Owens Corning Q4 FY2024 Earnings Call

Good morning, everyone, and welcome to Owens Corning's fourth quarter and full year 2024 earnings call. My name is Lydia, and I'll be your operator today. After the prepared remarks, there will be an opportunity to ask questions. If you'd like to participate in our Q&A, you can do so by pressing star followed by one on your telephone. We kindly ask that you limit yourself to one question. I'll now hand you over to Amber Wohlfarth, Vice President of Corporate Affairs and Investor Relations. Please go ahead.

Good morning. Thank you for taking the time to join us for today's conference call and review of our business results for the fourth quarter and full year 2024. Joining us today are Brian Chambers, Owens Corning's Chair and Chief Executive Officer, and Todd Fister, our Chief Financial Officer. Following our presentation this morning, we will open this one-hour call to your questions. In order to accommodate as many call participants as possible, please limit yourselves to one question only. Earlier this morning, we issued a news release and filed a 10-K that detailed our financial results for the fourth quarter and full year 2024. For the purposes of our discussion today, we have prepared presentation slides summarizing our performance and results and will refer to these slides during this call. You can access the earnings press release, Form 10-K, and the presentation slides at our website, owenscorning.com. Refer to the investors link under the corporate section of our homepage. A transcript and recording of this call and the supporting slides will be available on our website for future reference. Please reference slide two where we offer a couple of reminders. First, today's remarks will include forward-looking statements that are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for more detail. Second, the presentation slides in today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in our earnings press release and presentation available on the investors section of our website, owenscorning.com. For those of you following along with our slide presentation, we'll begin on slide four. And now, opening remarks from our Chair and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us today. During the call this morning, we will begin with a brief overview of our fourth quarter and full year 2024 results, before providing an update on the key strategic choices we've made over the past year as well as future investments we're making to position Owens Corning for long-term growth. Todd will then discuss our fourth quarter and full year financial results in greater detail. And I will come back to share expectations for our end markets and outlook for the first quarter. 2024 was a transformative year for Owens Corning as we successfully executed three major strategic moves to reshape and focus the company on building products in North America and Europe, while consistently delivering higher, more resilient earnings and cash flow. In addition to the acquisition of Masonite, the sale of our building materials business in Asia, and most recently, the sale of our glass reinforcements business, we also announced several capital investments to expand our capacity in highly profitable product lines that will further strengthen our market positions and drive organic growth. While market conditions were mixed across our business segments during the year, the combined power of our enterprise resulted in revenue, earnings, and cash flow growth. Through outstanding execution, we have demonstrated that Owens Corning is a best-in-class building products leader that consistently delivers strong financial performance and is positioned for future growth. Let me start a review of the quarter and the year with safety. In 2024, our team drove steady improvement of our already top-tier safety results through our Safer Together operating framework. Our recordable incident rate for the fourth quarter was 0.5, and we ended the year with a 25% reduction in injuries versus the prior year. Since acquiring Masonite in May of last year, we've been working closely to integrate safety systems and processes and have delivered a significant improvement in performance. In addition to great safety performance, we also delivered strong financial results for the quarter and the full year. For the fourth quarter, we closed out the year delivering revenue of $2.8 billion, up 23%, with an adjusted EBIT margin of 15% and an adjusted EBITDA margin of 22%. Q4 marks our eighteenth consecutive quarter delivering mid-teens or better adjusted EBIT margins and 20% or better adjusted EBITDA margins. For the full year, we delivered revenues of $11 billion, up 13%, adjusted EBIT of $2 billion, and adjusted EBITDA of $2.7 billion, as each of our businesses delivered strong results relative to market conditions, including EBIT margin expansion in our core roofing and insulation businesses. Our consistent performance over the past several years demonstrates the structurally higher and more resilient earnings profile we have built for the company, creating a cash-generating engine that has allowed us to make strategic investments in our businesses and return significant cash to shareholders. In 2024, we returned 51% of free cash flow to our shareholders. 2024 also marked our eleventh consecutive year of increasing our dividends. These actions demonstrate our commitment to a disciplined capital allocation strategy, all while continuing to invest in growth and innovation. In addition to delivering strong financial results, we executed our enterprise strategy to reshape and focus Owens Corning as a leading residential and commercial building products company in North America and Europe. A key driver of our long-term performance has been our operating discipline to focus on products and geographies where we can build market-leading positions. In line with this disciplined approach, we executed three major strategic moves during the year. First was our acquisition of Masonite. This acquisition expanded our portfolio of branded residential building products into a complementary category and was an important step in our long-term growth strategy. It has significantly expanded our addressable market and provides a great opportunity for us to create a scalable growth platform. We are seeing immediate benefits from the acquisition as we execute our integration playbook. By leveraging our enterprise scale, we are on track to achieve our synergy commitment in the first two years of ownership. Through our brand leadership, extensive customer and channel knowledge, manufacturing expertise, and leading technology, we continue to see opportunities to drive both cost and revenue synergies on a path to achieving 20% EBITDA margins in the business. The second major move was our decision to sell our building materials business in China and Korea. This divestiture simplifies our geographic footprint and supports our strategy to grow our building products businesses in North America and Europe. The third major move was the exploration of strategic options for our glass reinforcements business, which we recently completed with the signing of a definitive agreement to sell the business to Pranic Group. As we shared at the start of the process, the glass reinforcement business primarily services industrial applications that are outside of our strategic focus to invest and grow in residential and commercial building products. The transaction is expected to close later this year, subject to customary regulatory approvals and other conditions. In addition to these major strategic moves, we've been focused on strengthening and growing our core businesses by investing in new capacity and modernizing our manufacturing facilities. In roofing, we recently announced our newest investment to expand our shingle capacity with the addition of a new laminate shingle manufacturing facility. This plant will operate a full-wide laminator capable of producing around six million squares per year. The additional capacity will be used to service the continued strong demand for our product, including our premium duration shingles, and support ongoing market growth in the Southeastern US, which is the biggest asphalt shingle region in the country. We plan to announce the specific location for the new plant later this year, with production expected to begin sometime in 2027. This new facility complements the other investments we have made to expand our shingle capacity, including our new laminated shingle line in Ohio, which is expected to start up midyear. We are also excited to begin capitalizing on a recently commissioned glass nonwoven plant, creating incremental capacity to serve our growing roofing business as well as other building product applications. Within our insulation business, we are also investing to increase production capacity and further strengthen our flexible, cost-efficient manufacturing network. In 2024, we announced the addition of a new fiberglass insulation production line in our Kansas City facility. Expected to be operational in 2027, the new line will give us the capability to rebalance our network and increase capacity to serve both residential and commercial applications. In addition, our new formula NGX plant in Arkansas is expected to come online later this year to serve the growing demand for XPS insulation. And in Europe, we're making good progress on converting our mineral wool plant in Sweden from coke-fired furnaces to electric melting. This move strengthens our market-leading position in the region while improving manufacturing efficiency, reducing emissions, and meeting our European customer needs. Collectively, these three investments will support growth of core insulation products while continuing to improve our winning cost position in the business. As we invest for growth, we will continue to be disciplined capital allocators, focusing on markets and product lines where we can build leading positions through our unique enterprise capabilities. Over the past several years, we have proven our ability to grow our business while consistently enhancing shareholder value through our capital allocation strategy of returning approximately 50% of free cash flow to investors over time through dividends and share repurchases. As a result, in the past three years, we've more than doubled our quarterly dividend. And since 2020, we have bought back more than 20% of our outstanding shares. This demonstrates both the cash-generating power of Owens Corning and our disciplined approach to deploying capital. In summary, our teams achieved many accomplishments in 2024, delivering outstanding financial performance while reshaping the company as a focused building products leader in North America and Europe. Before turning over to Todd, I want to thank our team for their tremendous work throughout 2024. We are proud of our achievements, which are also being recognized by others, including being named to the Wall Street Journal's top 250 best-managed companies and earning a place on the Dow Jones Sustainability Index for the fifteenth consecutive year. These acknowledgments reflect the incredible effort and dedication that our team brings to work every day to help our customers win and grow in the market and drive the success of our company. I will now turn it over to Todd to discuss our fourth quarter and full year financial results in more detail.

Thank you, Brian, and good morning, everyone. As Brian mentioned, we finished the year with strong performance in the fourth quarter and outstanding results overall in 2024. We drove double-digit gains in top-line sales, adjusted EBITDA, and operating cash flow versus the prior year. Throughout 2024, the structural improvements we have made to the enterprise and the best-in-class commercial and operational execution from our team came through in our results. We have multiple paths to sustain our structurally higher EBITDA margin, deliver strong cash generation, and return significant cash to shareholders. By leveraging the strength of our Owens Corning operating model, delivering on the multiple organic investments in new highly efficient manufacturing plants, and executing our strategic plans to deliver the full potential of the Doors business, I'd now like to turn to Slide five to discuss the results for the quarter and the full year. In the fourth quarter, we delivered top-line and bottom-line growth. Adjusted earnings per diluted share for the fourth quarter were $3.22, in line with the prior year. For the full year 2024, adjusted EBIT grew to $2 billion, and adjusted EBITDA grew to $2.7 billion. Our roofing and insulation business segments delivered robust year-over-year margin expansion, driving an adjusted EBIT margin of 19% and adjusted EBITDA margin of 25% for the company overall. Our full-year adjusted earnings per diluted share were $15.91, up 10% from 2023. For the year, adjusting items, mostly noncash charges, tied to the three major strategic moves we made this year totaled approximately $910 million and are excluded from our full-year adjusted EBIT and adjusted EBITDA. They include $483 million of asset impairment charges resulting from the strategic review of our glass reinforcements business, $132 million of transaction and integration costs stemming from our acquisition of Masonite, which took place in May, $91 million of charges associated with the announced sale of our building materials business in China and Korea, and $86 million of charges associated with our ongoing cost optimization and product line rationalization actions. Turning to slide six, throughout 2024, we demonstrated the power of our cash generation and disciplined capital allocation strategy. At the end of the year, our net debt to adjusted EBITDA was below our target range of two to three times, including taking on the additional debt from the Masonite acquisition, paying off $400 million on our 2024 notes, and meeting our commitment to return at least 50% of free cash flow to shareholders over time. Strong earnings and continued discipline on working capital resulted in $479 million of free cash flow in the quarter and $1.2 billion of free cash flow for the year, an increase of over $50 million from the prior year. Free cash conversion was 89% of adjusted earnings. Full-year capital additions were $647 million, inclusive of $73 million of capital expenditures related to the Doors segment. Even as we make significant new organic investments in US and European manufacturing capacity, we remain focused on capital efficiency through productivity and process innovations. As a result of strong commercial and operational execution, our return on capital was 16% for the year. At year-end, the company had liquidity of $1.7 billion, consisting of approximately $400 million of cash and $1.3 billion of availability on our bank debt facilities. During the fourth quarter of 2024, we returned $152 million to shareholders through share repurchases and dividends, bringing the year-to-date total to $638 million or 51% of free cash flow. In December, the board declared a cash dividend of $0.69 per share, an increase of approximately 15%. Our commitment to our capital allocation strategy remains focused on generating strong free cash flow, returning approximately 50% to investors over time, and maintaining an investment-grade balance sheet, all while executing on our business strategies to grow the company. Now turning to slide seven, I'll provide additional details on our segment results. The roofing business finished the year with another quarter of strong demand for our shingles. Sales in the quarter were $912 million, down slightly from the prior year. We continue to see strong demand for our shingles and have positive price realization inclusive of our August price increase. The US asphalt shingle market on a volume basis was up 1% compared to the prior year. The higher demand was primarily in Florida, the Southwest, and the Southeast, driven by higher storm demand. Our US shingle volume was in line with the market. Components volumes were down as attachment rates continue to normalize and distributors worked through channel inventories of these products. This also is the last quarter with the year-over-year impact from the strategic exit of our protective packaging business. EBIT was $280 million for the quarter, down slightly versus the prior year. We saw higher manufacturing costs as we continue to invest in our assets to meet the high level of demand for our products. For the quarter, we delivered EBIT margins of 31% and EBITDA margins of 32%. For the full year, sales were $4.1 billion, up slightly versus 2023. Our contractor engagement model continued to drive demand for our shingles. We had positive price realization on our announced increases in April and August. The US asphalt shingle market on a volume basis was up 2% compared to the prior year. Storm-related demand remained above the long-term average. Our US shingle volumes were relatively flat as we remained on plan to meet the market. The market continued to shift to a higher mix of laminate shingles. We were able to serve more demand for these products as a result of investments in debottlenecking to create additional capacity, which delivered record laminate shingle production. For the year overall, components volumes were down due to the normalizing attach rates. Volume also was impacted by the strategic exit of our protective packaging business. For the full year, EBITDA was $1.3 billion, up $124 million versus last year. The increase was primarily due to positive price and favorable mix offsetting the components volume decline. The resulting EBIT margins for the year were 32% and EBITDA margins were 34%. Now please turn to slide eight for a summary of our insulation business. The insulation business finished the year strong with its fifteenth consecutive quarter of 20-plus percent EBITDA margins. Q4 revenues were $926 million, in line with the prior year. We saw revenue growth in North America residential and continued realization on our midyear price increase. Volumes in residential were down slightly. In technical and global, revenue was down. While strong execution resulted in growth for our fiberglass technical insulation products in North America, demand headwinds were fueled by a soft market environment outside of the US. Insulation EBIT for the fourth quarter was $155 million, up $5 million compared to the prior year. We saw incremental manufacturing costs that were more than offset by positive price realization. Overall, insulation delivered EBIT margins of 17% and EBITDA margins of 23% in the fourth quarter. For the full year, insulation net sales were $3.7 billion, up slightly compared to the prior year. Strong commercial execution delivered positive price realization overall, which was partially offset by lower volumes. EBIT increased $63 million to $682 million, with EBIT margins of 18% and EBITDA margins of 24% for the full year. Moving to slide nine, I'll provide an overview of the Doors business. Overall, the business performed well in a challenging market, with volumes remaining relatively flat sequentially. In the quarter, the business generated revenue of $564 million. This revenue includes the volume and price impact of the softer markets in North America and Europe. EBIT for the quarter was $29 million, including $18 million of impact from purchase accounting. EBITDA for the quarter was $82 million. Overall, Doors generated an EBIT margin of 5% and EBITDA margin of 15% in the fourth quarter. The integration is progressing very well. When we closed on the acquisition, we had line of sight to delivering $125 million of enterprise synergies by the end of year two, with about half hitting the Doors business. We are on track to meet or exceed the enterprise commitment. In 2024, we've recognized approximately $30 million of OpEx and sourcing synergies in our consolidated P&L, which would run rate to about $75 million annually. Since acquiring Masonite on May 15, 2024, the Doors segment has delivered $1.4 billion of revenue and $232 million of EBITDA. Slide ten provides an overview of our composites business. Before I discuss the results, as Brian mentioned, we have successfully finished the strategic review of the glass reinforcements business and entered into an agreement to sell the business to Pranic Group. The enterprise value of the business is $755 million, and we expect net after-tax proceeds of approximately $360 million, including $225 million of notes to be issued to the company by the purchasers. We also expect to sell approximately $100 million of excess metal alloy from the glass reinforcements business after closing. We will look to deploy the proceeds in line with our capital allocation strategy, investing to strengthen our existing businesses and return cash to shareholders. With the conclusion of the strategic review, glass reinforcement results will be reported as discontinued operations. Our vertically integrated glass nonwovens business and our structural lumber business will operate within the roofing system. We also will continue to operate two glass fiber plants that supply nonwoven to external customers. These plants will operate and be integrated into the insulation segment. These changes will be effective for 2025 reporting, and we expect EBITDA margins for the added revenue to be approximately in line with the overall margins. We will share more details on the comparable periods when we report Q1 results. With glass reinforcements being reported as discontinued operations going forward, I will review the business results briefly. Sales for the quarter were $515 million, in line with the prior year. Nonwovens grew in the quarter with positive price and stronger demand in North America. EBIT for the quarter was $47 million, up $21 million from the prior year. Overall, composites delivered 9% EBIT margins and 18% EBITDA margins for the quarter. For the full year, net sales of $2.1 billion decreased 7% compared to the prior year. Nonwovens recognized positive price on stable volumes. EBIT for the year was $215 million, a decrease of $27 million from last year. Overall, composites delivered 10% EBIT margins and 19% EBITDA margins for 2024. Moving on to slide eleven, I'll discuss our full-year 2025 outlook for key financial items. General corporate expenses are expected to range from $240 million to $260 million. This increase includes our best view of expenses for the glass reinforcements business that will not be included in discontinued operations. We are early in the process and will provide updates as we work towards the close. Our corporate eliminations will also change with the resegmentation. Nonwoven sales to shingles will now be eliminated within the roofing segment, and the glass fiber sales to nonwovens will be eliminated at the corporate level. This should result in corporate eliminations of approximately half of what we saw in 2024. Capital additions are expected to be approximately $800 million. This level of capital investment reflects the strategic investments Brian mentioned in his opening. We have several multiyear organic investments to bring on new manufacturing capacity and drive long-term growth. This CapEx continues to include glass reinforcements. We expect CapEx to remain elevated in the near term as we progress towards completing the attractive, high-return, capital-efficient projects we have discussed on this call. Before CapEx is expected to return to levels in line with our previous guidance. One other item I would like to discuss before turning the call back to Brian is a change in the primary measure we will use for year-over-year comparisons. Historically, we have used adjusted EBIT as our primary operational performance metric. Beginning in 2025, we will use adjusted EBITDA. This gives more visibility to the cash generation of Owens Corning and provides a more accurate view of operational performance without the impact of purchase accounting. Now please turn to slide twelve, and I'll turn the call back to Brian to further discuss our outlook.

Thank you, Todd. Throughout 2024, our team delivered great results, demonstrating the strength of our market positions and the impact of the strategic choices we have made over the past several years to position Owens Corning to deliver long-term growth, generate significant free cash flow, and sustain higher margins. Turning to our outlook, we expect our residential and commercial end markets to provide solid but mixed opportunities as we enter into the first half of 2025. In North America, we expect near-term demand for non-discretionary repair activity, especially in roofing, to remain stable, while residential new construction and other remodeling activity is expected to be weaker to start the year as interest rates remain elevated. Commercial construction activity is also expected to start the year slower than the prior year. And in Europe, we expect near-term market conditions to remain challenging but stable, similar to the second half of 2024. Within this environment, we still expect first-quarter revenue for continuing operations to grow mid-20% compared to the prior year's revenue of $2 billion after adjusting for glass reinforcement. For EBITDA, we expect to deliver another strong quarter of low 20% for the enterprise. Now, consistent with prior calls, I'll provide a more detailed business-specific outlook for the first quarter. Starting with our roofing business, we anticipate our revenue for the legacy roofing segment to be in line with the prior year. We expect our market shipments to be flat to slightly down versus the prior year. We anticipate our shipments to be relatively flat as distributors continue to see high demand for our products and are expected to build inventory of our shingles. For components, we anticipate volumes in the quarter to be down versus the prior year as we expect another quarter of attachment rates normalizing. We expect positive price from our previous announcements to offset higher manufacturing costs, which is being carried over from the end of 2024 as we invest in our assets to continue to meet the high level of demand for our products and absorb the cost of maintenance. Compared to Q1 of last year, we also anticipate input cost inflation. In addition to shingles and components, as Todd mentioned, nonwovens and our structural lumber businesses will now be part of the roofing segment going forward. With this change, we expect approximately $130 million of additional revenue in the roofing segment in Q1 at similar margins to the roofing business. Overall for roofing, we anticipate generating an EBITDA margin of approximately 30% in the first quarter. Moving on to our insulation business, we expect revenue for the legacy segment to be down slightly versus the prior year, with ongoing price realization largely offsetting lower volumes. We expect the newly added glass fiber plants to add approximately $30 million of revenue. In our North American residential insulation business, we anticipate revenue to be up slightly versus the prior year. We expect carryover price realization from the June increase to be partially offset by lower volumes as we work through slower lagged housing starts versus the prior year and construction cycles returning to normal. In technical and global, we expect revenue to be down modestly versus the prior year, with lower volume partially offset by positive price. In North America, our top line is expected to be relatively stable, while in Europe, market demand remains soft but stable sequentially. For the overall insulation business in the quarter, we expect to incur cost inflation with price cost remaining positive. Given all this, we expect to generate an EBITDA margin for insulation, including resegmentation, of low 20%. Turning to the Doors business, the business continues to perform well relative to market conditions, with Q1 revenue anticipated to be down modestly versus Q4 on slightly lower price and volume sequentially. In addition, we anticipate ongoing synergies and cost controls to largely offset the tariff recovery we recognized in the fourth quarter. Overall for Doors in the quarter, we anticipate EBITDA margins of low double digits to low teens. With the resegmentation, the results of our glass reinforcements business will be excluded from continuing operations. One other item that could impact our results going forward is the implementation of additional tariffs. While the majority of our products are made with local materials and sold in local markets, we operate an integrated supply chain that spans Canada, Mexico, and the US, which could result in additional costs. With that view of our businesses, I'll turn to a few enterprise items. As I shared at the start of the call, 2024 was a transformative year reshaping the company into a focused building products leader in North America and Europe. Through our unique enterprise capabilities, market-leading positions, and consistent execution, we are positioning Owens Corning to continue to outperform the market. As we grow, we will continue to be disciplined operators, committed to strong cash flow generation and a balanced capital allocation strategy, returning at least 50% of free cash flow to shareholders over time. Before moving on to the Q&A session, I'd like to highlight one other item from this morning's press release. We will be hosting an investor day at our world headquarters in Toledo, Ohio, this May. As a new Owens Corning, members of our executive leadership team and I look forward to sharing more about our strategy and financial goals for the future. In closing, I want to recognize the outstanding results our team delivered in 2024 while making significant strides to position OC for the future. We have built multiple paths to achieve 20% or more adjusted EBITDA margin, mid-teen returns on invested capital, and significant free cash flow. As we begin 2025, we are focused on successfully integrating the Doors business, continuing to strengthen our core product lines, and leveraging our enterprise scale and capabilities to help our customers win and grow in the market while creating value for our shareholders. With that, we would like to open the call up for questions.

Thank you.

Please press star followed by the number one if you'd like to ask a question. Ensure your device is unmuted locally when it's your time to speak. A kind reminder to please limit yourself to one question only.

Good morning. I was wondering if you could walk through maybe in a little bit more detail potential tariff impacts and the mitigation strategies that you referenced. And if there's any way to kind of quantify either percentage of COGS, percentage of sales, or just any of the platform components of it.

Good morning, Anthony. It's Todd. Appreciate the question. When we step back, we look at our execution over a longer period of time, the last five years, and we've been in a lot of different markets. We were in the COVID period where demand was really weak, the COVID period where demand was really strong. We had supply chain challenges, we had an inflationary period, we had relatively mixed markets last year. And I think what you've seen from us is really consistent execution through all those periods driving good, stable high EBITDA margins as well as free cash generation. When we look at tariff exposure, as Brian shared in his comments, we are mostly local for local. We produce with significantly local cost of goods sold for local customers. When we look then at what our tariff exposure could be, if we look at all of the discussed tariffs, so China, steel and aluminum, as well as Canada and Mexico, the scope that you're looking at is five percent or less of our total cost for the enterprise. So when we think about that, a lot of that is finished goods, where we've got an integrated supply chain across North America, where we're supplying product from Mexico and Canada into the US. It's not really a big deal in our roofing business. It's a de minimis exposure in roofing. So when you think about that COGS exposure or the cost exposure across the enterprise, it's about two-thirds doors and then about one-third of insulation. And as I started with, our track record of execution is we're in dynamic markets. As we face those dynamic markets, we use all the tools that we have available to us to offset that in the short run and in the long term and get back to market-leading margins. Appreciate the question, Anthony.

Thank you. Our next question comes from Michael Rehaut with JPMorgan. Please go ahead.

Thanks. Good morning, everyone. Thanks for taking my question. I wanted to focus on pricing trends as you see them coming out of 2024 and into 2025, especially around your residential markets. I think there's been various amounts of concern regarding the potentially softer start in some of the new res and repair remodel segments. How are you thinking about pricing power in 2025, particularly, if you could kind of hit on insulation, roofing, and doors, and if there's any changes perhaps that you might be anticipating this year relative to the pricing power you've enjoyed over the last couple of years?

Thanks, Mike. I'll start. Maybe I'll have Todd join in as we walk through. If I step back, I think we've had very good pricing trends in our core residential insulation businesses, our technical insulation business, our roofing business. And we're stepping into the market now with the doors business. So I think across the product platforms, we have seen some mixed end market conditions through 2024 and into 2025, and that's probably leading to a little bit of mixed pricing trends that we're seeing. But overall, I'd say within our roofing business, we continue to see good demand for our products. We continue to bring great value to our customers. And so there, you've seen really positive price cost over the last year through some of the price realization that we've gotten through the increases last year. We've got another one announced in April in roofing. And given the strength of the market conditions we see in front of us, the strength of our product offering, we would expect to continue to see good realization there. In the doors business, I think we've seen a little bit of mixed end markets. Overall, the pricing in the market is relatively stable as we start the year, which is good to see. Our pricing moves that we've seen, a little bit of pricing headwinds that you're seeing in our outlook is really related to our focused moves to get our price points in the market in line with historic premiums that we've had in the market relative to our service, our quality, and our innovation. But in terms of stability in the market, we're seeing relatively good stability on the pricing. Some of the pricing moves we're making that we made in the back half of the year and in the fourth quarter, we're going to see some carryover effects as we get those price points stabilized in the market. I'll pass to Todd for more color on residential insulation.

Mike, this is Todd. Appreciate the question. When we step back and look at residential insulation, we've said before we think the industry can serve a market around 1.4 to 1.5 million housing starts. That was before we saw the shift towards single-family from multifamily. When we look at single-family, we see about 30% higher take per unit for a start than with multifamily. So we're in a market where we're still seeing good demand trends. Recent starts activity has been right around that level of 1.4 to 1.5 million, and we think utilization is still at healthy levels for the industry. Our estimates would be in Q4 we were into the high 90% range of utilization for insulation in these markets. So we had positive price in Q4. Our guide for Q1 is positive price in residential insulation. We know how to navigate through markets like these where there is some noise from builders and others right now as we start the year, but that's not uncommon in residential. We'll execute the way we have been in these markets to make sure we drive the right price points in the market for the year. Appreciate the questions, Mike.

Our next question comes from John Lovallo with UBS. Your line is open.

Good morning, guys. Thank you for taking my call. The question is, roofing will include about $130 million of revenue from structural lumber, nonwovens, and insulation, about $30 million from the glass fiber plants. How do we think about the cadence of that as we move through the year? Should we expect the revenue contribution to just step up seasonally, or what's the right way to think about that?

Yeah. Thanks, John. I think you can think about the revenue in that side of the business as being fairly consistent across the year. There's a little bit of seasonality on the nonwoven side that we see in the fourth quarter because some of that production is tied to roofing demand, which tends to slow down a little bit in the fourth quarter on seasonality. But overall, you could kind of look at those revenue guides as pretty ratable in terms of quarterly guides going forward in the business. And then the margin profile is going to stay very consistent with the underlying businesses that we've attached those to. So a little color on why we're doing that and how that's setting up: when we announced our strategic review, it focused on the glass reinforcements business, which is more industrial and doesn't fit our long-term building products strategy. Nonwovens and lumber are very focused on building products. They give capabilities in the roofing business with a vertical integration play. The lumber business uses distribution partners and a go-to-market strategy similar to shingles. Bringing nonwovens and lumber into roofing gives operational efficiencies and commercial opportunities to expand those product lines. The nonwovens business makes a specialty fiber called WUX and has two facilities in North America; we wanted to maintain that vertical integration for supply security because it's critical to roofing profitability. The glass melting operations are best served inside insulation. So there's operational and commercial rationale for placing these businesses within roofing and insulation. We expect them to generate margin profiles similar to the underlying roofing and insulation businesses and be a good operational fit that provides margin stability going forward.

Our next question comes from Sam Reid with Wells Fargo. Please go ahead.

Awesome. Thanks so much. Wanted to touch on some of the capacity that's coming online later this year in roofing. Specifically, could you talk to the margin lift from mix? It should come from incremental laminate capacity, especially as some of that is replacing lower margin strip shingle capacity that's coming offline. Thanks so much.

Thanks, Sam. We've not provided detailed splits between strip and laminate margin profiles, but you're correct that we expect a positive mix shift with more laminate sales. That shift has been a driver of margin performance over the last several years and has supported our ability to raise and sustain margins. We've seen about a one-and-a-half point mix shift from strips to laminates in the industry, which is why we've invested to increase throughput and laminate capacity and why we converted the Medina facility from strip to laminate. That facility is expected to come online midyear. It will provide additional laminate capacity that will ramp up through the back half of this year and into next, giving us a stronger platform in the Midwest to serve customer demand for laminate products.

Thank you. And next question comes from Matthew Bouley with Barclays. Please go ahead. Your line is open.

Morning, everyone. Thank you for taking the question. I wanted to ask on the new roofing capacity or the new plant. In an industry that is also adding capacity over the next couple of years, depending on demand, it would be helpful if you could give perspective on how you think about the impact of new capacity on roofing industry margins and roofing industry price and how you think about incentives of getting plant utilization to a certain level. Thank you.

Okay. Let me walk through our view and why we're adding capacity, then touch on the industry. We're excited about adding a new plant in the Southeast, the largest asphalt shingle market in the country, which also sees significant storm activity. We have limited capacity with our three plants in the region today to service incremental demand. The new plant gives us opportunity to service incremental storm demand and enough capacity in the region to consider servicing other regions differently, allowing us to change service cycles and create additional capacity in the Midwest and Southwest. Regarding industry capacity announcements, not all announced capacity is incremental. Some manufacturers are replacing older, less efficient assets driven by regulation, cost, and efficiency, so the announcements don't necessarily equate to net new incremental capacity. Over the last four or five years, additional capacity announcements have not impacted demand structure, pricing, or margin profile materially. Roofing is a material conversion business with relatively low fixed and labor costs, allowing lines to flex cost-efficiently and still generate strong margins. We feel good about adding capacity to service customer demand and provide flexibility to optimize our network and continue to generate strong margins while servicing incremental volumes we have not been able to reach in recent years.

Our next question comes from Stephen Kim with Evercore. Please go ahead.

Thanks very much. Thinking on utilization rates, insulation, I think you indicated utilization rates were at the high nineties in the fourth quarter for fiberglass in North America. Can you talk about what utilization rates look like across your technical footprint? And with the glass plants that you're transferring to the business, what does the annual DNA look like associated with those two facilities? You said margins will be similar—are we talking within a couple of hundred basis points or something broader?

Good morning, Stephen. When we look at technical and global insulation, the bulk of the North America technical business uses similar assets to our residential side, so utilization rates are relatively healthy and attractive in North America. The areas with weakness have been in international markets, especially Europe and Asia. We haven't announced a transaction to divest Asia, so Europe is our remaining global exposure for technical and global. Our team has performed well in difficult market conditions, particularly since the start of the Ukraine conflict; demand in Europe has been soft. We've focused on cost structure and cash generation in that business and have repositioned it for weaker market conditions. There is excess capacity in Europe, and when demand recovers, we are well-positioned to capture attractive incremental margins due to the work we've done. Regarding the two WUX plants we're adding to insulation, their DNA is similar to composites overall. We've invested a lot in nonwovens capacity because those are growing attractive markets. The ongoing capital intensity and rebuild cycle for nonwovens are different from glass melting assets; nonwovens assets are more like roofing assets from a maintenance perspective and don't require the heavy maintenance cycles of glass melting. That's part of the logic for integrating nonwovens into roofing. You should not read the investment into nonwovens as indicating heavy ongoing capital intensity; it's materially different from traditional glass melting assets.

Our next question comes from Brian Biras with research. Your line's open.

Hey. Good morning. Thank you for taking my question. On R&R demand, if it comes in a little bit better for the year or whenever it starts to pick back up, that should be a boost to the door segment given the R&R aspect there. How are you thinking about price versus volume and share gains for the door segment when R&R returns to growth?

Thanks, Brian. We expect that type of rebound as we move through 2025. The doors business is mixed between new construction and R&R activity, slightly skewed to new construction but with a meaningful R&R component. We saw weakness in R&R through 2024 and expect improvement through the year. We're applying the same operating model we use in insulation and roofing: focus on customers, product and process innovation, and manufacturing performance, service, quality, and cost competitiveness. We're starting to see momentum from that playbook. Q4 volumes were a little better, and our commercial teams are strengthening distribution partnerships. We're looking at downstream pull-through activities with lumber dealers and investments focused on home centers to drive our service proposition. We'll focus on pricing to value; we carry a price premium based on our value proposition that we expect to continue, but we will prioritize winning with customers. As markets recover, we expect good volume growth and margin improvement for doors.

Our next question comes from Trevor Allinson with Wolfe Research. Your line's open.

Hi. Good morning. Thank you for taking my question. Going back to roofing margins for 2025, maybe excluding any impact from nonwovens: you've got a couple of price increases in 2024 that carry over, another for April. You mentioned some cost inflation, but you're also expecting to be price-cost positive. Should we think about healthy core roofing margins year over year going into 2025, or are there other notable offsets to consider?

Trevor, you're thinking about it correctly. We are set up for another very good year in roofing. We have price carryover, and we do expect more inflation this year than last. We also expect some investment-related costs, including increased maintenance and potential downtime as we upgrade facilities to improve efficiency and laminate capacity. The near-term headwind in Q1 is components volume; that's a last quarter year-over-year impact we expect to normalize. The run rate of attachment rates has been consistent; the negative comp is versus a very strong 2023. Outside of components, we see good repair demand and some storm carryover into the year. Overall, we see a good first half and a healthy margin profile.

Next question comes from Philip Ng with Jefferies. Please go ahead. Your line is open.

Hey, guys. Doors is still a very new business for me, so I just wanted to drill down a little. I think if I heard you correctly, you're dialing back some of your pricing to be more in line with the broader market. When I look at your margins, you're guiding to low double digits to low teens from mid-teens. What's the path to getting margins back to mid-teens this year? Also, does the business have more tariff risk? Any exposure to Colombian lumber or similar inputs that could be a concern?

Thanks. Let me start with the exposure. We're not meaningfully exposed to inputs like Colombian lumber; we've reshuffled the supply chain and don't see that as a major cost concern. We do operate an integrated supply chain for finished goods in the doors business, producing in Mexico and bringing finished doors into the US, or producing in the US and moving into Canada. That makes our exposure more tied to finished goods crossing borders rather than raw material inputs, which is why doors is more sensitive in a tariffs scenario, and insulation can be exposed similarly because of cross-border finished goods. On the path to margin improvement: first, we're driving integration synergies—sourcing and OpEx savings are ramping as we bring the business together. Second, we're working on network optimization, including facility closures where appropriate, similar to what we've done in other segments; that will take time but is a big opportunity. Third, revenue levers come from volume recovery; our cost basis is strengthening, so incremental volume will deliver stronger-than-historic margin leverage. We're also beginning commercial initiatives to strengthen distribution partnerships and downstream pull-through with contractors and lumber dealers. Near term it's cost-focused, and as volumes recover, we'll see revenue synergies. We view this as a path to improved margins and to reach our longer-term targets.

And our next question comes from Garik Shmois with Loop Capital. Your line is open.

Hi. Thank you. I had a question on the CapEx increase for 2025. Could you speak to what's incremental this year and what would be a good maintenance CapEx figure to use when considering the divestment of the highly capital-intensive glass reinforcements business?

Thanks, Garik. The step-up in CapEx this year is driven by major growth, productivity, and sustainability projects: multiyear investments to add manufacturing capacity and improve productivity. In the near term, we expect the stepped-up level to continue as these projects progress from start to finish. Long term, our consistent external guidance remains that we want ongoing CapEx in the 4% to 5% of sales range. The Doors business we acquired is capital efficient, and we expect its ongoing capital needs to be modest. We're under contract to sell the most capital-intensive piece of our business, the glass reinforcements element, which will reduce ongoing capital intensity. Taken together with investments in modern assets, we expect attractive ongoing capital requirements, though we must work through this near-term period as we complete major projects.

Thank you. We're now out of time for further questions, so I'll pass back to Brian Chambers for any closing comments.

Okay. Thanks, Lydia. I'd like to thank everyone for making time to join us on today's call and your ongoing interest in Owens Corning. We look forward to speaking with you again on our first-quarter call, and I hope everyone will be able to join us at our Investor Day in May in Toledo. Thanks.

This concludes today's call. Thank you for joining. You may now disconnect your line.