Construction and Housebuilding
Owens Corning falls after announcing Q1 results
26 April 2012
FACTS: Owens Corning (OC US) announced Q1 2012 results before US markets opened on April 25th. Revenues in the first quarter rose 9% to $1.35bn, ahead of the $1.3bn expectation. However, adjusted EBIT fell 30% while adjusted EPS of 9c was 59% lower than the Q1 2011 result and sharply below the 31c expectation. The stock fell 3.5% following the announcement.
ANALYSIS: By division, OC's insulation revenues rose 14% year-on-year (yoy) in Q4 and the division narrowed its Q1 loss from $47m in Q1 2011 to $34m. Q2 2008 was the last quarter in which this division turned a profit. The performance of the division has a limited read-through for Kingspan as OC is mainly focused on residential and is a fibre manufacturer.
In roofing, revenues and EBIT rose 19% and 8% yoy respectively in Q1. This is relevant for CRH and Saint-Gobain (both in terms of distribution) and the shrinkage in the trading margin was attributed to asphalt price inflation.
OC's composites business remains challenged: revenues fell 3% yoy and EBIT was down 52% on the first quarter of 2011. As previously acknowledged, weakness in the European glass fibre reinforcements market was cited. Reacting to this, OC will incur c.$130m in restructuring costs in 2012/2013 (unchanged from previous guidance). OC's composites business is essentially reinforcement glass and other materials used to create alternative products, which has some read-through for Saint-Gobain.
DAVY VIEW: Based on OC's comments, the demand outlook into 2012 for roofing products in the US should remain firm. Beneficiaries of this will be CRH and Saint-Gobain, although the latter may be impacted in its High Performance Materials division by the type of weakness OC is seeing in its composites business.