OC - Earnings call transcript Q2 2021

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Operator

Hello, and welcome to the Owens Corning Q2 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded. I now would like to turn the conference over to Amber Wohlfarth. Ms. ahead. go please Wohlfarth,

Amber Wohlfarth

XXXX. good join Thank call us business second of and the and for time our quarter the for to for results morning, you you everyone. taking review Thank today’s conference

Chief Joining us today Officer. and Brian Chambers, Financial Parks, Chief Executive Chair our Owens Ken Officer; Corning’s are and

question order morning, we please many as call second issued as possible, this Following this release a call accommodate our morning, and presentation this to XXXX. quarter our XX-Q to one-hour yourselves only. to a news that one limit open the we financial will your Earlier questions. In filed for results participants detailed

slides For that the performance we’ll and today, we of these discussion and summarize this have during prepared call. our our presentation results slides to purposes refer

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

measure results. our items be investors Explanations earnings on adjust release which we remarks are our in comparison compare period-over-period contain is press slides to significant found the earnings calculating representative fluctuations, primary operations earnings of and Adjusted GAAP share. presentation adjusted meaningful the our be effective and may and with effect We is and earnings. measures owenscorning.com. practice, tax adjusted historical and measures. believe believe ongoing per of are presentation, and at of the Second, available and measure text we tables non-GAAP of when for rate of it which to excluded our the certain to remove financial reconciliations adjusted not our EBIT financial our adjusted a non-GAAP of today’s potential in Consistent we’ve have quarter-to-quarter arriving EBIT that to both

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those of Brian? our X. following Slide with And slide Chambers. now, you Brian from will our on remarks and For CEO, along begin Chair presentation, opening we

Brian Chambers

posted for first an record Thanks, results thank all XXXX. contributing joining hope Amber. Corning safe. Good are today's half of staying us call. and second for to everyone, morning, you and you of outstanding Owens healthy I quarter today,

market the end our results being see of our across are we to but by not driven strength During quarter, broad markets, many favorable only continued conditions.

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

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

my with begin will review I safety. always, As

of second During a while And XX% compared this which last is with EBIT safe have with quarter, Nearly associated very than of injury-free the of adjusted up we a on record second the with significant $XXX Delta our And record two-thirds facilities we constant a second safe. of we year, facilities compared quarter maintained with seeing year. an our on improvement period $X.X are a for with billion, year of done an revenue RIR each so working healthy the basis. strong we customers keep our together increase same environment X.XX, an remained to all more continue our the risk last increased quarter and quarter historically. over delivered have and XX% suppliers for year. variant, of and a focus to a other, million, half Financially, currency operate any

Our against earnings at power company. delivering are our global dynamic a high and of executing our a the in outstanding backdrop team level, this financial to well perform The of environment. exceptional operational market capability people results we continues demonstrate

in margin driven company and our quarter the recovered applications. above price our and EBIT margins double-digit consecutive posting are with continue now during have markets an businesses manufacturing Our quarter. of XX% of of half within challenges levels our was This our high all adjusted the industrial robust we three strong markets the about at see past levels for Many for of from in revenues fourth pre-pandemic months. across account demand end resulted the XX EBIT and for our to which by efficiencies of broad performance as of realization QX, volumes, Demand enterprise higher U.S. for businesses. operating commercial our residential products, remained or a all

investments remained Clara, to comments. our financial underlying to our emphasize take work with on operating service customers. a and is to to the innovation productivity environment, have volume in growth while tight for that to operating transaction needed agreement our invest our execution to in XXXX. insulation this Panatone. quarter to supply first announced we estate flexible of inflation the quarter, next entered commercial net during and real product pricing plan strategy and through offset third now production results. our the actions expect enabled plant into deliver This to of site will us a enterprise, impact an products our about implementing California, of we to and our our and enhance a substantial I'll demand headwinds. we priorities, best network continue transaction this want moments recent we Santa updates. needs record most of select our to quarter Ken network in operate capitalize initiatives assets. meet to ongoing to across to strong the customers service detail not during the developer, While some share sell Commercially, is performance. I located optimizing to cost-efficient market and today complete to few Insulation, part action continue capacity his share that the customers our ability And to the run manufacturing service further Within facilities continue our customers. We geographically our in will our on or the The reduce the hard year

the in of acquisition production to capacity higher-value building brings we glass new to over grow flexible, nonwovens serve our downstream While construction, to in investing accelerate specializes better applications, great energy moves Earlier significant better long-term we such Utah in our Lipa customers as to the team market. we of other which see have a for GMBH, capabilities the more materials Composites capacity portfolio and options infrastructure. we and trend available cost-effective and and materials footprint And continue housing to printing European create higher. manufacturing region. business, to the we expansion demand continue In a Overall, finishing coating, technology if invest applications month, Germany, these expanding plant building nonwovens at will in next complement and be restarting the West Lipa announced our other plant enable building we Coast, and and with serve Eloy, allow operate year, renewable market this the us to Nefa, us Arizona Based construction industry. and and in growth our continue service to of the the facility. will that

strength, operating growth commercial improve and All and to our opportunities, generate our leverages scale which of capabilities expand these global strong enterprise efficiencies operating investments operating are our enabled our model, science material free by flow. cash

our Citizens for demonstrate an to in Corporate our sustainability Before Ken through year This to unprecedented impact I to financial is list more an turn commitment XXX were achievements the the in that ranking detail, In earn several to of front. making third employees share XX,XXX recent walk the I'd like performance we on honored of Best over one a ESG. the it to in brief on top update May, a row.

on learn recognition this of approach aspects rewarding this their goals has most space. in customers to that the collaborate to us spurred of One is it and

carbon are circular work on over and including core Ken? We end-of-life by will is customers important to turn is to to our that, customers in us results to expressing collaborating in purpose providing look our in our further new our on more deliver our Specifically, and This growing updates I forward solutions, With reduced it both them. financial detail. outcomes to progress increasingly solutions. for products opportunities products recycled that to content embodied value interest economy and now area. to this providing Ken discuss and

Ken Parks

morning, good Thanks, Brian, and everyone.

Commercial had focus with one the capital sequentially earnings, execution second with to same margins with resulted along quarterly generated XX% quarter, to operating Corning in capital EBIT over As period Brian an led ago. the performance healthy XX% continued cash results. combined quarter, led XX%. margin free and QX flow Owens XXX from investments record and working from strong stronger top in EBIT a line of Commercial commented, The basis generation more points the expansion adjusted of quarter. we and XXX basis year of quarterly in points management than Overall, adjusted on delivering year-over-year. record execution, coupled growth outstanding gross second

driving remain conditions ongoing execution fundamental across across markets performance. we demand was business strong While this to serve, the the our

the positive petroleum-based and move Maintaining we materials, inflationary price focus remains this talked call, positive QX inflationary costs. about headwind to offset realization as more than the we're through an along balance in inflation relating a we As the managing this primarily in Overall, increasingly transportation quarter. with asphalt environment. environment, other

results. closer turning to take at Slide Now, we our X, a can look

net share residential consolidated up reported broadly For we million, the XXXX and year compared housing prior diluted sequentially of $X.XX were segments, reflecting the $XXX second to by expense $XXX the share quarter up quarter to for QX double-digit second over industrial quarter Depreciation the robust three for million for highlighted as sales up was market in or XXXX $X.XX or was all the EBIT per across EBIT growth compared improvement million the all diluted the million, quarter, amortization to revenue and in three $X.X with stronger reached XXXX. margin earnings XX% and slightly million Adjusted Adjusted segments. per of second commercial and XXXX. $XXX $XXX second compared quarter and the markets. billion, of U.S. $XX

$XXX for up XXXX. to Our million, quarter second million $XXX the as capital compared additions were QX

We productivity. second Slide X will spending we on continue prioritizing EBIT our of million. our to flow cash focus drive EBIT $XXX free and as reconciles capital in of our disciplined adjusted to and investments strong quarter that $XXX be million reported delivering growth

gains of us Ongoing and our tooling and has quarter, precious modify $XX designs metal of certain the initiatives our holdings. the During certain precious on metals. technology to recognized the reduce productivity of enabled further sale process million production manufacturing on progress we

EBIT associated EBIT In previously X from $X growth of recorded a expansion. $XXX comparing margin Slide delivered over addition, our are XXXX increased second company sequential Adjusted announced million EBIT for million actions. and high-level the costs These of excluded a prior All adjusted of to record year-over-year provides three overview items quarterly EBIT. XXXX. with $XXX quarter year. second the quarter restructuring new was million and we segments adjusted and

transaction to review operate Before referred is around Santa customers. continue our to This at the plan to least of manufacturing want at of network better first Brian the of action our more a of share and a turning earlier. ongoing Santa flexible, our in assets to each transaction cost-efficient geographically to for part service details Clara our complete the We quarter our strategy businesses, I the and locate year to expect Clara XXXX. operations facility to

net range of Cumulative We associated intend the primarily be We existing carrying expected be to $XX proceeds million. Eloy, and charges in Utah $XX Arizona of consisting to transaction proceeds accelerated are with the expect pretax approximately a million facilities. market, the $XX $XXX to expected in primarily portion charges value. the million million, of in to the Cumulative capacity noncash depreciation are gross range in to serve and of the Nihi, cash our $XX of million. invest land to

XXXX. mineral up In second in demand a provide Pricing past over continue benefit business other technical see million, to performance X strong quarter highly specified North in the U.S. across see the we more as insulation, volumes second result build with strengthened. we We commercial pricing to with insulation, quarter, continued additions. on growth and with sequential with expansion construction serve a Now FOAMGLAS the we turning business we in quarter. for markets I'll line from of build QX we to margin positive XX% incremental Insulation growth as on to of the continued the robust coming In America the broadly expectations currency increase as in saw new QX the capacity were be details and volume continue and saw was saw over The both to Slide wall. fiberglass growth In actions translation. and gains X. and the strength saw products Europe for performance end of in relatively the positive globally on notable American businesses. demonstrated to and our we residential continue we've Sales each quarters. of we we strength a and taken the the $XXX second from the in quarter, North most QX year-over-year from continued

lead accelerating lagged nature the business in quarter the price insulation as of project-based of business, costs price/cost nearly the a and positive transportation the material inflation of positive was as For longer the impact while pricing offset insulation inflation more and Insulation result and residential in other times. technical

XX% recovery from We $XXX of of from delivered continue our the in $XX second benefited million, up EBIT manufacturing well absorption XXXX. quarter to and of $XX in of margins execute cost We operations million fixed and of production. higher on of million EBIT the

XX% year. to our EBIT. million, record business turn volume produced Slide business. quarter business of Sales for $XXX nearly XX% please quarter. delivered the up Now compared were in a X of growth The quarterly to second prior review The Composites Composites the for the

is demand by local for in our geographies We downstream applications continue well to being local demand in where valued as customers. see our for strength key supply as demand model

prior a were second higher Operationally, the high quarter. EBIT, our XX% price price Sales up of of realization in We XX% slightly perform at resulting quarter, the business recovered overview delivered negotiations U.S. quarter market performance costs. composites, Roofing business. to as our also as for and positive offset Slide shingle of $XXX in Roofing year. XX%. U.S. In headwinds our to announced to year continue and manufacturing margins curtailment manufacturing expected trailing compared second better positive than materials level million, grew contract second The to well from provides market, see the up Composites the in shingle XX business. The although quarter as the noncontractual EBIT price continue nearly costs. from quarter, to with inflation of over increases prior an the In million we continued last to our solid execute year, due the the for $XX million transportation compared $XX million the $XX asphalt stronger and volumes performance. with

additional and on We're strong. increases remained to positive the remain inflationary our asphalt price materials, seeing from as Contribution face inflation. price attachment into and in and performance benefited announced and became margins realization transportation we volume favorable quarter continued components. Additionally, our rates high costs

year, EBIT up from For the million quarter, EBIT million, the $XXX $XX was prior XX% achieving margins.

full Slide financial I'll highlights and XXXX. discuss the to XX. significant for Turning quarter second year

Continued an of second year. working $XXX cash discipline second was million cash for the expenses compared flow the We million, resulted $XXX of of to operating up cash in million, $XXX $XXX management over capital, prior capital investments Free around reported million quarterly XXXX of and quarter of and the flow strong record XXXX. quarter flow. increase operating

XXXX, of During XX% over for $XXX stock company strong dividends. million million the through and of free quarter combined investment XXXX billion cash quarter million an cash had sheet focused company the liquidity. $XXX X.X XX, of end, investors the of Through nearly balance and We with ample flow to on consistently share performance, consisting bank least to maintaining shareholders we With shares returning sheet. June second repurchased of availability the million. $X company has our common $XXX time strong investment-grade repurchases balance this maintain debt solid a $X.X returned approximately remain on grade of at facilities. flow, billion generating cash and liquidity At

items. our results. million. for and between outlook, below an expected XXXX are which are compensation be range million, to reflects Capital from corporate driven additions expected turning $XXX key Now higher prior by expenses depreciation General and outlook financial increase This $XXX performance-based to amortization expected to approximately strong is million. which our our $XXX $XXX of is approximately million

Our of California to be to has depreciation is by amortization expect XXXX Santa and earnings. we pre-tax adjusted rate of estimated XX% tax driven And accelerated $XXX tax million. earnings and XX% depreciation be increased, million to between cash our transaction. to adjusted to and our XX% effective related XX% Interest be pre-tax to for $XXX outlook Clara, our expense primarily total rate

further Brian and the I'll company. our outlook Now please return to Slide Brian? turn for to XX, discuss call the to

Brian Chambers

Thank you, Ken.

growth longer-term driven we opportunities second to by investing on ourselves key capitalize to the During position continue trends. secular in while quarter, market near-term

and and remain global expect and end new second the the our commercial of into continue markets strengthen. end markets industrial construction year, robust move remodeling U.S. and we repair to we half to residential As to

our terms and half continue In way the we operating and we QX, revenue regional the first expect of in on businesses. priorities in financial of the growth. we second inflation, will in transportation year-over-year carefully in of continue Throughout more a key of of our this another cost delivering earnings quarter the generated continue COVID increases to the material execution significant and manage the first we impacts to to expect year And faced half, and half. has strong results, monitor

third business the specific a with prior detailed quarter. calls, more consistent Now for Insulation. I'll Starting outlook with provide

see insulation our volumes residential our year. in up be prior anticipate We to fiberglass XX% business continue strong North to and American demand approximately versus

We to increase expect should In increases. the during into increasing improve demand applications. products building construction XX%, effect to building also improve global insulation continue quarter, Pricing approximately realization from that prior of our the pricing our other realization technical additional went the end continue of should with for businesses, volumes and some through at and also in with grow June. to

terms price in expect be transportation to of cost in price/cost inflation, quarter. will realization what quarter we in additional In higher we and result QX third the anticipate increases but mix a than the that material in positive experienced

by fixed improve our $XX absorption prior million expect we cost approximately Additionally, year. quarter to in the versus

we EBIT approaching versus in to delivered what QX slightly up margins with Given mid-teens. all QX in this, be expect performance we

with quarter. we the flat the what from to in to to XXXX. to to the pricing our of quarter revenue we In in realize relatively that volumes, and And Roofing, Roofing both to improve will the is of implementation continue expect we margins mid-teens third the improve our EBIT inflation primarily mid-single-digits, Moving quarter we third versus additional delivered of recovery mix curtailment market year. Overall, continue pricing sales expect previously prior third the in additional the price in volumes benefit $XX costs in impact we We to work and second million flat roughly increases. on expected announced expect of close range, improve our saw based on we should composite our to to the be offsetting Composites. commercial of be anticipate price. relatively year-over-year, driven by improve quarter, even and

of the view headwinds a enterprise increase as but to effect from Roofing given we In of price inputs items. another couple second close quarter August. our the asphalt material X% that I'll positive. more With with the inflation expect XX% our that other of announced margins half, we significant recently strong anticipate price/cost and remains EBIT nearly businesses, we with take end mix of X% of will narrows, in addition, Overall, a at

Our team cash remains to flow. generating operating and strong free committed

focused In through business, and time on dividends organic least terms of initiatives, balance shareholders and our at maintaining flow XX% especially free productivity repurchases reinvesting capital allocation, of to share our growth and cash over returning remain in an investment-grade sheet. priorities

the and evidenced operational bolt-on building Lipa, product In geographic expand addition, we continue by of our our to investments evaluate announced in that recently acquisition offering. commercial, leverage and as construction strength acquisitions and

to from the session, other to moving morning's on I'd like one this highlight Before item release. Q&A press

Investor an world our leadership executive value. to hosting long-term and team be Day headquarters will priorities, Wednesday, initiatives and November at objectives strategic the financial drive We in stakeholder our of on company's Members to discuss XX. Ohio I Toledo, plan

back the have Amber win We open will our in our important the In financial the in and plan company, of our in grow be by performance details meantime, this further to market In join deliver you second for operational quarter will that, to event. is to outstanding delivered now opportunities hope turn we the we value you and the the our it team the hold help November. to day us for months proud are and With questions. up call closing, in and shareholders. will the with we coming to I customers sharing excited

Amber Wohlfarth

Thank you, Brian.

We Q&A are begin to now ready the session.

Operator

from first the Barclays. Bouley And with comes Instructions] [Operator question Matthew

Matthew Bouley

fiberglass North the on volume I'll American start with outlook. a question

Just U.S. Thank some to hearing perhaps and a how kind different QX restricting what sort curious this around And homebuilders growth some construction. Obviously, and seeing that you're in are of QX. expecting embedding in new effect of outlook you. of think pace just of beyond volume is sales of QX? I'm guided you light in the lot you're just into places. of what you your or into I XX% with

Brian Chambers

Good morning. Thanks the for question.

new mean, at several continue years. particularly and the underbuilt for I back construction of overall, mean new on we've expect year. I the U.S. as calls, construction half pace been housing in And this think previous market to housing through talked I I about think we has a solid

to would starts. expect range we're that we kind million trends. given that going very continue operate sustainable that, of this to to So, in of million We think housing X.X is X.X demographic

seen of So, the reports builders on and we have same customers. we when kind also talk to contracting our

I've on - As material about supply part previously, just think than labor. development, talked or I materials broader building the construction is inputs. land of around constraint availability around raw building material They're and

housing, there I supply be in in. So, be able I And to going of think we of material and I and service rates of would starts fundamental solid pace, our to in there's is to those growth. development get that chain much to of these lot at growth headwinds land they than unless in addressed some grow suppliers, our those moving headwinds of higher caught availability. But pace. that today. But think are I environment a emphasize very robust think housing terms do great will continue are gives kind impact where to some labor some business get a a do may today's above of think higher terms up issues that do to ourselves like others for pace that

our impact. more. additional with also some additional brought capacity to we're to ourselves service are we're year going and year capacity last in to more some customers. market. going Overall, of work on we're seeing terms significantly produce next than hard through volume service growth we we between We year that the to some continue COVID this and lost last the existing positioning customers produce to the to year more time, year So, produce installation adds operating in to of And our our this

a So, to us housing overall be in forward. is going well think positioned to think and very we're our for we good tailwind continue we going network,

Operator

And next you. with Thank comes Research. from Kathryn the question Thompson Thompson

Kathryn Thompson

the getting touches but Roofing both with general Composite broadly I since high SKUs in we're is just demand. field have in high into to Composites one of get has the kind reduce keeping utilization demand in your And a Composite side to given underlayment of been bottleneck in tying the that, that demand? Plants the with the of ties thoughts order in that they really that It to also on to your demand side. up roofing shingle and the feedback ability wanted and the demand. number on capacity to also your meet on manufacture keep up side, is order

Brian Chambers

Yes. Thanks, Kathryn.

first is the quite in mat we've glass improve bottleneck. some terms you're think materials with business. I Roofing of the constrained we're I continued materials then certainly capacity working we've inflate material saying, seen supply our part Composite utilization challenges was and a bit. that very through. in and a the that constraints of to in been has about hear of Part seen also asphalt see mean, as refinery a of And year We've low rates. other

vertically are are we own we our integrated fibers that and glass glass and fortunate mat. in produce So

as roofing capacity non-wovens we've and announced our more our the net to capacity. bring full in past running both give are us assets, specialty service a assets, that able market come stream to But production. be polyiso on supply services So early in a why that facility about design plant does capability that as in non-woven in and Composite terms with on we've It's at talked we our of Smith gypsum and the our XXXX we well our have internal that to to Fort expansion materials. other

working are of bit think, we I think to be a environment a think And overall that's the through amount be to governor impact also I to industry. we going supply roofing capacity produced. be through the very of and can this So that's, an a on going year, in industry continue tight that

out we is I the what relative for that pretty materialize QX to guide produced and raw QX, or full in QX our that industry available. material inputs probably think saw the in to be think we can running

So benefits in us we we that's to we continue to think think vertical some that integration network overall, see. a to strategy. serve the adding capacity We address see I the do these going to will that forward. of have well of areas We again, growth going be

we're, our we terms of production in think well-positioned term capacity. and So again, near-term longer

Operator

from comes Thank you. with And the next Markets. RBC Capital question Dahl Mike

Mike Dahl

think just Santa mothballed Clara XXXX. the I decisions since a on the Eloy. but plant been if I'm question me had mistaken, two-part capacity and I around Correct Eloy has

it versus new But take with comes in you us Santa rationale, is in. whether sneak like if Clara? look as that CapEx relative online. made more anything than wondering plant terms or with give capacity, investing we to about us the likely So second Santa back also, if profile modernizing of rationale and it's profile be to one sense start-up in sorry of And also costs through lower-cost any Eloy Clara? in And sense answer terms with the why you that the associated of just that the Thanks. should return that just part, could in or could decision facility last just around margin thinking what

Brian Chambers

all hit Mike. Thanks, try to one. We'll

QX been Santa decision. we I improving cost-efficient work our through scenarios. Let and team the productivity, And our a that that residential Insulation phenomenal me And just in variety network has build start business, can network. efficiencies, really our increasing of of have flexible, entire Clara demand key our a increasing our delivered process building focused through of our success mean, and in done throughput has service on operating just customers the where to quarter another in business great broadly been part continues with momentum. terms

So valuable piece to the this that heart of best we given in very time have And assets sits right all Valley. real it thought then in to the region. existing that that monetize time of was our work, we the some a in service customers in of Coast leverage West estate Silicon better the

premise this the was for that so And decision.

the real million. sell So for we've developer a to agreed $XXX to property estate

in capacity to use Utah to time least the As facility Arizona part Nephi, we and out year Eloy, continue transaction, our to then plan facility. of for and then this our another operate restart facility that at build

plant operated as pointed a have been decade. Eloy out, a you've So that over not in we has

been we capacity But little more going that leverage better we are service then to in assets facilities. in down cost also very the effectively. are demand our up those And balance can to actions us. and it's and turn region. there flexible They to think us So been the around to that region allows available a these it two

enough our So two have Coast customers. to these will, through we facilities West capacity service

and do to and us the the invest to overall, this to the facilities. Eloy leverage I in ability net-net, monetize real been And allows Nephi. us region we our It a in that's valuable So gives of existing we the estate. rationale. is capacity in think still very add better that And have piece what assets retain other on

So that I retain think we optionality.

demand the to a I operation, two-furnace in you bit think just little Clara, I of the many efficiently. is part furnaces only one it's really of of market there enough is a around Santa but local know, operate details in the challenge that as think

all demand difficult part operate country. So because part the the central became the in furnace was the of or the cost second the to country of very

So it it's and ship that east. inefficient to furnace run cost so second very far

maintain to So we continue that we valuable to give of better West capacity as this our do Coast continue estate. customers service amount some piece need that of real a and optionality to to use that the service to an our monetize rebalance network us wanted base, but and customer there, to opportunity

So heart the that the was decision. of kind of

start-up, in our to to portion. next I We be running the quarter but us with normal be very is the efficiently. the to been later up done at. than it's facility within costs first that We've In invest guidance This we'll for out In products proceeds, and of Eloy. facility to Eloy, to Nephi, pads call think bring going there a I there. service of expect we're we've produce portion special facility the year. more to Coast. West no operating But CapEx no to And probably would some start-up production large see be think up CapEx. can in and smaller we of produce the and maintained going little put going to able a we're create expand terms that to CapEx, investment a pads

year. in next So address still this we then we we address But rebalance coming we year if options expansion Nephi, the in call get our monetize same into quarter's might great any next of like we to see start-up our we been us is thing costs network, see to We some and the a then Clara. capacity facilities. we would retain can we fourth costs complete to start-up move later quarter. start-up asset Santa nominal that shutdown other through with material. that after the give net-net, And Nephi think the valuable production time kind that next could as be our again, of And

So we And we've up, up can to I options well to us pull. continue sets that if starts the continue for future. see housing think got that we trend

margin think given of the I at part question when months, guidance. over you business XX any where with last now Insulation drop year operate operating business drop look saw we and your performance Third to just you margins, where not with share last seeing QX increases. on maintain specific And the probably tremendous volumes off. we've in that would our even been I profitable able the that saw off margin you're we've a you

to Now mid-teens. we're getting

that be we maintain in as margins. our to results still So we're to leverage off the cost improving I think see levels getting you're in residential improvements increase, and seeing at volumes business assets kind able made And operating profitability. volume the of tremendous operational lower our our operate then we've really

seeing in demonstrated we're I efforts with efforts, shipping producing of results. really volumes been those been think coming we've it's last And over productivity efficiency really the our cost through the that I think facility. XX months So range installation the inside

has terms in of assets able and So service team the the the being growth. running great done to just work

Operator

Kim question Thank Stephen comes you. ISI. And next the with from Evercore

Stephen Kim

but again. am insulation the ask to starts about expectation, guys. your we million going about, things housing and near lot about interesting could comments Lots ask I X.X of a Thanks in term. Brian, you some made

about near talked term. the other land issues about things builders talking constraints are You some certainly and which are

the things one net of and However, capacity of what sellable was couple in next is I those imagine aggregate could expanding of Santa as do done plants and know the potentially volumes, initiatives. years, Eloy And there try of a said additions growth a will you is down understand think guess, I net part and ongoing anticipate of coming in dissipate of envision or and would secondarily terms of the all today, once guess maybe housing that my plants, from all lot capacity of I over a have that much satisfied? to figure be restarting before. productivity in of them the Clara question the you you for that capacity that versus product, kind you put terms to change How then industry start within those that,

launched think product. Thanks. you one potential you've productivity that a X% about on greater tried whether to average, to I insulation. to in the that just I as that capacity add NextGen improvement about by is, recently thought insulation X% talked or curious expand you historically know than had was that you target. a degree target that that, the year I you productivity guys your

Brian Chambers

Thanks, Great. Stephen.

we've So in first Santa mean, look when one. the broadly, the try at address puts takes I operating capacity I we and guess, I'll Clara. been to for how

than in single terms adding we've of Nephi in offset we're Clara. what production anything been think line running the in Santa there Eloy I capacity that and with more

that So we operating capacity. retain

would all the net-net the all takes. So say of puts moves, I and

really capacity, we are the well now we've Our the have we the not installed. service the X.X, this we about made ads over fill We by to market year. say, in as believe Bats versus to last last that going the net can as time million like at year quarters and decision. production market, we've kind getting got additional loose capacity which X.X interpret both is feel service installed change starts. you operating that we X.X And as capacity to when capacity to look We this up I'd few and can with Rolls & of housing

this brought as So catch-up I of think playing bit we on. little we're capacity a

housing we has And move service several to No then that. we good look, think more up starts place I I there's again, been feel last sequentially we'll as continue think for So see housing with we're in be underbuilt going finish mean start XXXX beyond this to the installed would a the year place - full all produce in to like X.X. like years. to we year. and running, capacity into we quarter-over-quarter going we

do beyond are that said to that. think facing I've asking and move get would like some I But into see growth constraints we'd I were as a think trajectory that addressed. is you about, other to see are there have that builders as we

timeframe beyond do options facility. few at those our if Now get bring a cost network could fairly starts pretty can we short next and capacity moving effectively housing do up could we with productivity have we in addressed our just the pace, that expansion see over up some we in other expansions years that that beyond other

growth So for beyond plan I to think X.X%. we continue

engineering with all think year the capacity as things we're the other just how sure adds that fits kind that into environment market of are in if assets occurs, that to but see our ready make service invest efforts go this we XXXX. if we've capacity. I to how occurs. continue and kind made within We ready to additional to and again, settle with event But we're we ourselves But preparing

I think we've the running been that productivity on piece, yes, range. in

a that's certainly work we're handle, to doing to I will this part, expansion in great in made Give looking love been help and product our doing. us not we innovation. We launch about announced but continue increase have better our product our takes we've And other advantage our beyond what And to to a easier And to product that think produce the going efficiency invest that's I is contractors - really be launch, around that. we're will process product allows to product to capacity this I aspects of get and and think formally going think, easier to product we've launch great support continuing have cut new insulation with inside yet our network and improvements contractors. that we a throughput. density product productivity do rates think

through better network giving us well to going they're manufacturing working love think with our efficiencies I as as

Operator

And you. Thank Research. comes from the Truman of Wolfe next question Patterson

Truman Patterson

on quick question inflation. a Just

can or raw about second You quarter for million end us and when an $XXX gas idea elevated. total of all balance hoping about company how that, thinking of inflation inflationary in year transportation you're give that balance thinking peak? remain you I'm the the material oil you natty seeing through the pretty pressures and costs just up had transportation the and

Brian Chambers

for the So Truman. question. Thanks morning, Good

in above We the are, comments earlier additional levels the second inflation indicated kind flow that in the of saw anticipating quarter. we as into our quarter third to

what I seeing think is a big we're of in and component outlook of the area asphalt. our that

inflationary, expect that quarter. probably to the in little more we to be third continue a bit So

third peaks petroleum are think of based going is energy we We When inflation, more this on That's as seeing a piece on as you QX. said, well It's to it really to is transportation. specifically. anything quarter than as do hard the costs. going price that what we're initiating of and fourth on dealing will early increases and in the quarter proactive But nature I with pleased inflation to with to tell what's businesses appropriate happen you it. recover the call be

impacts anticipate through positive through the of expect We environment, manage very side we'll we that quarter flow the Owens continue million for through out price to business about actually year. we the and for the million cost $XXX of saw overall. we to $XXX specifically, is balance pricing You we And $XXX inflation the called remain saw fully continue that million, to to overall move inflationary Corning. in as positive that second to the flip this

Operator

Jefferies. next the question And with comes you. Phil Ng Thank from

Phil Ng

appreciating take steadily very here? strong look holding to years, demand? on longer-term up a level? are kind you pretty see few that on pretty of to back bring a how take, on Brian, the to quarter. you're to demand your how XXXX, about it think do wanted the get when last more you I strong roofing outlook out to Or and and lapping long inventory And demand would you going Congrats normalized in Roofing channel

Brian Chambers

continues our and perform high Thanks, at market remain Roofing Phil, very strong. continue to morning. good very think business Overall, and I a see demand we to level,

as So our I we good seeing do continuing. backlogs leads good think surveys, we're contractor

back in best our continue strength ongoing the is kind probably of the half the of of of indicator that's that contractor to terms year. work think going we third here in into So and quarter

distributor country. continue out-the-door terms most very strong sales, In sales of the in I remained parts mean, we of hear to that

we've seen think Midwest little I a bit little impact storm of region in bit volume. lower the a with

about rate. in continues remodeling, a re-roof, that on the call that than that lighter continue high little actually I lighter. kind of We saw second fundamental track little storm the think repair, we talked to a very last that a tracking demand at quarter. overall prior year was But and

in a So, I saw shipment close million QX. think square XX to market we

we see amount to that guiding QX. are a We expect similar in

manufacturers, they I can think, much all that. So producing shipping and pretty

And of lot basis. channel increases a a broad so seen not on we've far, inventory

regional low with So but still some there, think are very most historically pockets again, running or I maybe here inventory. distributors

impact of inventory QX we in if quarter, year, the a a And might fourth that's seasonally of the then inventory see here the think a to QX, just expect start last card, QX. some third So robustness that full going outdoor of see in of levels go to continue build. distribution impact strong demand continue the - see we could season bit And If keep see this was the sales, storm we quarter could to then we year that which we will storm don't warm. to that, kind quarter. we fourth a in where as little into wild in bit low for be

So of lot done. roofing there activity was a

would that little year, that's finished probably still inventories year a to a weather bit winter an little going distributor over the season in on if get quarter, into levels, going in could that might out the normal the to suspect a and of this see and carry bit and So, we I XXXX. give dampen But we're more inventory. see and up to for sales impacted catch demand door that distributors opportunity by QX at low

So think pretty we're demand your routine of business. going we're expecting robust I to our part near answer see to the that question, in the second term in

our order probably outdoor and we inventory strong then quarters in year. at this But we So the inventory fundamental take, built. Phil, I continue think as year, manufacturing And inventory get would of desire in driven a I would lows. by sites next to fact, I then for to into think replenish rest of a start at levels our are get see getting think sales because, levels to to historic it demand couple

need And be to So we distribution with need able partners work then to rebuild some inventory. we their also our inventory. to rebuild

quarters of and that our normalized for to both partners. think I would for us levels to the level manufacturing work get So that then get at done a to level our at couple take more distribution

Operator

the Thank next BNP you. question And comes Bromehead with from Exane Yves the Paribas.

Yves Bromehead

stand that achieve anything to helpful. very also and Europe U.S., pricing to would maybe could much. the forward? what on be about help wanted you non-residential some the maybe I where Can of are and if know really technical just insulation granularity the between market. Thank you've on versus levels able if you thinking been that split us you XXXX understand how here, the you additional we going and And you of quantify and the part that provide to could

Brian Chambers

Yes. Thanks.

in strength broad and other technical seen we've businesses. think our I insulation

to be of this applications. residential third wall our is or products. About of mineral a So is that on business this that into foam is our set businesses glass, a going

in in and see the Home. we U.S., our in applications. our insulation example, systems Europe, Flex residential mineral - our In like used For HVAC wall stock of is some

about about industrial. grow above levels. board, a across fact, in in it's So basis. or broadly kind at that, of residential And And those saw two-thirds say a operating and lines product XXXX commercial year-over-year QX, we're speaking, I'd we the third and kind on of

recovery in good end seen we've So the markets.

in I think, the Europe. and U.S. both

from So a we that standpoint, continuing. demand see

more we're I in there. think seeing rebound commercial activity on the a projects. seeing non-res piece, We're

built. pipeline our index ABI where of in and a business some our pretty to reporting other the of We're Dodge momentum in and would robust project kind recent being it's project-driven. of a little that see part that, activity the show U.S., trends more backlogs think this there's I starting

project just now completed an we're increase seeing We're again. seeing in in pipeline. work So getting that increase the

strength I trends. the So say, I think tough and lines. in seeing would we're U.S., both broad And cut to product Europe

We think From both over into the we see don't I pricing business consistent more pricing inflationary that in standpoint, for QX. lines, regions project-based. lagging The cyclicality We're seeing our in downside time. a mix. an of and continue more product we a consistent price/cost on the pretty we're margins is it's of expect businesses do is more bit are like our because we're It's same I residential about that some environment that specified. - to we what growth in. the mean, this that it's love

lines. the We both have in for Europe product U.S. and increases price announced in these

indicated lines in realization. product do as Ken do we we And with the expected we're inflation. inflation with good seeing businesses these comments, of positive are mix, we expect seeing these a I'm think in his businesses, in carefully price/cost these sorry, get because that to QX I we're we're something in of very increased inflation both seeing - but these both watching markets, increased it's in

to the our And offset headwinds. these teams gain to price done commercial have half so, inflationary through great first while work

we technical go take going these a maintain price/cost QX. more specified expect to we and first cost watch half additional forward, think, if good product positive growth I half, positive the the the second to in evaluate into to But, move to these need costs to actions here and offerings continue realization we're us. for we should carefully, we're through to price as we we get As some continue going volume very ensure mix work in

Ken Parks

technical inflation. give those the that quarter of little it, I that price thing the move actions the other that, while a still positive behind only of bit on for We pricing launched And question earlier to and continuing we the those. little as in specificity recover kind said, your we've to did so the bit and well to up. lagging I as overall, in step quarter, on versus pricing Brian insulation comments, And side add beginning achieve and in would a said announced were see is to more just second positive

Operator

with question is Thank Mr. comes next the Truist. Keith Hughes ahead, next from you. And Please comes your Hughes, go line question live.

Keith Hughes

second still you some Just the insulation. anticipate the composite is that products. half built there commodity-type shifting to product? year? on into Are I back some inventory, know those shortages business to And of the more of do that continue of to

Brian Chambers

And product you. referring line I to? are Keith, which didn't you quite catch

Keith Hughes

composite. Within some and composite. some almost composite is insulation. is products capacity technical built Within I there? that at inventory know the of of less in How

Brian Chambers

those Yes. is No. that low. levels Yes. We're in channels seeing are well as inventory -

our use end we and tight even in lot inventory. has for seeing supply And into right of seeing So demand markets, picked into lines, as in up than the going our we're chain. a product are a production fairly not those shipments

levels channels product low there that with still - in think those the are we pretty running as So lines well.

Amber Wohlfarth

one we And for have time last question.

Operator

Michael that you. comes Thank And JPMorgan. Rehaut with from Yes.

Mike Rehaut

here. I sneaking you Thanks. in appreciate guys me

broad three seeing capacity some talked production might Insulation, of it was least, take quarters currently, back Earlier, to across I Roofing that fact to and inventory but you Just not of of question, levels. inventory Composites. to a I inventory levels couple the of rebuild businesses. kind and and you're across give sense businesses, wanted a a roofing, know hoping, your lot at in to increases circle those the channel about it's each

and supply levels whatnot, your basis, If In to When inventory that terms sake, persist. sold-out capacity when order you to say levels working industry might online, inventory more see and a incremental programming’s production and rates normalized level are dynamic. levels you view just out expect, based any even a backlogs production to other current coming in very any just I'm your own on a not backlogs getting demand where When but words, might terms based of have future the today, in of asking demand and even per sense is back - se, everything that expect low. current demand be necessarily capacity? in the of is on where you forecast might you more on let's are, things

Brian Chambers

answer really of kind we a for it's because probably little certainly QX, year. bit we're So going difficult a share that be directly me as with and environment. this little you, the broadly probably indicating it on Mike, to would through to does back the speaking, half finish depend I demand of

to We continue broad demand strength see the in market.

So term. demand our we're for in soften lines the product near not seeing trends

going in. demand that's create to for to so continue And pretty environment to great us operate a

have would produce couple the to we opportunities. been been be Now able continue in to quarters this more to in our half, insulation where up last and lines adds of over and through and continue have that material ramping many capacity we that have composites, make of first product some we

demand to that continue try though a is just now, pretty our think right robust environment. service to up I keeping to view that's So

this into think view QX would we're starts in here I run I clear with and as pretty the picture back chains. environment see But impacts that. half, a demand materializing. think we basis. supply Certainly, supply And as going to going we'll And we operating to best So is more a chain. I 'XX, I to we in get year-over-year overall kind how as go going available how see we – capacity be, finish then on we're 'XX. my – look think tight service some to then have the the into we're of that to maybe

Operator

Thank Brian turn closing floor Chambers to to conclude like any the you. question-and-answer that for would does I session. the comments. And

Brian Chambers

us and We today. been has time outstanding to a your gotten your for everyone, second performance Certainly, questions our appreciate great and quarter start. much Thanks, really Okay. very off has it.

continue to teams growth high global a the of in demonstrating QX. earnings company. our expect of execute people to Our and power year-over-year at of deliver our here earnings and operational quarter really we the another level, exceptional capability revenue And

in quarter remain November you and on then, our call to families XX. healthy forward look with and our we And until hope you safe. speaking during Day I at October your third again Investor So and Thanks.

Operator

Thank now you. conference has presentation. attending Thank The concluded. for today's you

disconnect now may You your lines.

Owens Corning (OC) 28 Jul 212021 Q2 Earnings call transcript