Owens Corning posts lower sales, profit in '07

2/28/2008

Owens Corning sold more fiber-glass materials last year to windmill makers and manufacturers supplying the Middle East's booming construction market, but still had a decline in sales.

Hammered by slowing U.S. housing construction, revenues slipped 8 percent to just under $5 billion last year from an adjusted $5.4 billion in 2006, the Toledo Fortune 500 company said yesterday. OC is the nation's largest producer of residential building insulation and a major manufacturer of roofing shingles and faux stone.

Profits before interest payments and taxes on ongoing operations were $145 million, down from $407 million in 2006.

"All in all, we were pleased with the way we finished," Chief Executive Mike Thaman said in a conference call with analysts. "Our results were in line with our expectations in a very difficult market environment for our North American building materials businesses."

The company adjusted its report to exclude from 2006 revenues sales from its former vinyl siding business and certain other businesses that were sold or closed last year. That reduced 2006 revenues from the originally reported $6.5 billion.

Profits last year were $96 million, or 75 cents a share. That compared with a profit of $8 billion in 2006, but that number mostly reflected accounting moves connected to the firm's exit from Chapter 11 bankruptcy in late 2006.

"The report is basically in line with what I've been seeing for many of their peer companies," said Keith Hughes, a financial analyst with SunTrust Robinson Humphrey, an investment bank in Atlanta.

He sees more of the same this year. "It's going to be a difficult year for housing-related businesses."

The earnings report came one day after Moody's Investors Service cut OC's credit rating three notches to noninvestment grade because of weak U.S. building material sales. The rating was trimmed from to Baa to Ba, which is a so-called "junk."

The development will raise OC's costs of borrowing money.

But Duncan Palmer, company chief financial officer, downplayed its significance.

"We are disappointed," he said during the call. "But it makes a minimal difference to our interest expense and we have ample liquidity to operate our businesses."

Up to 200 more employees, mostly outside North America, could be trimmed from its fiber-glass-reinforcements busi-ness as the firm continues to merge the operations with those formerly owned by France's Saint-Gobain, officials said. The 2007 merger created the world's largest fiber-glass manufacturer with sales throughout the world. It has already trimmed 100 employees, which will help cut expenses by $30 million in 2008.

The deal was originally expected to boost OC revenues by $900 million, but the sale of plants in Belgium and Norway to resolve anti-trust concerns will trim that by $300 million.

Strong fiber-glass sales helped offset weak building material sales, which were down 15 to 20 percent across product lines.

To keep the businesses profitable, the company trimmed its workforce by 1,100 people to about 19,000 and reduced production. The moves will trim expenses by $100 million annually. OC has 950 employees at its world headquarters on Toledo's downtown riverfront.

In the fourth quarter, the firm reported a loss of $46 million on sales of $1.3 billion that were slightly higher than in the year before.

OC shares slipped 43 cents, or 2 percent, to $19.01 in trading yesterday on the New York Stock Exchange.

Contact Gary Pakulski at: gpakulski@theblade.com or 419-724-6082.