Owens Corning Inc · NYSE:OC
Owens Corning — Investor Day (September 2008)
93 slides from Owens Corning's investor day presentation, Sep 9, 2008
Slide 1: Investor Day, September 9, 2008
™ Investor = Day September 9, 2008 Oe DELIVERING SOLUTIONS © TRANSFORMING MARKETS © ENHANCING LIVES
Slide 2: Good Morning
Good Morning Scott Deitz Vice President, Investor Relations
Slide 3: Innovations for Living
Geel INNOVATIONS FOR LIVING™ DELIVERING SOLUTIONS © TRANSFORMING MARKETS e ENHANCING LIVES
Slide 4: Welcome!
Welcome! Mike Thaman Chairman of the Board and Chief Executive Officer
Slide 5: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 6: Owens Corning At A Glance
Owens Corning At A Glance • Founded in 1938, an industry leader in glass fiber insulation, roofing and asphalt, and glass fiber reinforcements • 2007 sales: $5 billion • Current market cap about $3.3 billion • 18,000 employees in 26 countries • NYSE trading symbol: OC • 130 million diluted shares ou
Slide 7: Achievements
Achievements • Grew Composites, rebalanced our portfolio and created shareholder value • Streamlined our cost structure and production capacity • Performed well financially • Sharpened focus on innovation and customers by adding key talent
Slide 8: Outlook
Outlook • Composites demonstrating double-digit margin performance • Building Materials performing well in a difficult market • Raised guidance by 10% during the second quarter call to adjusted EBIT of at least $265 million for the year • Recent strength in roofing performance creates an additional
Slide 9: Objectives for the Day
Objectives for the Day • Demonstrate that Owens Corning is a preferred investment • Provide information and insight – Composites: A high-performing business – Building Materials: Solid businesses poised for further profitability – Operational Excellence: Performance case studies – Financial Strategy
Slide 10: Composites
Composites Chuck Dana Group President, Composite Solutions Dr. Ashish Diwanji Vice President, Innovations, Composite Solutions
Slide 11: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 12: What is a Composite?
Glass 95%* Other An engineered material system… …resulting in unique attributes replacing traditional materials What is a “Composite”? + Other Materials • Resins • Additives • Filler Source: Owens Corning Reinforcements High Strength Light Weight Durable Non-Conductive Non-Corrosive Longer Blades Up
Slide 13: Owens Corning Sells Glass Reinforcements
Owens Corning Sells Glass Reinforcements Downstream Glass Fibers Technical Fabrics Specialty Glass Mats
Slide 14: Composites
Composites Composites Sales EBIT as % of Sales U.S. & Canada Commercial & Industrial 19% U.S. & Canada Residential Construction 7% Non-U.S. & Canada 74% Company estimates Current Market Environment Q2 2008 Revenue by End Market Four-Year and LTM Financial Performance • Strong energy and industrial r
Slide 15: A High-Performing Business
Successful Acquisition Market Position Innovation A High-Performing Business *Refers to the acquisition of Saint Gobain’s glass reinforcements and fabrics businesses completed on October 31, 2007 Effectively integrating the 2007 acquisition* Global leadership in a growing industry Delivering innovat
Slide 16: The acquisition is delivering results
The acquisition is delivering results Successful Acquisition Market Position Innovation A Successful Acquisition • Timely closing of transaction and required divestitures – October 2007: $640 million purchase price – May 2008: divestitures complete; about $200 million in proceeds • Effective integra
Slide 17: The acquisition better positions us for the future
The acquisition better positions us for the future Successful Acquisition Market Position Innovation First-Half Results $0.8B Pre-acquisition 1H 2007 $1.3B Post-acquisition 1H 2008 Revenue 7% 10% EBIT % Solid Performance in 2008 • 76% net sales growth 1H ’08 vs. 1H ’07 • 165% EBIT growth 1H ’08 vs.
Slide 18: At least $100 million of total synergies by 2011
At least $100 million of total synergies by 2011 Successful Acquisition Market Position Innovation 30% Greater Value through Synergy Attainment Source: Owens Corning Composition of Synergies Technology: • Upgrading to Advantex ® Supply Chain: • Reconfiguring plants • Fewer ocean shipments Operating
Slide 19: 2X more capacity in emerging economies
2X more capacity in emerging economies, and expandable Successful Acquisition Market Position Innovation Asia Europe Latin America North America Sales Breakdown Post-acquisition Sales Breakdown Pre-acquisition Manufacturing operations in 16 countries Source: Owens Corning Greater Access to Global Pl
Slide 20: Unmatched in global supply, product, and technology
A glass reinforcements company unmatched in global supply, product, and technology capabilities Successful Acquisition Market Position Innovation Owens Corning Jushi PPG CPIC Johns Manville Scale Global Operations Product-Line Breadth Downstream Businesses* Best Able to Serve Customers *Only compani
Slide 21: The global leader in glass reinforcements
The global leader in glass reinforcements Successful Acquisition Market Position Innovation Our Strategy for Growth • Expansion to serve customers • Differentiation to provide value • Innovation to transform markets
Slide 22: Composites Markets and Innovations
Composites Markets and Innovations Dr. Ashish Diwanji
Slide 23: 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 24: Attractive End-Use Market Growth
Owens Corning has played a major role in the development of these markets Successful Acquisition Market Position Innovation 1,000 Attractive End-Use Market Growth Power & Energy Aerospace & Defense Water Distribution Industrial Housing Source: Owens Corning Consumer CAGR ’08-’13 >10% ~5% Growth Tran
Slide 25: Our legacy of innovation continues today
Our legacy of innovation continues today Successful Acquisition Market Position Innovation Owens Corning in Composites • Commercialized glass fibers in 1938 • Pioneered the use of glass as a reinforcement in composites • Instrumental in converting applications to glass reinforced composites 1950s 19
Slide 26: Leading supplier of glass reinforcements for wind power
Owens Corning is the leading supplier of glass reinforcements for wind power today Wind Power • The world will spend $11 trillion on power infrastructure through 2030 • By 2015, spending on renewable energy will reach $300 billion a year • Wind power is growing 20% per year, consuming 200,000 tons o
Slide 27: Making wind energy possible and more affordable
Making wind energy possible and more affordable Advantex ® Fabrics Advantex ® Fibers Owens Corning: Innovation for Wind Power Non-Conductive Fatigue Resistant Higher Strength • Today: 25% longer blade life • Future: 2X increase in blade length Source: Owens Corning
Slide 28: Leading supplier of glass reinforcements for composite pipe
Owens Corning is a leading supplier of glass reinforcements for composite pipe Composite Pipe • Pipe is the largest application for glass reinforcements (300,000 tons annually) • The use of composite pipe is growing globally 10 – 15% per year driven by: – Expanding industrial base – Global increase
Slide 29: Replacing steel and concrete with durable solutions
Replacing steel and concrete with durable and less costly solutions Owens Corning: Innovation for Pipe Non-Corrosive Burst Strength Longer Lasting • 50% more corrosion resistance • 50% reduction of concrete repair costs • 2X more burst strength than steel • 12X more acid resistance Source: Owens Cor
Slide 30: Developing new glass reinforcements for ballistic armor
Owens Corning is developing new glass reinforcements for these challenges Ballistic Armor • New threats require new materials • The use of metal in armor is decreasing • Composite materials are designed to meet challenging military demands Armor Material Systems Metals Non-Metals Transparent Source:
Slide 31: ShieldStrand: Advanced premium performance, yet affordable
ShieldStrand : Advanced premium performance, yet affordable ™ Owens Corning: Innovation for Armor • 40% tougher than steel parts • Scale quantities available • 50% lighter than steel • Half the cost of current solutions Higher Strength Lighter Weight Cost Effective Fabrics Vehicle Armor Spall Liner
Slide 32: Opportunities for Continued Growth
Successful Acquisition Market Position Innovation Opportunities for Continued Growth Wood Global Materials Market Source: E-Composites; Owens Corning Steel Composites 1.5% Aluminum Plastics
Slide 33: Innovations for Living
Geel INNOVATIONS FOR LIVING™ DELIVERING SOLUTIONS © TRANSFORMING MARKETS e ENHANCING LIVES
Slide 34: Building Materials
Building Materials Karel Czanderna Group President, Building Materials
Slide 35: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 36: Residential and Commercial Building Materials
Residential and Commercial Building Materials • Attractive building materials segments: – Insulating Systems – Roofing and Asphalt – Other Building Materials and Services • Leading market shares • Powerful brand • Broad distribution • Used in virtually every home built in America
Slide 37: Building Materials
Building Materials Net sales before inter-segment eliminations Building Materials $0 $1,000 $2,000 $3,000 $4,000 $5,000 2004 2005 2006 2007 LTM 0% 3% 6% 9% 12% 15% U.S. & Canada Commercial & Industrial 19% U.S. & Canada Residential Repair & Remodeling 36% U.S. & Canada New Residential Construction 3
Slide 38: Building Materials Customers
Building Materials Customers
Slide 39: Opportunities for Building Materials Growth
Opportunities for Building Materials Growth • Rebound of United States housing markets (new and existing) • Strength of our channels and the Owens Corning brand • Growth of our customers’ businesses – Innovation – Energy efficiency
Slide 40: Roofing and Asphalt
Roofing and Asphalt Sheree Bargabos President, Roofing and Asphalt
Slide 41: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 42: Improved operating margin and return on invested capital
Improved operating margin and return on invested capital Strategic Priorities • Manage price to recover cost inflation • Innovation fuels our customers’ success – Duration ® Series Shingle – Roofing accessories – Reinsulation opportunity • Margin improvement – Enhance product mix – Increase roofing
Slide 43: Providing "Top of the House" Solutions
Providing “Top of the House” Solutions
Slide 44: Asphalt Roofing Industry is Attractive
Asphalt Roofing Industry is Attractive • More than $7 billion market representing 75% of all residential roofing installed • 75% – 80% re-roof; 20% – 25% new construction • Market growth driven by aging of existing housing stock, new construction and storm activity • Four national producers service
Slide 45: Asphalt Shingles Will Continue to be the Product of Choice
(1) Market estimates based upon Principia Partners and The Freedonia Group studies for North America. (2) Owens Corning estimates and average roof size of 30 squares. Does not include additional structural costs that might be associated with heavy-weight products. Asphalt Shingles Will Continue to b
Slide 46: Roofing and Asphalt
Roofing and Asphalt Sales EBIT as % of Sales Four-Year and LTM Financial Performance Net sales before inter-segment eliminations Roofing and Asphalt $0 $500 $1,000 $1,500 $2,000 2004 2005 2006 2007 LTM 0% 5% 10% 15% 20% U.S. & Canada Commercial & Industrial 11% U.S. & Canada Residential Repair & Rem
Slide 47: Insulating Systems
Insulating Systems Roy Dean President, Insulating Systems
Slide 48: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 49: Our Insulating Products
Our Insulating Products • Residential Insulating Batt – used in wall cavities of newly constructed and existing homes • Foam Insulation – used in above- and below-grade construction applications • Flexible Duct Media – insulated duct used in new and existing homes as a more energy-efficient HVAC sol
Slide 50: Insulating Systems Strategic Priorities
Customer focus, cycle management and innovation are key to our success • Remain profitable in a weak market • Responsive capacity management • Focus on operational execution • Commercialize innovation supporting energy efficiency Insulating Systems Strategic Priorities
Slide 51: Leading market position in insulation
Owens Corning holds the leading market position in residential, commercial and industrial insulation North American Insulation Market – Product Share • Buildings are the #1 user of energy in the United States • Building code adoption will continue to drive improved energy efficiency and insulation d
Slide 52: Attractive North American Fiberglass Insulation Market
Average EBIT margin 2004-2008 of about 16% over the past 25 years Attractive North American Fiberglass Insulation Market • Three manufacturers account for about 80% of market share • Residential, commercial and industrial market penetration provides good diversity in mix • Customer and channel diver
Slide 53: Insulating Systems
Insulating Systems Q2 2008 Revenue by End Market Company estimates Current Market Environment Sales EBIT as % of Sales Four-Year and LTM Financial Performance Insulating Systems • Experiencing inflation, weak demand, low selling prices and capacity utilization in the 60% to 70% range • Expect to rem
Slide 54: Insulating Systems Profitable Growth
Insulating Systems Profitable Growth • The United States housing market will strengthen and we will be ready • Growing our customers’ businesses – Contemporary aisle logic, consumer-friendly packaging and innovative premium products for retail-facing customers – Building science and energy-efficienc
Slide 55: Creating a Reinsulation Market
Creating a Reinsulation Market Chuck Stein, Chief Marketing Officer, Building Materials
Slide 56: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 57: The Reinsulation Market Opportunity
Nearly 80 million homes in United States are under insulated *Source: McKinsey & Company The Reinsulation Market Opportunity • 40% of all energy in the United States is used in buildings – More than industry and more than transportation • Concern for energy efficiency and the environment is front-pa
Slide 58: The Reinsulation Financial Opportunity
Well less than 1% of the reinsulation opportunity was captured in 2007 The Reinsulation Financial Opportunity Owens Corning Growth Up to $1,500 per Home (2) = x 80 Million Under Insulated Homes (1) (1) Source: Department of Energy and Claritas iXpress Studies (2) Source: Owens Corning
Slide 59: Reinsulation: Do It Yourself
Reinsulation: “Do It Yourself” • Create the awareness of the need to insulate • Make information easily available • Clarify retail shopping experience How Owens Corning is capturing the opportunity How to move “Do It Yourself” consumers into action • Make the decision to insulate an easy one • Quant
Slide 60: Reinsulation: Do It For Me
Homeowners have simple and easy solution for energy efficiency upgrades Reinsulation: “Do It For Me” How to move “Do It For Me” consumers into action • Expanding contractors’ ability to tap into the reinsulation market by providing business models, marketing tools and training – Hundreds of roofing
Slide 61: October is Energy Efficiency Month
October is Energy Efficiency Month • Leverage the brand • Build awareness • Drive customer sales
Slide 62: Innovations for Living
Geel INNOVATIONS FOR LIVING™ DELIVERING SOLUTIONS © TRANSFORMING MARKETS e ENHANCING LIVES
Slide 63: Operational Excellence
Operational Excellence Duncan Palmer Chief Financial Officer
Slide 64: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 65: Operational Excellence at Owens Corning
Operational Excellence at Owens Corning • Focus on eliminating waste • Driven by continuous improvement • Benefits: – Safety – Quality – Productivity – Cost reduction
Slide 66: It All Starts With Safety
It All Starts With Safety… 2002 2003 2004 2005 2006 2007 2008 YTD Industry* OC *North American Industry Classification System RIR = Number of employees injured per 200,000 hours worked. Injured is defined by OSHA recordability guidelines
Slide 67: Operational Excellence: Energy Intensity Reduction
Operational Excellence: Energy Intensity Reduction Frank O’Brien-Bernini Chief Sustainability Officer
Slide 68: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 69: Greening Our Operations: Energy Intensity Reduction
Greening Our Operations: Energy Intensity Reduction is a Key Driver 1% Energy Intensity Reduction > $5 million EBIT Energy Intensity 0.70 0.75 0.80 0.85 0.90 0.95 1.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 70: Energy Consumption
67% 9% 39% Energy Consumption By Business Group Building Materials Composites By Process Other Manufacturing Glass Melting, Fiber Forming, Curing By Source Electricity Other Natural Gas Energy costs are approximately 10% of cost of sales 33% 63% 28% 61%
Slide 71: Employees reducing energy use and sharing results
Thousands of engaged employees reducing energy use and sharing results Low Cost / No Cost Solutions
Slide 72: A pipeline of rapid-return capital projects
A pipeline of rapid-return capital projects Proven Solutions Energy Project Portfolio 2006 2007 2008 2009 Investment Savings Forecast
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Slide 75: Proprietary Technology and Processes
Composites Furnace Insulation Furnace Proprietary Technology and Processes Recycled Glass Use in Insulation Leading Edge Technology • Energy and emissions reduction • Manufacturing cost reduction • Capacity increase • Longer asset life 2002 2003 2004 2005 2006 2007 2008 More than 1 billion lbs/yr
Slide 76: Energy Intensity Reduction: Taking Action to Create Shareholder Value
Energy Intensity Reduction: Taking Action to Create Shareholder Value We understand our energy use and how to reduce it Our actions are delivering results We have visibility to additional significant reductions
Slide 77: Operational Excellence: Composites
Operational Excellence: Composites Greg Morgan Vice President, Operations and Supply Chain, Composite Solutions
Slide 78: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 79: Advantex: a proprietary technology and competitive advantage
Advantex ® : a proprietary technology and competitive advantage Composites: Operational Excellence Less Energy Lower Cost Raw Materials Better Asset Efficiency Advantex ® Technology: An Owens Corning Innovation
Slide 80: Advantex is a stronger, cleaner and lower cost reinforcement
Advantex ® is a stronger, cleaner and lower cost reinforcement Advantex ® Technology: A Better Glass Fiber • Eliminates expensive raw materials • Reduces waste • Better performance for customers Source: Owens Corning Raw Material Cost Index per ton of production 35%
Slide 81: Advantex is the most energy efficient melting technology
Advantex ® is the most energy efficient melting technology* Advantex ® Technology: Using Less Energy • 35% less fossil fuels • Lower emissions *Source: Owens Corning, and TNO Science and Report, Energy Efficiency Benchmark of Glass Furnaces, May 10, 2005 Energy Consumption Index per ton of productio
Slide 82: Advantex provides higher investment returns
Advantex ® technology provides higher investment returns Advantex ® Technology: More Asset Efficient • Higher output from plants • Eliminates treatment costs • Enables capital-efficient expansion Source: Owens Corning, Industry Average Compiled from Data Collected During Recent Acquisitions Asset Ef
Slide 83: Advantex Technology: A Case Study
Leveraging the benefits by upgrading the acquired assets Advantex ® Technology: A Case Study • Raw materials: 5% reduction • Energy: 42% reduction • Output: 35% increase Hangzhou, China • Raw materials: 35% reduction • Energy: 50% reduction • Output: 45% increase • Closed one inefficient furnace Thi
Slide 84: Creating a Sustainable Future
Creating a Sustainable Future Advantex ® Technology Better for the environment Better for customers Better for investors
Slide 85: Innovations for Living
Geel INNOVATIONS FOR LIVING™ DELIVERING SOLUTIONS © TRANSFORMING MARKETS e ENHANCING LIVES
Slide 86: Financial Strategy
Financial Strategy Duncan Palmer Chief Financial Officer
Slide 87: Forward-looking Statement and Non-GAAP Measures
Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other
Slide 88: Financial Strategies
Financial Strategies • Financial performance and discipline – Strong operating cash flow to support growth and innovation – Continual focus on return on net assets in excess of cost of capital • Balanced use of free cash flow – Maintain strong balance sheet and ample liquidity – Disciplined capital
Slide 89: Balance Sheet Snapshot
Balance Sheet Snapshot 34% 34% Debt/Total Capitalization 3.0 3.2 Debt/Adjusted LTM EBITDA Available Liquidity (1) 6,038 6,154 Total Capitalization 3,988 4,054 Shareholder Equity 2,050 2,100 Total Debt $ 135 $ 121 Cash December 31, 2007 June 30, 2008 ($ in millions) Owens Corning (1) Unused portion o
Slide 90: Guidance for 2008
Guidance for 2008 • EBIT at least $265 million for the fiscal year • Cash taxes will be less than the $40 million paid in 2007 • Capital expenditures estimated to be $350 million in 2008 • Energy used in manufacturing – Represents about 10% of cost of sales – About 60% natural gas, 30% electricity,
Slide 91: Innovations for Living
Geel INNOVATIONS FOR LIVING™ DELIVERING SOLUTIONS © TRANSFORMING MARKETS e ENHANCING LIVES
Slide 92: Closing Comments
Closing Comments Mike Thaman, Chairman and Chief Executive Officer Duncan Palmer, Chief Financial Officer
Slide 93: Innovations for Living
Geel INNOVATIONS FOR LIVING™ DELIVERING SOLUTIONS © TRANSFORMING MARKETS e ENHANCING LIVES