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Owens Corning Hopes Stimulus Will Lift Demand

Post Time:Feb 19,2009Classify:Company NewsView:271

Building materials maker expects continued weakness in construction industry, but U.S. stimulus plan could help.

On a day when investors learned that housing starts hit an all-time low in January, Owens Corning said it doesn't expect the construction industry to see a quick turnaround. Tax credits for energy efficiency initiatives in the new U.S. economic stimulus plan, however, have raised the company's hope that it will see some sales improvement in the near term.

On Wednesday, the U.S. Commerce Department said housing starts and building permits fell to new lows in January. At 466,000, the 16.8% decline in housing starts was well below the reading of 529,000 expected by analysts. Building permits were also lower than expected, but at 521,000 in January, they were within reach of analysts' forecast for 525,000. (See "U.S. Housing: Fits And Starts.")

Owens Corning (nyse: OC - news - people ) vowed an aggressive approach to cost-cutting in the near-term but didn't provide details other than to say it would reduce headcount and delay projects, including its previously announced Russian expansion.

The company's insulation business swung to a fourth-quarter loss and Owens Corning said profitability will be difficult in 2009 but expressed optimism in the new U.S. economic stimulus plan, which encourages home and building reinsulation as a way to keep down energy costs. (See "The Most Stimulated States.") Weakness in insulation and composites businesses were mitigated by improved margins in the company's roofing and asphalt division. The unit reported a 35.0% sales surge in 2008, which Owens Corning attributed to the year's damaging storms and improved product mix.

Owens Corning also expects composite demand to improve as customers burn through inventory.

"Despite expectations of weaker global growth through 2009, our internal analysis suggests that we may see more balanced demand levels in the second half associated with inventory equilibrium in the supply chain," the company said during Wednesday's conference call.

Shares of Owens Corning lost 76 cents, or 6.0%, to close Wednesday's trading session at $11.91.

Source: Owens CorningAuthor: shangyi

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