price of lumber it buys in Canada. A greatly reduced demand for its products gave the company a fourth quarter loss.Other companies also experienced problems during the quarter. Decking material manufacturer Terex Co. had lower fourth quarter sales–and said it expects 2008 to be a rough market. Wallboard provider USG posted a fourth quarter loss; in addition, its financial ratings were placed under review and may be downgraded.Profit at Eagle Materials Inc., another wallboard maker, fell 45 percent. Shares of Eagle–which also sells cement–have recovered from a 52-week low but are still 40 percent below their previous 12-month high level.Times are tough for builders. The Dow Jones U.S. Building Materials index declined 18 percent in the past year. For the first time since 2006, the index dropped below 300 in January.Construction spending declined by 2.6 percent in 2007–a new high–primarily due to huge homebuilding project reductions by private companies. As the number of new, unsold homes increases, public builders also have slowed construction.In addition, construction spending saw its largest fall in 15 months–1.1 percent–in December, which suggests the housing decline is getting worse, not better.