USG Announces Strategic Partnership in Oman to Serve Emerging Markets; Exploring Strategic Alternatives for European Operations
CHICAGO--(BUSINESS WIRE)-- USG Corporation (USG) today announced that it has entered into a strategic partnership with the Zawawi Group of Oman to meet the growing demand for its building products in the Middle East and India. The investment by USG opens up new opportunities for the company in the rapidly growing Indian wallboard market, and will provide commercial construction projects in the region better access to USGs industry leading wallboard products. USG expects the investment of approximately $60 million to be incurred over two years, with the majority in 2012.
This is an important step forward in our strategic initiative to diversify the sources of USGs earnings by investing in higher-growth international markets, said James S. Metcalf, Chairman, President and CEO. The market in India and more broadly in the Middle East represents an attractive growth opportunity. We are thrilled to partner with a prominent and highly regarded organization such as the Zawawi Group, whose business acumen and market knowledge will contribute to the success of the venture.
USGs partnership with the Zawawi Group will be multifaceted. The first phase will be establishment of a mining joint venture through which USG will acquire 55% of Zawawi Gypsum, which holds the mining rights to a gypsum quarry in Salalah, Oman. The joint venture will develop infrastructure and operate the quarry. Salalah has shipping access to many ports on the Indian coast and will be an ideal location for providing gypsum to future USG wallboard plants, as well as to cement manufacturers in the region. Quarry mining operations are targeted for startup in the third quarter of 2013.
The second phase of the partnership will be a 50/50 manufacturing joint venture with Zawawi Minerals to build and operate a new low cost wallboard plant in the Salalah Free Zone, Oman. The Free Zone in Oman is an enterprise zone that has been operational for three years and has attracted in excess of $4 billion in investments from international companies. The plant site is in close proximity to the gypsum quarry and port facilities, facilitating efficient access into markets in India and the Middle East. The target for commencement of wallboard production operations is the fourth quarter of 2013.
According to Executive Vice President, Operations, Chris Griffin, Through the joint ventures, we believe that we can enhance our success in India by securing the strategic gypsum rock source in Oman, and cost-effectively shipping products to India, thereby accelerating USG wallboard penetration in the region. USGs strong brand recognition and state-of-the-art technology combined with Zawawis local strength, resources, and management expertise should contribute to increased sales and profitable growth for both organizations.
USG also announced today that it is exploring strategic alternatives for its wholly-owned European operations, including their possible sale. Those businesses include the manufacture and distribution of ceiling grid systems and finishing compounds throughout Europe and Russia.
USG Corporation is a manufacturer and distributor of high-performance building systems through its United States Gypsum Company, USG Interiors, LLC and L&W Supply Corporation and other subsidiaries. Headquartered in Chicago, USG's worldwide operations serve the residential and non-residential construction markets, repair and remodel construction markets, and industrial processes. USG's wall, ceiling, flooring and roofing products provide leading-edge building solutions for customers, while L&W Supply branch locations efficiently stock and deliver building materials nationwide. For additional information, visit www.usg.com.
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Source: USG CorporationCopyright Business Wire 2012