Owens Corning

The stable outlook reflects S&P Global Ratings' view that Owens Corning will maintain adjusted leverage in line with historical levels in the 2x–3x range over the 24 months. Our outlook takes into account the possibility of continued margin compression from slowing end-market activity in the U.S. and Europe, however, our assumptions suggest more of a moderate impact on EBITDA. We expect reduced levels of capital spending would lessen the impact of lower earnings on FOCF, and we also expect that credit measures will benefit from additional debt prepayments. We believe Owens Corning will finish 2019 with leverage around 2.7x and remain in the 2x–3x range through 2020. We could downgrade Owens Corning if we expect adjusted leverage to be sustained

...We continue to view Owens Corning's outlook as stable despite a softening global industrial outlook. Our forecasts of slowing U.S. and Eurozone GDP growth rates, as well as contracting to flat construction markets for the rest of 2019, portend upcoming headwinds. The company has taken steps in response to the changing market environment, including adjusting prices to maintain market share, and in the case of North American residential fiberglass insulation, curtailing production to address slowing growth and new entrants. Ultimately, we expect the company to have enough cushion in its levels of profitability to maintain adjusted leverage in line with the current rating, around 2.7x through the end of 2019. We anticipate downward pressure on profitability over the next year. In addition to softening end markets, Owens Corning has faced ongoing cost inflation that threatens to narrow margins. Though asphalt costs continue to rise, transportation costs have eased in the U.S. The roofing segment...

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