Owens Corning Inc · NYSE:OC

Owens Corning — OC Roadshow Hosted by Goldman Sachs – Europe (March 2017)

42 slides from Owens Corning's conference presentation, Mar 28, 2017

  1. Slide 1: Owens Corning: Focused on Shareholder Value

    Owens Corning Focused on Shareholder Value Q1 2017 This presentation shared at the following event(s): 3/28/17 OC Roadshow Hosted by Goldman Sachs – Europe Michael McMurray, Chief Financial Officer

  2. Slide 2: Forward-Looking Statements and Non-GAAP Measures

    Forward-Looking Statements and Non-GAAP Measures This presentation and the associated remarks and comments 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

  3. Slide 3: Agenda

    Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information

  4. Slide 4: Owens Corning at a Glance

    Owens Corning at a Glance 1938 $5.7 BILLION 16k 26 62 Founded Three Employees Countries Consecutive 2016 Over 79 Strong Worldwide Around Years on the Sales Years Ago Businesses the World Fortune 500® Source: Owens Corning SEC filings and Fortune Magazine 4

  5. Slide 5: Balanced End Market Exposure

    Balanced End Market Exposure 2016 OC REVENUE BY END MARKET 15% U.S. & Canada Residential New Construction 26% U.S. & Canada Repair and Remodeling U.S. & Canada Commercial and Industrial 38% International 21% Roofing Insulation Composites 1% 3% 12% 8% 16% 11% 36% 25% 60% 26% 79% 23% Source: Owens Cor

  6. Slide 6: Owens Corning Sustainability Strategy

    Owens Corning Sustainability Strategy Driving to be a Net Positive Company Employee Operations Product & Energy Safety, Health Sustainability Supply Chain Efficiency & Durable Material & Engagement Sustainability Solutions 6

  7. Slide 7: Owens Corning Footprint

    Owens Corning Footprint Progress Toward 2nd Set of 10-Year Goals Goal Progress (2010-2020) (2010-2015) Primary Energy -20% -17% Greenhouse Gas -50% -41% Particulate Matter 2.5 Toxic Air Emissions -15% -75% -17% -66%  Waste to Landfill -70% -14% Water -35% -32% Source: Owens Corning 2015 Global Repo

  8. Slide 8: Agenda

    Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information

  9. Slide 9: OC Investment Thesis

    OC Investment Thesis 1 2 3 Attractive Market Improved Macro Leading Portfolio, Drivers Businesses Earnings & Cash Flow  Favorable  Leadership  Disciplined global trends positions in capital allocation attractive industries  Positive  Access to growth market outlook  Valuable brands opportuniti

  10. Slide 10: Portfolio Improvement Has Lifted Margin Profile

    Portfolio Improvement Has Lifted Margin Profile 2016 2011 - 16 2007 - 10 Adjusted 9% 13% EBIT Margin: 7%  Acquired and expanded mineral fiber assets  Grew business outside North America Insulation  Returned engineered & regional business to record levels  Lowered breakeven point  Implemented su

  11. Slide 11: Portfolio Improvement Has Boosted Return on Capital

    Portfolio Improvement Has Boosted Return on Capital Return on Capital 12% 10% 8% 6% 4% 2012 2013 2014 2015 2016 Return on capital is defined as net operating profit after tax divided by total capital. Please refer to Table 2 in Appendix B for reconciliation to Owens Corning SEC filings. Total capita

  12. Slide 12: Significantly Improved Free Cash Flow

    Significantly Improved Free Cash Flow Free Cash Flow 600 500  2012-2014 management 400 actions to improve portfolio constrained cash flow Millions of $ 300 performance 200  Free cash flow conversion 100 of adjusted earnings expected to be about 100% on average 0 over 2015 to 2018 -100 2012 2013 20

  13. Slide 13: Superior Free Cash Flow Yield Within Sector

    Superior Free Cash Flow Yield Within Sector 10% 9% 8% 7% 6% 5% Peer Average 4% 3% 2% 1% 0% Source: Management estimates, based on data from CapitalIQ as of 2/13/2017. Management believes this disclosure is useful to investors to compare a company’s ability to generate free cash flow to its market va

  14. Slide 14: Disciplined Capital Allocation Strategy

    Disciplined Capital Allocation Strategy  Drive shareholder returns by enabling organic and inorganic growth and supporting the balance sheet o Maintain investment grade  Capital allocation strategy o Investing in attractive organic growth o Pursuing value-creating acquisitions o Returning cash to

  15. Slide 15: Agenda

    Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information

  16. Slide 16: Portfolio Financial Profile

    Portfolio Financial Profile 2016 Insulation Roofing Composites Corporate Total (Millions $) Net sales 1,748 2,194 1,952 (217) 5,677 EBIT / Adj EBIT 126 486 264 (130) 746 EBIT / Adj EBIT as % of 7% 22% 14% 13% sales Source: Owens Corning SEC filings. For the Corporate column, Net sales reflects inter

  17. Slide 17: Strong Portfolio

    Strong Portfolio '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Insulation Roofing Composites Margin >= 10% 0%<= Margin < 10% Margin < 0% Last 20 years of performance. Source: Owens Corning’s SEC filings since 2006. For comparability purposes, prior years have been p

  18. Slide 18: Insulation Business

    Insulation Business Progress supports confidence in return to historical profitability $2,000 15%  Track record of proven performance $1,500 10%  Strong brand and broad product portfolio $1,000 5%  Investment opportunities for global expansion $500 0%  Confidence in return to historical $0 2012

  19. Slide 19: Return to Historical Profitability Levels

    Return to Historical Profitability Levels 30% EBIT Margin Avg EBIT Margin '85-'08 (15%) 20% 10% 0% -10% '85 '90 '95 '00 '05 '10 ‘16 '15 Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts; Expect to Average 50% Operating Leverage through the Housing Recovery Source: Owens Corning m

  20. Slide 20: U.S. & Canada Fiberglass Industry Light Density Network Capacity and Demand

    U.S. & Canada Fiberglass Industry Light Density Network Capacity and Demand 2005 2016 2.1 MM 1.2 MM U.S. Housing Starts U.S. Housing Starts Capacity Utilization: 100% 80% 73% 85% 85% 90% 90% ( 0.5) ( 0.3) ( 0.2) B Lbs 4.6 4.1 3.8 3.6 2005 Total Retired 2016 Total Mothballed Operating Cold Lines Oper

  21. Slide 21: Market Pricing Still Significantly Below Historical Levels

    Market Pricing Still Significantly Below Historical Levels OC U.S. New Construction Price Index 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 100% 90% 80% 70% 60% Source: Owens Corning management estimates as of January 2017. Owens Corning nominal price index based on average price of fiber

  22. Slide 22: Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels

    Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels EBIT MM$ & Margins 400 26% 300 200 17% 14% MM$ 100 4% 2% 0 -100 -23% -200 2006 2009 2015 (Peak) (Trough) U.S. & Canada Residential Fiberglass Building Insulation Engineered Insulation & Other Regions Residential fibergl

  23. Slide 23: Roofing Business

    Roofing Business Strong market position sustaining high operating margins $2,500 25%  Strong market position and leading brands $2,000 20%  Performance track record through varied $1,500 15% market conditions $1,000 10%  Confidence in sustaining average operating $500 5% margins of mid-teens or b

  24. Slide 24: U.S. Asphalt Shingle Re-Roof Demand Drivers

    U.S. Asphalt Shingle Re-Roof Demand Drivers HIGH Replacement age  Average replacement age increased driven by technological advances IMPACT Major storms & other weather events  Weather events drive demand and create early replacement of roofs  Weather-related demand estimated based on NOAA data a

  25. Slide 25: New Construction and Replacement Markets Growing over Last Three Years

    New Construction and Replacement Markets Growing over Last Three Years U.S. Asphalt Shingle Market New Construction Age Related/Economic Other Weather Events Major Storms 18 MM Sq. 8 7 8 3 2 3 21 22 15 28 3 27 19 30 35 17 34 11 32 6 6 4 25 6 23 30 21 24 95 28 31 34 30 23 86 87 81 77 71 75 75 73 65 6

  26. Slide 26: Track Record of Strong Financial Performance

    Track Record of Strong Financial Performance Roofing EBIT Margin 25  Delivered average EBIT 20 margins of 18% since Average 18% 2010 (ranging from 13% to 22%) 15 % 10  Strong market position; confidence in sustaining 5 average EBIT margins of mid-teens or better 0 2010 2011 2012 2013 2014 2015 201

  27. Slide 27: Successful InterWrap Acquisition

    Successful InterWrap Acquisition Strengthens Position of Roofing Components Business  Acquired and integrated leading manufacturer of synthetic roofing underlayment and packaging materials for $450 million on April 21st, 2016  Value contributors: o Established track record of double-digit revenue

  28. Slide 28: Composites Business

    Composites Business Market-leading business with improving economic conditions and higher utilization rates  A leader in a stable industry with strong growth $2,500 25% prospects $2,000 20% $1,500 15%  Improving economic conditions and higher utilization rates $1,000 10% $500 5%  Transformed busi

  29. Slide 29: Glass Fiber

    Glass Fiber A $7.5 Billion Global Market With Favorable Exposure Markets Building & Transportation Consumer Industrial Power & Energy Construction Size Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Source: Fiber Economics Bureau

  30. Slide 30: Positioned to Compete Anywhere in the World

    Positioned to Compete Anywhere in the World World headquarters #1 Position Emerging Position Composites facilities Europe China 28% 26% 23% 11% % Market % OC % Market % OC Revenue Revenue Revenue Revenue #1 Position #1 Position Americas Rest of World 47% 33% 18% 14% % Market % OC % Market % OC Reven

  31. Slide 31: Supply Tension Expected in the Near Term

    Supply Tension Expected in the Near Term China Emergence Tightening Capacity Supply Tension Capacity Overbuild Price Inflection Improved Returns '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16E '17E '18E 100% 1.7 1.7 Estimated Capacity Utilization 90% 90% Threshold 80% Change in global demand (MM T)

  32. Slide 32: Agenda

    Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information

  33. Slide 33: FY 2016 Highlights and Outlook

    Appendix A FY 2016 Highlights and Outlook  Improved level of safety performance  Adjusted EBIT of $746MM  Composites: record EBIT of $264MM  Roofing: $486MM EBIT; 22% EBIT margins  Insulation: $126MM EBIT  Free cash flow: $570MM; 126% conversion of adjusted earnings over last two years  Repur

  34. Slide 34: Key Financial Data - Corporate

    Appendix A Key Financial Data - Corporate Q4 Q4 ($ in millions, except per share data) 2016 2015 2016 2015 Net sales $5,677 $5,350 $1,383 $1,297 Net earnings attributable to Owens Corning $393 $330 $86 $109 Diluted earnings per share attributable to Owens $3.41 $2.79 $0.76 $0.92 Corning common stock

  35. Slide 35: Key Financial Data - Business

    Appendix A Key Financial Data - Business Insulation Roofing Composites ($ in millions) Q4 2016 Q4 2015 Q4 2016 Q4 2015 Q4 2016 Q4 2015 Net sales $473 $518 $483 $368 $466 $445 EBIT $43 $70 $98 $53 $65 $44 EBIT as % of sales 9% 14% 20% 14% 14% 10% D&A $28 $26 $12 $10 $35 $33 FY 2016 FY 2015 FY 2016 FY

  36. Slide 36: 2017 Corporate Environment and Guidance

    Appendix A 2017 Corporate Environment and Guidance Macro Environment  Environment consistent with consensus U.S. housing starts  Expect moderate global industrial production growth Primary Guidance Other Guidance Items  Strong conversion of adjusted earnings into free  Corporate expenses in $120

  37. Slide 37: Non-GAAP Reconciliations – Table

    Appendix B Non-GAAP Reconciliations – Table 1 37

  38. Slide 38: Non-GAAP Reconciliations – Table

    Appendix B Non-GAAP Reconciliations – Table 2 38

  39. Slide 39: Non-GAAP Reconciliations – Table

    Appendix B Non-GAAP Reconciliations – Table 3 39

  40. Slide 40: Non-GAAP Reconciliations – Table

    Appendix B Non-GAAP Reconciliations – Table 4 40

  41. Slide 41: Non-GAAP Reconciliations – Table

    Appendix B Non-GAAP Reconciliations – Table 5 41

  42. Slide 42: Non-GAAP Reconciliations – Table

    Appendix B Non-GAAP Reconciliations – Table 6 42

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