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Buffett-Backed USG Rises Most Since 2011 on Building Gain

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Buffett’s move to exchange convertible bonds for shares in January paid off after USG posted earnings excluding some costs of 19 cents per share, beating the 10-cent average of 17 analysts surveyed by Bloomberg. Photographer: Scott Eells/Bloomberg

Feb. 6 (Bloomberg) -- USG Corp., the wallboard maker whose largest shareholder is Warren Buffett’s Berkshire Hathaway Inc., rose to its highest level since 2008 after profit beat analysts’ estimates amid a homebuilding rebound.

Buffett’s move to exchange convertible bonds for shares, announced in January, paid off with fourth-quarter earnings excluding some costs of 19 cents per share topping the 10-cent average of 17 analysts surveyed by Bloomberg. Sales jumped 16 percent to $915 million, exceeding a $909 million projection.

“USG should continue to benefit from both the realization of favorable wallboard prices and higher volumes attributable to increased new residential construction activity,” Robert Wetenhall, an RBC Capital Markets LLC analyst in New York, said in a note today. “Commercial demand should begin to accelerate during the balance of the year.”

USG climbed 13 percent to $33.39 at the close in New York, the highest level since June 2008. Shares of the Chicago-based company have increased 18 percent this year. Wetenhall rates the stock as outperform.

Subsidiaries of Omaha, Nebraska-based Berkshire converted debt into more than $600 million of USG common stock in January. Berkshire and Fairfax Financial Holdings Ltd. agreed in 2008 to buy $400 million of debt from USG as the cash-strapped company struggled with frozen credit markets and dwindling wallboard demand. The convertible notes paid 10 percent interest.

Berkshire’s Stake

Berkshire owns about 28 percent of USG’s outstanding shares, and there are still $75 million of convertible notes owned by Berkshire and Fairfax, said Robert Williams, a USG spokesman.

USG racked up losses after U.S. housing starts on an annual basis plummeted to a low of 478,000 in 2009 from a January 2006 peak of 2.27 million. Residential starts have since recovered, rising to an annualized pace of 1.11 million in November that was the highest since 2007.

Adjusted results for the fourth quarter included a $16 million charge for a pension settlement, USG said today. The net loss narrowed to $3 million from $13 million a year earlier. Wallboard shipments rose 13 percent and prices increased 17 percent.

“I believe that our business is well-positioned for growth as we continue to see demand strengthening in each of our markets,” Chief Executive Officer James Metcalf said today on a conference call with analysts.

For the year, the maker of Sheetrock-brand wallboard posted net income of $46 million, its first annual profit since 2007 after reducing production capacity to cut costs.

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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