2Q Earnings Roundup: Brief Sunshine Before More Clouds

Spring is many peoples' favorite season, and it was particularly true this year if that person works at a timber mill. Earnings reports for second quarter of this year showed robust gains in sales and profits, typically because of the runup in OSB prices and the brief rise in U.S. housing starts. Outside the lumber mills, results among the public companies that make, distribute, or sell construction supplies were more mixed as well as more moderated. One thing they did have in common was that most forecast a return to sluggish sales and profits in the second half of this year.

Here is a roundup of sales and earnings by the most significant public companies involved in construction supply. For some diversified companies--firms that make paper as well as studs, for instance, or that produce sporting goods as well as building supplies--the numbers given reflect sales and profit (usually operating rather than net profit) for the appropriate business segment.

Some outlying results are because of special factors, such as the way exchange-rate developments on Ainsworth's debt caused it to swing to a loss despite a 37.5% rise in sales. See ProSales' stories on each company for those details.

The commentary offered by Ply Gem president and CEO Gary E. Robinette was typical of many executives. "[The results] demonstrate significant improvement over the same periods in 2009 and reflect our continued trend of positive year-over-year earnings performance," he said. "However, the housing market in the first half of 2010 was stimulated by the federal home buyer tax credit program which expired on April 30. Not surprisingly, there have been signs of weakness in the later part of the second quarter."

Officials at Masco "were encouraged that March and April 2010 sales were up high single digits compared to 2009," CEO Tim Wadhams said in a statement. "Since then, economic activity related to our markets, particularly consumer spending and new home building has slowed and our business has slowed.

"Although we continue to be concerned about foreclosure activity and access to financing, we believe that housing starts will improve in 2010 from 554,000 units in 2009, but currently believe that the increase will be in a range of 575,000 to 625,000 units," Wadhams continued. "This is a reduction of our previous expectation that 2010 housing starts would increase to a range of 600,000 to 700,000 units. In addition, we anticipate that expenditures on repair and remodel activity will be challenged in the second half of 2010 and expect that big-ticket items will continue to be deferred, in the short-term, until general economic conditions, unemployment, consumer confidence, credit availability and home prices improve."

Louisiana-Pacific Corp. (LP) chief executive officer said demand began to taper significantly in the second half of May and continued into June. "The U.S. economy remains in an unsettled state that requires companies to be extremely agile to respond to wide swings in demand," he added. "For housing, there is growing agreement that the timing and strength of the recovery will be determined by the size of the inventory of excess vacant homes and household formations enabled by job recovery. I believe we'll see an erratic path for the rest of 2010 and into next year."

Canfor president and CEO Jim Shepard said: "As encouraging as it has been to see another quarter of improved results, the significant decline in solid wood prices in the latter part of the quarter clearly highlights the fragility of the U.S. housing sector." And Universal Forest Products Inc. CEO Michael Glenn said America is experiencing "the most unstable lumber market I've seen in my 36 years with the company."

And William C. Foote, USG Corp. chairman and CEO, said in his statement. "Market conditions during the quarter were similar to the prior quarter and modestly better than the environment experienced last year, but demand remains exceptionally weak."