Owens Corning (OC), a leading global producer of residential and commercial building materials, has announced a 57.14 percent plunge in profit for the quarter ended Jun. 30, 2014, due to sharp increase in operating expenses.
The company earned $21 million or $0.18 a share in the second-quarter compared with $49 million or $0.41 a share a year ago. It has reported non-GAAP adjusted earnings of $0.38 a share as against analysts' expectation of $0.47 a share.
Revenue during the second-quarter went up marginally 0.59 percent to $1,355 million from $1,347 million in the last year period.
Gross margin contracted by 152 basis points over the last year period to 18.30 percent. Total expenses as a percentage of revenues increased to 94.61 percent from 91.24 percent in the same period last year. That has resulted in contraction of 337 basis points in operating margins to 5.39 percent.
The company posted operating income of $73 million compared with $118 million in the previous year period.
Commenting on the outlook, the company said, "The Insulation business should continue to benefit from growth in U.S. residential new construction, improved pricing and operating leverage.
The Composites business continues to benefit from stable global economic growth, improved operating performance and pricing. Pricing is expected to be the primary driver of EBIT growth in 2014. Composites pricing is now expected to be at the top end of the previous guidance range of $20 million to $30 million.
The roofing market was down through the first two quarters of this year. The company now expects that the roofing market will be flat to slightly down for full-year 2014 compared to prior year. Volumes in the Roofing business are expected to more closely track the market in the second half than they did in the first half of 2014."
The company estimates a long-term effective tax rate of 28 percent to 30 percent, and a long-term effective cash tax rate of 10 percent to 12 percent on adjusted pre-tax earnings, due to the company's $2.1 billion U.S. tax net operating loss carry forward. The effective book tax rate for 2014 on adjusted earnings is expected to be within the long-term range.
The company expects general corporate expenses to be $100 million to $110 million in 2014, a $20 million cost reduction versus the previous guidance. Capital expenditures in 2014 are expected to total approximately $370 million, a $30 million reduction from our previous guidance, it said.
For the full year 2014, the company's adjusted EBIT is expected to be greater than the 2013 result of $416 million.
Cash Flow
Owens Corning has spent $117 million cash to meet operating activities during the first half, as against cash outgo of $15 million in the last year period.
The company has spent $65 million cash to meet investing activities during the first half, as against cash outgo of $162 million in the last year period. It has made net capital expenditure of $65 million during the first half, which was lower by 48 percent or $60 million, from a year ago.
The company has generated cash of $206 million from financing activities during the first half, up 4.57 percent or $9 million, when compared with the last year period. It has borrowed net of $262 million through debt during the first half. It has spent net of $44 million on repurchase of common stocks.
As on Jun. 30, 2014, the company's cash balance stood at $81 million.
Debt Position
As on Jun. 30, 2014, total debt stood at $2,292 million, which was 29.40 percent of total assets. Owens Corning's debt to equity ratio was at 0.59 as on Jun. 30, 2014.
Shares of Owens Corning went down by $0.89 or 2.41 percent to settle at $36.96 on Tuesday.