Owens Corning today reported it took in a record $182 million profit from its roofing unit during the second quarter, up from $37 million a year earlier, on a 14% rise in sales to $542 million. But the insulation business swung to a $28 million loss from a $7 million profit the year before as sales slumped 31% to $284 million.
Those groups combined with other operations to push Owens Corning's Building Materials group to $143 million in earnings before interest and taxes (EBIT) for the quarter, more than tripling its $39 million EBITshowing in the April-June 2008 period. This came even though sales for the group slipped 9% to $865 million.
The Toledo, Ohio-based firm noted that increases in selling prices up to the third quarter of last year--increases that have remained in place since then--helped produce increases in net sales. "Roofing unit margins begam improving in the second quarter of 2008 as selling price increases outpaced inflation," it said. "These improvements accounted for substantially all of the increase in roofing EBIT." But sales in volume terms actually declined by an unspecified amount as a result of lower residential construction activity and reduced storm-related demand, the company noted.
As for insulation, declining demand as a result of fewer housing starts was the culprit, Owens Corning said. Underutilization of the company's insulation-producing capacity hurt profit margins.
The Building Materials group's results helped the overall company report $62 million in earnings in the quarter, about 50% better than the $40 million posted a year earlier. This came despite sales dropping by a quarter to $1.2 billion.
Owens Corning said it expects a "challenging" business environment during the second half of 2009. "Capacity will remain curtailed; costs and capital spending will be lower compared to 2008," it said.
"The continued weakness in the U.S. housing industry is expected to negatively affect demand in Owens Corning's Building Materials segment throughout the remainder of 2009," the company added. "In the insulation business, despite significant cost and capacity actions, cost savings are not expected to offset the impact of continued demand-driven weakness. Assuming sustained gross margins in the roofing business, roofing performance will continue to more than offset weakness in the insulation and other businesses. Uncertainties that may impact roofing gross margins include competitive pricing pressure and the cost and availability of raw materials, particularly asphalt. In the insulation and other businesses, Owens Corning is prepared to take further actions to reduce capacity and lower the businesses' cost structure if further weakening occurs. Conversely, the company is prepared to respond to increased demand by bringing additional production capacity back on line."