Owens Corning : Q2 2021 Earnings Call Transcript

Owens Corning NYSE:OC

FQ2 2021 Earnings Call Transcripts

Wednesday, July 28, 2021 1:00 PM GMT

S&P Global Market Intelligence Estimates

		-FQ2 2021-		-FQ3 2021-	-FY 2021-	-FY 2022-
	CONSENSUS	ACTUAL	SURPRISE	CONSENSUS	CONSENSUS	CONSENSUS
EPS Normalized	2.14	2.60	21.50	2.22	7.91	8.43
Revenue (mm)	1997.08	2239.00	12.11	2074.43	7909.37	8275.89
Currency: USD

Consensus as of Jul-28-2021 1:23 PM GMT

- EPS NORMALIZED -

	CONSENSUS	ACTUAL	SURPRISE
FQ3 2020	1.31	1.70	29.77 %
FQ4 2020	1.37	1.90	38.69 %
FQ1 2021	1.43	1.73	20.98 %
FQ2 2021	2.14	2.60	21.50 %

COPYRIGHT © 2021 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved

1

spglobal.com/marketintelligence

Contents

Table of Contents

Call Participants........................................................................................................................................................	3
Presentation........................................................................................................................................................	4
Question and Answer........................................................................................................................................................	11

COPYRIGHT © 2021 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved

2

spglobal.com/marketintelligence

OWENS CORNING FQ2 2021 EARNINGS CALL | JUL 28, 2021

Call Participants

EXECUTIVES

Amber Wohlfarth

Director of Investor Relations

Brian D. Chambers

President, CEO & Chairman of the

Board

Kenneth S. Parks

Executive VP & CFO

ANALYSTS

Kathryn Ingram Thompson

Thompson Research Group, LLC

Keith Brian Hughes

Truist Securities, Inc., Research

Division

Matthew Adrien Bouley

Barclays Bank PLC, Research

Division

Michael Glaser Dahl

RBC Capital Markets, Research

Division

Michael Jason Rehaut

JPMorgan Chase & Co, Research

Division

Philip H. Ng

Jefferies LLC, Research Division

Stephen Kim

Evercore ISI Institutional Equities,

Research Division

Truman Andrew Patterson

Wolfe Research, LLC

Yves Brian Felix Bromehead

Exane BNP Paribas, Research

Division

COPYRIGHT © 2021 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved.

3

spglobal.com/marketintelligence

OWENS CORNING FQ2 2021 EARNINGS CALL | JUL 28, 2021

Presentation

Operator

Hello and welcome to the Owens Corning Q2 2021 Earnings Call. [Operator Instructions] Please note, today's event is being recorded. I now would like to turn the conference over to Amber Wohlfarth. Ms. Wohlfarth. Please go ahead.

Amber Wohlfarth

Director of Investor Relations

Thank you and good morning, everyone. Thank you for taking the time to join us for today's conference call and review of our business results for the second quarter 2021. Joining us today are Brian Chambers, Owens Corning's Chair and Chief Executive Officer; and Ken Parks, our Chief Financial Officer. Following our presentation this morning, we will open this 1-hour call to your questions. [Operator Instructions]

Earlier this morning, we issued a news release and filed a 10-Q that detailed our financial results for the second quarter 2021. For the purposes of our discussion today, we have prepared presentation slides that summarize our performance and results, and we'll refer to these slides during this call.

You can access the earnings press release, Form 10-Q and the presentation slides at our website, owenscorning.com. Refer to the Investors link under the Corporate section of our home page. A transcript and recording of this call and the supporting slides will be available on our website for future reference.

Please reference Slide 2 before we begin, where we offer a couple of reminders. First, today's remarks will include forward-looking statements based on our current forecasts and estimates of future events. These statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for a more detailed explanation of the inherent risks and uncertainties affecting such forward-looking statements.

Second, the presentation slides and today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in the text and financial tables of our earnings press release and presentation, both of which are available on owenscorning.com.

Adjusted EBIT is our primary measure of period-over-period comparisons, and we believe it is a meaningful measure for investors to compare our results. Consistent with our historical practice, we have excluded certain items that we believe are not representative of our ongoing operations when calculating adjusted EBIT and adjusted earnings. We adjust our effective tax rate to remove the effect of quarter-to-quarter fluctuations, which have the potential to be significant in arriving at adjusted earnings and adjusted earnings per share.

We also use free cash flow and free cash flow conversion of adjusted earnings as measures helpful to investors to evaluate the company's ability to generate cash and utilize that cash to pursue opportunities that enhance shareholder value. The tables in today's news release and the Form 10-Q include more detailed financial information. For those of you following along with our slide presentation, we will begin on Slide 4.

And now opening remarks from our Chair and CEO, Brian Chambers. Brian?

COPYRIGHT © 2021 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved.

4

spglobal.com/marketintelligence

OWENS CORNING FQ2 2021 EARNINGS CALL | JUL 28, 2021

Brian D. Chambers

President, CEO & Chairman of the Board

Thanks, Amber. Good morning, everyone, and thank you for joining us for today's call. I hope all of you are staying healthy and safe. Owens Corning posted record second quarter results today, contributing to an outstanding first half of 2021. During the quarter, we continued to see broad strength across many of our end markets, but our results are not only being driven by favorable market conditions.

As Ken and I will discuss today, our commercial and operational execution continues to accelerate our performance and create new opportunities for growth. This puts us in a great position to consistently generate strong earnings and cash flow and continue to deliver greater value to our customers and shareholders over the long term.

During our call this morning, I'll start with an overview of our second quarter results before turning it over to Ken, who will provide additional details on our financial performance. I'll then come back to talk about our business outlook for the third quarter. As always, I will begin my review with safety.

During the second quarter, we maintained a very safe environment with an RIR of 0.51, a significant improvement compared with the second quarter last year. Nearly 2/3 of our facilities have remained injury-free this year and over half have done so for more than a year. And while we are seeing an increased risk associated with the Delta variant, we continue to operate all of our facilities with a strong focus on working together to keep each other, our customers and our suppliers healthy and safe.

Financially, we delivered record second quarter revenue of $2.2 billion, an increase of 38% compared with the same period last year, up 35% on a constant currency basis and adjusted EBIT of $408 million, which is a record for any quarter historically. Our global team continues to perform at a high level, executing well in a dynamic market environment. The outstanding financial results we are delivering against this backdrop demonstrate the exceptional operational capability of our people and earnings power of our company.

Our performance during the quarter was driven by strong volumes, broad price realization and high manufacturing efficiencies across all of our businesses. This resulted in an adjusted EBIT margin for the company of 18% with all 3 of our businesses posting double-digit EBIT margins for a fourth consecutive quarter. Demand for our U.S. residential products, which account for about half of our enterprise revenues, remained robust in Q2, and we continue to see higher demand levels within our commercial and industrial applications.

Many of our end markets are now operating at or above pre-pandemic levels as markets have recovered from the challenges of the past 18 months. While underlying market demand for our products remained strong during the quarter, our operating priorities, investments and execution enabled us to capitalize on this volume to deliver record financial results.

Commercially, we continue to work hard to meet the needs of our customers in a tight supply environment while implementing needed pricing actions to offset substantial inflation headwinds. And across the enterprise, we continue to invest in product innovation and select growth and productivity initiatives to service our customers and enhance our operating performance.

I'll take a few moments now to share our most recent updates. Within Insulation, we announced today that we have entered into an agreement to sell our insulation site in Santa Clara, California to commercial real estate developer Panattoni. This is part of our ongoing strategy to operate a flexible and cost-efficient manufacturing network with facilities geographically located to best service our customers.

We plan to continue to run the plant through the third quarter of next year and expect to complete the transaction in the

COPYRIGHT © 2021 S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved.

5

spglobal.com/marketintelligence