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Owens Corning Management Discusses Q2 2012 Results - Earnings Call Transcript

As I do each quarter, let me review our performance against the commitments and outlook I've previously provided. We said we would continue to make progress towards our goal creating an injury-free work place. As of June 30, our year-to-date rate of injuries has increased 13% over our full year 2011 performance. As you know, we've achieved 10 consecutive years of safety improvements, reducing the number of injuries in our company by more than 90% during this period. Given this performance, the bar for continued improvement is extremely high. We know that we are up to the challenge and remain committed to the pursuit of our goal of 0 injuries.

We said that we expected another great year for our Roofing business in 2012, reflecting some carryover of 2011's strong demand, improvement in the reroof market and modest improvement in new construction. Coming into the year, we had expected carryover storm demand and an improving U.S. housing market would allow us to get off to a fast start and deliver another year of 20% margins. While the business continues to operate at a high level of profitability, we now believe that the combination of first quarter competitive intensity, persistently high asphalt cost and the volume weakness that we've begun to see in the last 6 to 8 weeks will not allow us to sustain the margins that we've grown accustomed to over the last 3 years. We set our Insulation business with significantly narrow losses in 2012. Insulation significantly narrowed its losses in the quarter to $15 million from $35 million 1-year ago on improved sales volume and excellent operating leverage. Through the first half of the year, the business reduced losses to $50 million down from $85 million in 2011. We expect to further improve the financial performance of our Insulation business in the second half of the year and to significantly narrow losses in 2012 as a result of higher volumes, continued cost leverage and announced price increases. We said we would transform our composites operation into a global network of low delivery cost assets with a commitment to achieving significant progress against this goal this year. The restructuring of our European assets is on track, with all European consolidations and closures announced and on schedule. In addition, we are on track with the start up of new capacity in Mexico and Russia. Finally, we showed good progress against our inventory reduction goals in the quarter, which will accelerate in the third quarter. As a result, we are moving to a cost position that will produce stronger financial performance in the second half of 2012 particularly in the fourth quarter. On the basis of this progress, the business remains positioned to achieve double-digit margins in 2013. We said that we would grow adjusted EBIT this year. As we announced this morning, we have revised our EBIT growth expectations for the year to a range of $360 million to $420 million due to the recent weakness in the roofing market and the impact on margins from higher asphalt cost. Finally, we said 2012 would be a year of strong cash generation. We remain on course for strong cash flow this year. We continue to expect high levels of free cash conversion over the next 5 years, up to 100% of adjusted earnings on average. Based on our cash outlook and continued confidence in achieving our midterm earnings goals, we repurchased 2.6 million shares of common stock in the second quarter of 2012.

Read the rest of this transcript for free on seekingalpha.com

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