Owens Corning Inc · NYSE:OC
Owens Corning — Non-Deal Roadshow (June 2017)
41 slides from Owens Corning's roadshow presentation, Jun 20, 2017
Slide 1: Owens Corning: Focused on Shareholder Value
Owens Corning Focused on Shareholder Value Q2 2017 This presentation shared at the following event(s): 6/20/17 OC Roadshow Hosted by Thompson Research Group – Chicago Michael McMurray, Chief Financial Officer 6/13/17 OC Roadshow Hosted by Barclays – Denver & Kansas City Thierry Denis, Vice President
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
Slide 3: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 4: Owens Corning at a Glance
Owens Corning at a Glance 1938 $5.7 BILLION 16k 26 63 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
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
Slide 6: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 7: 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
Slide 8: 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
Slide 9: 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
Slide 10: 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
Slide 11: 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 2016 data from CapitalIQ. Management believes this disclosure is useful to investors to compare a company’s ability to generate free cash flow to its market valuation. Fr
Slide 12: 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
Slide 13: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 14: 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
Slide 15: 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
Slide 16: 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 $0 -5% 2
Slide 17: Return to Historical Profitability Levels
Return to Historical Profitability Levels 30% EBIT Margin Avg EBIT Margin '85-'08 (15%) 20% 10% 0% -10% '85 '90 '95 '00 '05 '10 ‘16 '15 Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts; Expect to Average 50% Operating Leverage through the Housing Recovery Source: Owens Corning m
Slide 18: U.S. & Canada Fiberglass Industry Capacity and Demand
U.S. & Canada Fiberglass Industry Light Density Network Capacity and Demand 2005 2016 2.1 MM 1.2 MM U.S. Housing Starts U.S. Housing Starts Capacity Utilization: 100% 80% 73% 85% 85% 90% 90% ( 0.5) ( 0.3) ( 0.2) B Lbs 4.6 4.1 3.8 3.6 2005 Total Retired 2016 Total Mothballed Operating Cold Lines Oper
Slide 19: Market Pricing Still Significantly Below Historical Levels
Market Pricing Still Significantly Below Historical Levels OC U.S. New Construction Price Index 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 100% 90% 80% 70% 60% Source: Owens Corning management estimates as of January 2017. Owens Corning nominal price index based on average price of fiber
Slide 20: Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels
Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels EBIT MM$ & 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
Slide 21: Pittsburgh Corning Acquisition
Pittsburgh Corning Acquisition Strengthens Position of Insulation Business Signed agreement to acquire global brand leader of cellular glass insulation and accessory products for approximately $560MM in cash, on a cash-free and debt-free basis, subject to regulatory approvals Consistent with Ins
Slide 22: Roofing Business
Roofing Business Strong market position sustaining high operating margins Strong market position and leading brands $2,500 25% $2,000 20% Performance track record through varied market conditions $1,500 15% $1,000 10% Confidence in sustaining average operating margins of mid-teens or better $5
Slide 23: 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
Slide 24: 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
Slide 25: 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
Slide 26: 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 $452MM on April 21st, 2016 Value contributors: o Established track record of double-digit revenue growth
Slide 27: Composites Business
Composites Business Market-leading business with improving economic conditions and higher utilization rates A leader in a stable industry with strong growth $2,000 20% prospects $1,500 15% Improving economic conditions and higher $1,000 10% utilization rates $500 5% Transformed business delive
Slide 28: Glass Fiber: A $7.5 Billion Global Market
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
Slide 29: 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
Slide 30: Expect Continued Supply Tension
Expect Continued Supply Tension China Emergence Tightening Capacity Supply Tension Capacity Overbuild Price Inflection Improved Returns '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17E '18E '19E 100% 1.8 1.7 90% Threshold Estimated Capacity Utilization 90% Change in global demand (MM T) 80% 0.9
Slide 31: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 32: Q1 2017 Highlights and Outlook
Appendix A Q1 2017 Highlights and Outlook Improved safety performance with recordable incident rate down 11% year over year Record first-quarter adjusted EBIT of $171MM Roofing: $125MM EBIT; 20% EBIT margins Composites: record first-quarter EBIT of $71MM Insulation: return to revenue growt
Slide 33: Key Financial Data - Corporate
Appendix A Key Financial Data - Corporate Q1 Q1 ($ in millions, except per share data) 2017 2016 Net sales $1,478 $1,231 Net earnings attributable to Owens Corning $101 $57 Diluted earnings per share attributable to Owens $0.89 $0.49 Corning common stockholders Earnings before interest and taxes (EB
Slide 34: Key Financial Data - Business
Appendix A Key Financial Data - Business Insulation Roofing Composites ($ in millions) Q1 2017 Q1 2016 Q1 2017 Q1 2016 Q1 2017 Q1 2016 Net sales $399 $385 $627 $429 $511 $473 EBIT $5 $13 $125 $73 $71 $64 EBIT as % of sales 1% 3% 20% 17% 14% 14% D&A $26 $25 $12 $10 $36 $34 Source: Owens Corning SEC f
Slide 35: 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 Conversion of adjusted earnings into free cash Corporate expenses in $120-$
Slide 36: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 1 36
Slide 37: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 2 37
Slide 38: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 3 38
Slide 39: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 4 39
Slide 40: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 5 40
Slide 41: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 6 41