World Bank private equity arm International Finance Corporation has invested $12 million for an undisclosed equity in fibre glass maker Owens Corning India Ltd (OCIL). The capital will be used to expand its manufacturing facility in Maharashtra. OCIL is a joint venture between Owens Corning USA (OC), which owns 78.5 per cent, and Mahindra & Mahindra, which owns 21.5 per cent stake. The expansion of glass melter and related downstream equipment capacity by Owens Corning will result in significant energy and efficiency improvements, IFC said in a release. Owens Corning is the inventor of as well as the world’s leading manufacturer of glass-fiber insulation, while M&M is India’s leading manufacturer of utility vehicles and tractors.
The facility is expanding in Taloja near Mumbai from 36,000 tons per annum (tpa) to 67,000 tpa at a cost of $39 million. The demand for glass-fibre in India is expected to increase by 18 per cent a year over the medium term, driven by growing infrastructure and automotive sectors, IFC said in a release.
Much has been said by Owens and others about the impact of the US housing market on results and rightfully so. Owens has taken many strides to offset that with the recent purchase of St. Gobain’s fast growing composites business and now the overseas expansion. Shares will suffer in the short term as all housing related issues will but when housing bottoms, and yes it will, Owens is making moves now to really boost profits when that segment resumes. Owens has yet to guide profit expectations lower and that means two things, they expected housing to be this bad when they set them or other divisions are performing so well that they are taking up some of the residential construction slack. My bet is that it is a little of both and that is real good as we own shares in a company that does not give us fairy tale expectations and is diversifying it’s operation away from an unhealthy reliance on US housing. .
All in all, I can wait.
4 replies on “Owens Corning Gets India Investment From World Bank”
OC is very attractive from a long-term point of view (I’m seriously looking at it and its warrants). But there is risk in the short and medium terms IMO.
Don’t you think there is a risk that management is way too optimistic? They haven’t lowered their full year estimates even though housing is far worse than consensus was early in the year. Either management was pessimistic with their estimates (I don’t think so), or they are going to miss estimates.
Their purchase of composites recently should help during any housing slowdown…
short term risk?yes
management is very conservative and straight forward with shareholders, i would not expect any real surprises
OC is definitely extremely risky in the short term, but if you are looking at it form a long term point of view like you stated, who cares?
I have been following OC for years and own both the warrants and current stock. I speculate that within 3-5 years, OC will pay us off for our patience.
Well, if you already own it or are a pure value investor then the short-term doesn’t matter. But if you looking to purchase and like to try timing things (yeah, I know, hardly a foolproof method), then it’s important to buy as low as possible. So it’s important to make sure that the stock can’t drop even further. Why buy now if price can drop further?
You guys may be right in saying that management is conservative, but how many people (other than bears) thought housing would suffer as much it has? I have a feeling that, even with a conservative outlook, management is going to be proven wrong.
Another risk is that I noticed that analysts raised their estimates after listening to management. Analysts, as is generally the case, are just blindly(?) following management estimates. If the management estimate is off, consensus estimate is going to be way off. This is probably why the stock is off 20% so far.
Anyway, good luck to the longs. This is a good company. I like it. Very similar to USG but arguably even better (since they have better international potential)…