Owens Corning (NYSE: OC) makes building materials, including fiberglass insulation, asphalt, and roofing products. The company is best known for its trademarked PINK colored residential and commercial fiberglass insulation - but in 2000, the company was forced to file Chapter 11 bankruptcy after over 460,000 personal injury lawsuits filed against the company due to the use of asbestos in its insulation. Owens Corning emerged from bankruptcy in October 2006, and it has since regained its 50% market share in the home and industrial insulation, reinforced plastics, and roofing supplies industries. The company eared $4.8 billion in net sales and $64 million in net income in 2009.
A key factor for the company are the high fixed costs involved in making Owens Corning's products, and that its industry is characterized by short-term contracts that don't guarantee that these costs will be recouped if demand slows. Furthermore, Owens Corning's revenue is also heavily correlated to the slumping U.S. Housing Market -- as new home construction stagnates, so does the demand for Owens' products.
Owens Corning makes building products for both residential and commercial applications. The company has four main business divisions: Insulating Systems, Roofing and Asphalt, Other Building Materials, and Composite Solutions. Owens Corning's largest division by sales is Insulating Systems, followed closely by Composite Solutions and Roofing and Asphalt. The company's smallest division is Other Building Materials and Services, as seen in the charts below. The company sells its products primarily to the transportation, wind energy, consumer electronics, telecommunications, infrastructure, and consumer products markets.
Owens Corning's business is divided into four different segments:
Owens Corning's Composite Solutions is one of the world's leading manufacturers of glass fiber reinforcement material. These fiberglass products are key components to the automotive, transportation, industrial, infrastructure, building products, and consumer markets. Its fiberglass products are used in shingles, tubs, showers, automotive body panels, rail cars, shipping and refrigerated containers, trailers, and commercial ships. Fiberglass products also have thousands of uses in the consumer market, such as sporting goods and the marine industry.
Sales of Fiberglass insulation, Owens Corning's's most profitable product, has been negatively affected by the slumping U.S. Housing Market. Demand for insulation products, and building products in general in the US, is highly levered to the U.S. Housing Market and more specifically New Home Construction and new commercial construction. Due to the collapse of the Subprime lending industry, housing construction has slowed, demand for building products is the US is down, and building companies are being forced to fire employees. Demand for building products is also highly levered to Interest Rates. When rates are high, fewer people build new homes or choose to remodel their existing homes because of the high cost of borrowing money.
Price increases in commodities such as natural gas, asphalt and a large number of chemicals increased Owens Corning's costs and reduce its margins. Despite the slumping U.S. Housing Market, building material costs continue to rise, due to the high cost of fuel to both manufacture and transport the products.
Owens Corning is investing more heavily in Research and Development, recently developing a new type of attic insulation (Atticat), and Advertising. In order to keep its products ahead of the competition in the minds of environmentally conscious customers. Public demand for more energy efficient and 'green' products is rising due to decreased energy costs over time, as well as the desire to decrease individual carbon footprints.
All of the industries which Owens Corning operates in are highly competitive. Despite its high level of brand recognition with its PINK INSULATION, the company's products are generic and compete heavily on price. Owens Corning's four closest competitors are: