Brian Chambers: Yes. Thanks, Mike. So I think the primary drivers that I talked about around operational efficiencies, our growth in our components business, those are bigger pieces of kind of taking the guide up from 20% to 25-ish, in the mid-20s range. So you can see those are going to be big drivers. But you’re absolutely right. When we look at our product innovation that’s created products that are duration shingle, that carries a high margin on the product. So the more we sell — that mix shift has been a part of that, both in the shingle side and on the component side that we think is sustainable going forward. And then the overall just value we’re bringing, I think, to our contractors as we help them build their businesses.
Certainly, there’s a durability of the price realizations we’ve had around the value we’re bringing to a contractor in terms of building their business, a value we are bringing to a distributor with high-quality products, serviced well and the value to the innovation we are bringing in terms of the new product offering. So it gets mixed into that in terms of the commercial capabilities. But I think the durability of this is really going to be on those primary two. We could also pick up from the mix shift to laminates that we think is sustainable. And the pricing and price value we get for our offering and our services, we think that’s durable. I think the incremental is going to be — there’s always a bit of upside when we get stronger market conditions that we’ve seen now the last couple of years where we get additional volume leverage.
But our ability to go gain price relative to inflation to be able to get good value for our products has been strong, and we think that continues as we go forward.
Operator: Our next question comes from Sam Reid at Wells Fargo. Please go ahead.
Sam Reid: Awesome. Thanks guys. So wanted to drill down a bit more on Composite margins and perhaps break out how those looked for glass reinforcements versus say nonwoven. And then thinking about your plans for glass reinforcements, realize it’s still early, but are you at the point where there’s a particular bias towards selling this business outright or spinning it, especially now that you probably had the opportunity to have perhaps a few more conversations post last week’s announcement? Thanks.
Brian Chambers: Thanks. Let me start with just an overview kind of on Composites on the reinforcements and then glass reinforcements margin. So we said when we announced this, the glass reinforcements business is about $1.3 billion of the $2.3 billion roughly. So the rest of that you can safely assume is tied to our kind of a nonwovens business, our structural lumber business we talked about. And we said that the EBITDA margins in the business were relatively similar over time on this space. Now I would say that the margins in our GR business certainly have been more pressured in 2023 relative to our nonwovens business. And so if I just take a step back a little bit more in the nonwovens business, it really is a great business that we’ve been investing in over the past few years to expand capacity and really build out our capabilities.
So it’s been key to our Roofing success. We have a vertically integrated model, where we make the hybrid, we make the mat. That has allowed us to design products that are cost-effective and really perform very, very well. So it’s been a key part of our Roofing success. But in addition to that, we also sell nonwoven materials to other roofing manufacturers as well as other building and construction material. So it’s an important input material around gypsum, for facer [ph], for polyiso board for commercial roofing applications, in ceiling applications, particularly in Europe, and then in flooring applications. So it really fits well into our building and construction folks and supports our drive to increase in product offering in that space.
It’s a business that is highly specified. It’s primarily all contracts, and it’s primarily in North America and Europe. So I think it fits our geographic footprint. So the business there has generated really good revenue, good earnings, and we saw that continue in 2023. And a little bit on the guide that we are trying to break out to give more visibility. We see good demand as we start the year primarily driven by roofing and our Roofing business and then a positive price/cost mix. So the contracts that we’ve been able to finalize in our nonwovens business have resulted in some positive pricing. So we see good price/cost as we go forward. So that’s going to be the difference in the businesses a little bit, but why it’s also so important that we are maintaining that as part of the company going forward.
In terms of our plans for GR, we are just early in the process. So I would say we’ve not made any conclusions on a sale or spin. That’s going to be part of our evaluation. And — but as we go forward, we are going to — we’ll continue to update you as needed on that progress. But I would say this is — we are just getting started in it. So it’s going to be a few quarters, I think before we can get to some of those conclusions, reach out to some buyers and be able to gauge some interest.
Operator: Our next question comes from John Lovallo from UBS. Please go ahead.
John Lovallo: Good morning guys. Thank you for taking my question. I guess it is — when you talk about near-term Roofing margins exceeding that mid 20% range, is that a 1Q comment specifically? Or could that perhaps be the case through 2024? And also, Roofing revenue typically rises by a decent amount quarter-over-quarter in the first quarter. The outlook seems to imply slightly down quarter-over-quarter. If we got that right, what might be driving that? Thanks.
Brian Chambers: So let me — I’ll start and then I’ll ask for a clarifying question on your revenue base. But I’d say on the long-term guide, we certainly guide a quarter at a time. So we’ve given that guide in the first quarter. But given my comments on the Roofing business overall, we think the first half of the year is going to be very strong. There’s a lot of pent-up demand in terms of carryover from storm activity that we see driving really good demand. And again, in that strong of a market, we would expect our margins to perform at a higher level than the mid 20% on average. That was our guide. So I wouldn’t say that is a 1 quarter only guide in terms of a higher outlook. I think that could continue as we go into the year on Roofing. And then I just want to maybe a clarifying question on your Roofing revenue question. Was that versus fourth quarter or year-on-year?
John Lovallo: Quarter-over-quarter, sorry.
Brian Chambers: Quarter-over-quarter, yes. So again, I’ll go back to Q1 of last year, we had a significant outperformance relative to the market overall. So we had very strong volumes. We were shipping everything we could make last year to start the year that continued throughout the year. So a little bit of the revenue growth for us this year is going to be — we’ve got a little bit of upside in volumes, but not significant. And then we are seeing a little bit of a headwind for the exit of our packaging business, and that’s about $100 million of revenue, and that’s pretty ratably across — evenly spread across all four quarters. So that’s impacting us a little bit here in Q1 on the revenue front.
Operator: The next question is from Matthew Bouley from Barclays. Please go ahead.
Matthew Bouley: Good morning. Thank you for taking the question. Just wanted to ask about production. I think in the fourth quarter, you were taking downtime across, I don’t know if it was all three segments. I think the plan was for all three segments. Can you just kind of remind us, what was the margin impact from some of the downtime you took? And then kind of as you’re seeing that — you’re calling for volumes to improve in Roofing and maybe you’ve got some improvement on the residential side and Insulation and all that, just how are you kind of planning to run your assets here in the first half? And what would that mean for your margins? Thank you.
Brian Chambers: Yes. Overall, I’d say the downtime we took in Q4 was really spread across all the businesses. In Composites, particularly GR, it was tied more to demand balancing and inventory management. I’d say the other parts of the company, we generally take fourth quarter maintenance downtimes to service the assets, and we did that throughout in the space. So we don’t quantify necessarily by facility or by business segment, but I’d say the impact was larger in our Composites business, the glass reinforcements business and then had an impact but less so in Insulation and Roofing. And we think, again, that was tied to just some temporary maintenance. In terms of how we’re running the assets now as we’ve started the year, Roofing, every facility is back up and running.
Our lines are running full out, producing as much product as we can to service our customers. I’d say the same thing in our Residential Insulation business. Again, we’ve got those assets up and running and producing at a high-level. Our nonwovens business were back up, so I’d say the one that we continue to balance our downtime and curtailments is going to be in our glass reinforcements business as we continue to just, again, balance production to demand, drive good cash flows in that business. But in our Roofing business, our Residential Insulation business, we are back up and running, and we’ll continue to operate those assets full out to service demand.
Operator: The next question comes from Kathryn Thompson of Thompson Research Group. Please go ahead.
Kathryn Thompson: Hi. Thank you for taking my question today. This is more focused on your Composite business. And just understanding more on the production level and as you contemplate selling your nonwovens business, we just note from our experience in going to plants is you can have different types of products produced — Composite products produced within a plant. Could you clarify to what extent that you’re able to nonwoven production versus other products on a single plant basis? So really just helping us understand how clean that should be. And then — and also, along that line, clearly, I understand there’s different types of nonwoven versus other products. But are there any other cross-selling or other opportunities that maybe lost from selling it? Or just helping us to understand really the true differential between nonwoven and your other core products. Thank you.
Brian Chambers: Right. Thanks, Kathryn. Yes, just to clarify, so our announcement is around strategic alternatives for our glass reinforcements business. So our nonwovens business and the glass melting assets needed for that are going to remain. That would be part of the core of Owens Corning going forward. So just to step back on our glass reinforcements business, and we had this in the announcement on Friday, it’s 18 manufacturing facilities as part of that. So it is something that we can put a defined perimeter around, to answer your question, on separating glass reinforcements from our nonwovens business. So that work is done. So those 18 facilities roughly break out. There are 9 on the glass reinforcements, glass melting facilities.
Then we’ve got about 5 — we have 5 fabrics facilities that we weave fabrics that are used in wind energy applications. And then we have 4 alloy facilities that will support the bushings and the equipment used in the melting of the glass on our GR plants. So that’s a defined perimeter. The perimeter to make our glass moments is also defined. So there are 2 glass melting facilities that make the fiber that’s unique and special for our glass nonwovens production. So those 2 facilities would stay because that would then service the glass fiber to our nonwoven facilities. All those nonwoven facilities would stay. So I think we can separate that and operate those independently as we think about alternatives for the glass reinforcements business.
In terms of your question on how that might impact the other products from a glass nonwovens business, we are going to continue to be able to service all of the building construction material categories that I talked about earlier. So we’ll have the ability to still provide that material to gypsum applications, ceiling applications, polyiso, flooring. So that’s a part of the permit of the business that we are going to continue to operate and grow and expand.
