Owens Corning Inc · NYSE:OC
Owens Corning — Non-Deal Roadshow (September 2019)
43 slides from Owens Corning's roadshow presentation, Sep 16, 2019
Slide 1: Focused on Shareholder Value
Q3 2019 FOCUSED ON SHAREHOLDER VALUE This presentation shared at the following events: 09/16/19 OC Roadshow – Cleveland & Columbus Thierry Denis, Vice President, Investor Relations 09/12/19 OC Roadshow – Boston Michael McMurray, Chief Financial Officer E 09/11/19 OC Roadshow Hosted by Barclays – Wes
Slide 2: Forward-Looking Statements and Non-GAAP Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP MEASURES This presentation and the associated remarks contain forward-looking statements. We caution you against relying on these statements as they involve risks and uncertainties that are difficult to predict and the Company’s actual results may differ mater
Slide 3: Agenda
AGENDA The company Investment thesis Three strong businesses Additional financial information 3
Slide 4: The Company
THE COMPANY
Slide 5: Owens Corning at a Glance
OWENS CORNING AT A GLANCE $7.1b 20,000 33 65 2018 sales employees countries consecutive years on the Fortune 500® 3 strong businesses Roofing | Insulation | Composites Source: Owens Corning SEC filings, Fortune Magazine 5
Slide 6: Balanced End Market Exposure
BALANCED END MARKET EXPOSURE 2018 Owens Corning revenue by end market Roofing Insulation Composites 13% 1% 34% 5% 6% 7% 12% 27% 40% 58% 29% 34% 10% 82% 23% 19% U.S. residential new construction U.S residential repair and remodeling U.S. commercial and industrial International Consolidated figures el
Slide 7: Investment Thesis
INVESTMENT THESIS
Slide 8: Compelling Investment Thesis
COMPELLING INVESTMENT THESIS 01 ATTRACTIVE MACRO DRIVERS 02 MARKET-LEADING POSITIONS 03 IMPROVED COMPETITIVE POSITION, EARNINGS & CASH FLOW • Implemented sustainable cost improvements • Drove organic growth through market-leading positions with customers • Acquired businesses with stable and attract
Slide 9: Long-Term Capital Allocation Strategy Focuses on Increasing Shareholder Return
LONG-TERM CAPITAL ALLOCATION STRATEGY FOCUSES ON INCREASING SHAREHOLDER RETURN Capital allocation Maintain investment Maintain safety of strategy grade balance sheet operations and • Investing in attractive that provides flexibility to productivity organic growth of existing portfolio • Pursuing val
Slide 10: Purposeful Actions Over the Decade Have Fueled Sustainable Portfolio Improvement
PURPOSEFUL ACTIONS OVER THE DECADE HAVE FUELED SUSTAINABLE PORTFOLIO IMPROVEMENT Management actions Improved portfolio • Implemented sustainable cost 2016 - 2018 reductions across three businesses 2013 - 2015 2007 - 2012 • Drove substantial organic 13% growth in attractive glass non- wovens, roofing
Slide 11: Proven Track Record of Financial Improvement
PROVEN TRACK RECORD OF FINANCIAL IMPROVEMENT Adjusted EBIT Return on capital $ mm Percent 855 861 11.9% 12.2% 746 10.2% 9.3% 550 7.2% 412 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Free cash flow Operating working capital / net sales $ mm Percent 679 18.0% 16.5% 570 14.0% 13.0% 12.4% 341 266
Slide 12: Our Pillars and Strategies Enable Us to Create a Sustainable Enterprise
OUR PILLARS AND STRATEGIES ENABLE US TO CREATE A SUSTAINABLE ENTERPRISE Financial High-performance strength people CUSTOMERS World-class INVESTORS Customer-inspired sustainability EMPLOYEES innovation COMMUNITIES Operational excellence 12
Slide 13: Owens Corning Broadly Recognized for a Strong ESG Framework
OWENS CORNING BROADLY RECOGNIZED FOR A STRONG ESG FRAMEWORK Ranked #1 six years Earned following ISS scores in 2019: consecutively in the Building • Environmental: 1 Products Group (top scores in • Social: 1 environmental, social and • Governance: 2 economic for 2nd year in a row) Included in CDP’s
Slide 14: A Global Building and Industrial Materials Leader with Integrated Market-Leading Businesses
A GLOBAL BUILDING AND INDUSTRIAL MATERIALS LEADER WITH INTEGRATED MARKET-LEADING BUSINESSES ROOFING Shared customers Material science Manufacturing technology Scalable functions Global growth platform Glass melting INSULATION COMPOSITES technology 14
Slide 15: Three Strong Businesses
THREE STRONG BUSINESSES
Slide 16: Portfolio Financial Profile
PORTFOLIO FINANCIAL PROFILE 2018 ($ in millions) Insulation Roofing Composites Corporate Total Net sales 2,720 2,492 2,041 (196) $7,057 EBIT / Adj EBIT 290 434 251 (114) 861 EBIT / Adj EBIT as % of net sales 11% 17% 12% 12% 16
Slide 17: Insulation Business
INSULATION BUSINESS Five-year financial performance Leverage broad portfolio in $3,000 12% commercial and industrial markets around the world $2,500 10% $2,000 8% U.S. residential construction $1,500 6% macro environment below historical averages $1,000 4% $500 2% Drive competitive advantage through
Slide 18: U.S. Residential Returning to Prior Performance Levels
U.S. RESIDENTIAL RETURNING TO PRIOR PERFORMANCE LEVELS Owens Corning U.S. insulation contractor price index • U.S. 2018 estimated capacity 110 utilization rate of light-density fiberglass operating lines in 100 excess of 90% 90 • Market growth has exceeded capacity restarts over the past 80 few year
Slide 19: Expanded in Commercial and Industrial Markets Globally with Stable and Attractive Margins
EXPANDED IN COMMERCIAL AND INDUSTRIAL MARKETS GLOBALLY WITH STABLE AND ATTRACTIVE MARGINS NORTH AMERICA EUROPE CHINA TEMPERATURE RANGE HIGH MID LOW PAROC® is a registered trademark for mineral wool insulation 19
Slide 20: Built a Stronger Global Insulation Business with Significant Through-the-Cycle Earnings Power
BUILT A STRONGER GLOBAL INSULATION BUSINESS WITH SIGNIFICANT THROUGH-THE-CYCLE EARNINGS POWER Insulation EBITDA $mm and margins • Insulation delivered 19% North American residential fiberglass insulation average EBITDA margin over 400 Technical and other building insulation the period 1985-2008 300
Slide 21: Roofing Business
ROOFING BUSINESS Five-year financial performance Track record of strong $3,000 25% operating performance $2,400 20% Positive outlook based on product preference and $1,800 15% market drivers $1,200 10% Components business growing above market with $600 5% stable, attractive margins $0 0% Commercial
Slide 22: Positive Outlook for U.S. Asphalt Roofing Demand
POSITIVE OUTLOOK FOR U.S. ASPHALT ROOFING DEMAND + + = Remodeling New construction Major storms and • Strong recovery over last • Housing activity below weather events 5 years long term averages • ~40mm square average • Aging housing stock provides growth storm market in last 10 years • Economic fac
Slide 23: Remodeling & New Construction Markets Have Been Growing
REMODELING & NEW CONSTRUCTION MARKETS HAVE BEEN GROWING U.S. asphalt shingle market in mm squares New construction Remodeling Weather events Major storms 15 3 22 15 13 25 17 19 11 6 4 34 24 23 6 6 30 21 30 24 28 31 34 23 75 74 77 73 65 68 71 63 59 58 60 61 26 17 17 18 19 20 21 22 11 11 11 14 2007 20
Slide 24: Components Is a Growth Engine
COMPONENTS IS A GROWTH ENGINE Components revenue OC Roofing Components InterWrap 3.6X 1.7X 2013 2018 Source: Owens Corning management estimates 24
Slide 25: Composites Business
COMPOSITES BUSINESS Five-year financial performance $2,500 15% Continued global growth $2,000 12% Favorable industry trends $1,500 9% Well-positioned to leverage market growth with a capital- $1,000 6% efficient strategy $500 3% Glass non-wovens is an attractive business with $0 0% strong reinvestme
Slide 26: Glass Fiber – an $8B Market with Favorable Exposure
GLASS FIBER – AN $8B MARKET WITH FAVORABLE EXPOSURE Markets Building & Consumer Industrial Power & Energy Transportation Construction Size Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Sources: Fiber Economics Bureau, GlassFibre
Slide 27: Market-Leading Platforms
MARKET-LEADING PLATFORMS Glass reinforcements • A global market leader • Product leadership offers differentiated customer value • Manufacturing technology supports low-delivered cost position Glass non-wovens • A global market leader • Highly specified and customized products deliver customer value
Slide 28: Positioned to Compete Anywhere in the World
POSITIONED TO COMPETE ANYWHERE IN THE WORLD #1 Position Emerging position Europe 29% China 23% 26% #1 Position 10% Americas % Market % OC 48% Revenue Revenue % Market % OC 33% Revenue Revenue % Market % OC Revenue Revenue #1 Position Rest of world 18% 13% % Market % OC Revenue Revenue Glass Non-Wove
Slide 29: Favorable Underlying Industry Trends
FAVORABLE UNDERLYING INDUSTRY TRENDS Stricter High capacity Industry regulatory utilization consolidation environment in rates: ~90% China Glass fiber market demand excludes E-glass yarns. All capacity data are Owens Corning management estimates based on legally obtained information from third parti
Slide 30: Additional Financial Information
ADDITIONAL FINANCIAL INFORMATION
Slide 31: Appendix A: Key Financial Data – Corporate
APPENDIX A: KEY FINANCIAL DATA – CORPORATE ($ in millions, except per share data) Q2 2019 Q2 2018 YTD 2019 YTD 2018 Net sales 1,918 1,824 3,585 3,515 Net earnings attributable to Owens Corning 138 121 182 213 Diluted earnings per share (EPS) attributable to $1.26 $1.08 $1.66 $1.90 Owens Corning comm
Slide 32: Appendix A: Key Financial Data – Business
APPENDIX A: KEY FINANCIAL DATA – BUSINESS Insulation Roofing Composites ($ in millions) Q2 2019 Q2 2018 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Net sales 661 682 778 659 535 541 EBIT 42 49 151 127 67 71 EBIT as % of net sales 6% 7% 19% 19% 13% 13% D&A 49 46 13 13 38 36 ($ in millions) YTD 2019 YTD 2018 YTD
Slide 33: Appendix A: 2019 Outlook
APPENDIX A: 2019 OUTLOOK Macro environment Environment consistent with consensus global industrial production growth, U.S. housing starts, and global commercial and industrial construction growth Business outlook Other guidance items • Strong cash flow generation • Corporate expenses: $125mm-$135mm
Slide 34: Appendix A: Acquisition Key Financial Data
APPENDIX A: ACQUISITION KEY FINANCIAL DATA Closing Date Value Revenue Adj. EBITDA EPS Accretion Synergies 2015: 2015: Delivered run rate of Interwrap April 2016 ~$450mm Approximately In year of closing $250mm $20mm by end 2017 20% Pittsburgh 2013-2016: Delivered $20mm run June 2017 ~$560mm 2016: $24
Slide 35: Appendix B: Non-GAAP Reconciliation – Table 1
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 1 35
Slide 36: Appendix B: Non-GAAP Reconciliation – Table 2
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 2 36
Slide 37: Appendix B: Non-GAAP Reconciliation – Table 3
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 3 37
Slide 38: Appendix B: Non-GAAP Reconciliation – Table 4
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 4 38
Slide 39: Appendix B: Non-GAAP Reconciliation – Table 5
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 5 39
Slide 40: Appendix B: Non-GAAP Reconciliation – Table 6
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 6 40
Slide 41: Appendix B: Non-GAAP Reconciliation – Table 7
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 7 41
Slide 42: Appendix B: Non-GAAP Reconciliation – Table 8
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 8 42
Slide 43: Appendix B: Non-GAAP Reconciliation – Table 9
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 9 43