Owens Corning planning to reduce net debt by $500 million in 2009

By Jennifer Lanning Drey

Portland, Ore., April 30 - Owens Corning expects to reduce net debt to $1.8 billion by the end of 2009, representing a $500 million reduction from the $2.3 billion of net debt the company reported at the end of the first quarter, Duncan Palmer, chief financial officer of Owens Corning, said Thursday during the company's quarterly earnings conference call.

The company also expects to generate $150 million of free cash flow in 2009 through cost and capital expenditure reductions and the strength of its roofing business. Owens Corning is looking to reduce costs and capital expenditures by a combined $300 million in 2009.

The company expects to begin generating positive free cash flow in the second quarter, Mike Thaman, chief executive officer of the company, said during the call.

Owens Corning had $90 million of cash on hand and $428 million available under its revolving credit facility at the March 31 end of the first quarter.

"We expect that the cash we have on hand coupled with future cash flows from operations and other sources of funds will provide ample liquidity to allow us to meet our cash requirements, capital investment plans and to endure significant additional market volatility," Palmer said.

Thaman also noted that the company believes it has plenty of headroom with regard to its debt covenants.

Roofing business strong

For the first quarter, Owens Corning reported consolidated net sales of $1.1 billion, a 21% decrease from the $1.4 billion of consolidated net sales reported in the same period of 2008.

However, the company said the quarter was highlighted by strong roofing sales, which grew 49% as compared to the prior-year first quarter.

First-quarter EBIT was a loss of $18 million, compared with EBIT of $21 million in the same period of 2008.

Based on the current trajectory of demand growth and the continuation of stable prices, Owens Corning expects to return to profitability in the third quarter, Thaman said. The company expects to restore inventory to target levels by year-end.

Owens Corning is a Toledo, Ohio-based building materials company.

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