Owens Corning Inc · NYSE:OC
Owens Corning — Non-Deal Roadshow (June 2019)
42 slides from Owens Corning's roadshow presentation, Jun 21, 2019
Slide 1: Focused on Shareholder Value
Q2 2019 FOCUSED ON This presentation shared at the following events: SHAREHOLDER VALUE 06/21/19 OC Roadshow Hosted by SunTrust – Boston Julian Francis, President, Insulation 06/06/19 OC Roadshow Hosted by Barclays – London E Michael McMurray, Chief Financial Officer 06/04/19 OC Roadshow Hosted by J.
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 64 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 2018: 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: Three Strong Businesses
THREE STRONG BUSINESSES
Slide 15: 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% 15
Slide 16: 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 17: 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 18: Expanded in Commercial and Industrial Markets Globally
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 18
Slide 19: Built a Stronger Global Insulation Business with 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 20: 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 21: 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 22: 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 23: 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 23
Slide 24: 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 25: Glass Fiber – An $8B Market with Favorable Exposure
GLASS FIBER – AN $8B MARKET WITH FAVORABLE EXPOSURE Markets Building & Consumer Industrial Power & Energy Transportation Construction Size Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Sources: Fiber Economics Bureau, GlassFibre
Slide 26: Market-Leading Platforms
MARKET-LEADING PLATFORMS Glass reinforcements • A global market leader • Product leadership offers differentiated customer value • Manufacturing technology supports low-delivered cost position Glass non-wovens • A global market leader • Highly specified and customized products deliver customer value
Slide 27: Positioned to Compete Anywhere in the World
POSITIONED TO COMPETE ANYWHERE IN THE WORLD #1 Position Emerging position Europe 29% China 23% 26% #1 Position 10% Americas % Market % OC 48% Revenue Revenue % Market % OC 33% Revenue Revenue % Market % OC Revenue Revenue #1 Position Rest of world 18% 13% % Market % OC Revenue Revenue Glass Non-Wove
Slide 28: Favorable Underlying Industry Trends
FAVORABLE UNDERLYING INDUSTRY TRENDS Stricter High capacity Industry regulatory utilization consolidation environment in rates: ~90% China Glass fiber market demand excludes E-glass yarns. All capacity data are Owens Corning management estimates based on legally obtained information from third parti
Slide 29: Additional Financial Information
ADDITIONAL FINANCIAL INFORMATION
Slide 30: Appendix A: Key Financial Data – Corporate
APPENDIX A: KEY FINANCIAL DATA – CORPORATE ($ in millions, except per share data) Q1 2019 Q1 2018 Net sales 1,667 1,691 Net earnings attributable to Owens Corning 44 92 Diluted earnings per share (EPS) attributable to $0.40 $0.82 Owens Corning common stockholders Earnings before interest and taxes (
Slide 31: Appendix A: Key Financial Data – Business
APPENDIX A: KEY FINANCIAL DATA – BUSINESS Insulation Roofing Composites ($ in millions) Q1 2019 Q1 2018 Q1 2019 Q1 2018 Q1 2019 Q1 2018 Net sales 591 596 614 642 513 511 EBIT 15 32 74 97 57 60 EBIT as % of net sales 3% 5% 12% 15% 11% 12% D&A 49 45 13 12 39 37 Source: Owens Corning SEC filings; repor
Slide 32: 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: $140mm-$150mm
Slide 33: 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: Expect $20mm run June 2017 ~$560mm 2016: $240+m
Slide 34: Appendix B: Non-GAAP Reconciliation – Table 1
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 1 34
Slide 35: Appendix B: Non-GAAP Reconciliation – Table 2
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 2 35
Slide 36: Appendix B: Non-GAAP Reconciliation – Table 3
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 3 36
Slide 37: Appendix B: Non-GAAP Reconciliation – Table 4
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 4 37
Slide 38: Appendix B: Non-GAAP Reconciliation – Table 5
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 5 38
Slide 39: Appendix B: Non-GAAP Reconciliation – Table 6
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 6 39
Slide 40: Appendix B: Non-GAAP Reconciliation – Table 7
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 7 40
Slide 41: Appendix B: Non-GAAP Reconciliation – Table 8
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 8 41
Slide 42: Appendix B: Non-GAAP Reconciliation – Table 9
APPENDIX B: NON-GAAP RECONCILIATION – TABLE 9 42