Good day and welcome to the Owens Corning fourth quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Amber Wohlfarth. Please go ahead.

Thank you and good morning everyone. Thank you for taking the time to join us for today’s conference call and review of our business results for the fourth quarter and full year 2021. Joining us today are Brian Chambers, Owens Corning’s Chair and Chief Executive Officer, and Ken Parks, our Chief Financial Officer. Following our presentation this morning, we will open this one-hour call to your questions. In order to accommodate as many call participants as possible, please limit yourselves to one question only. Earlier this morning, we issued a news release and filed a 10-K that detailed our financial results for the fourth quarter and full year 2021. For the purposes of our discussion today, we have prepared presentation slides that summarize our performance and results and will refer to these slides during this call. You can access the earnings press release, Form 10-K and the presentation slides at our website, owenscorning.com. Refer to the Investors link on our homepage. A transcript and recording of this call and the supporting slides will be available on our website for future reference. Please reference Slide 2 before we begin, where we offer a couple of reminders. First, today’s remarks will include forward-looking statements based on our current forecasts and estimates of future events. These statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for a more detailed explanation of the inherent risks and uncertainties affecting such forward-looking statements. Second, the presentation slides and today’s remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in the text and financial tables of our earnings press release and presentation, both of which are available on owenscorning.com. Adjusted EBIT is our primary measure of period-over-period comparisons and we believe it is a meaningful measure for investors to compare our results. Consistent with our historical practice, we have excluded certain items that we believe are not representative of our ongoing operations when calculating adjusted EBIT, adjusted EBITDA, and adjusted earnings. We adjust our effective tax rate to remove the effect of quarter-to-quarter fluctuations which have the potential to be significant in arriving at adjusted earnings and adjusted earnings per share. We also use free cash flow and free cash flow conversion of adjusted earnings as measures helpful to investors to evaluate the company’s ability to generate cash and utilize that cash to pursue opportunities that enhance shareholder value. The tables in today’s news release and the Form 10-K include more detailed financial information. For those of you following along with our slide presentation, we will begin on Slide 4. Now opening remarks from our Chair and CEO, Brian Chambers. Brian?

Thanks Amber. Good morning everyone and thank you for joining us for today’s call. I hope all of you are continuing to stay healthy and safe. During the call this morning, I will start with a broad overview of our performance and how we are investing in key areas to grow our company and deliver additional value to our shareholders. Ken will provide additional details on our fourth quarter and full year financial results and then I’ll come back to talk about our outlook for the first quarter and business trends. 2021 was a year of tremendous accomplishment and record results for Owens Corning. Like most companies around the world, we faced several challenges throughout the year: the continuing pandemic, supply chain disruptions, significant inflation, and other regional events all requiring creativity and adaptability for our company to succeed. Through it all, our global teams continued to elevate their performance, overcoming these challenges that impacted our businesses and markets to consistently deliver on our financial targets, generate growth in our key products and geographies, and outperform the markets we serve. A critical component to our success is our commitment to safety, where we continued to deliver world-class performance. During the fourth quarter, we achieved a recordable incident rate of 0.53. This lowered our full year 2021 RIR to 0.59, which is an 8% improvement over the prior year. Over the past two years, COVID has added another dimension to our unconditional commitment to safety. I greatly appreciate the focus and dedication of our teams to improving our safety performance despite the pandemic-related disruptions and extremely high production at virtually all of our manufacturing sites. While COVID case rates remain higher than any of us would like, we are encouraged by recent decreases in the severity and number of cases and…

Thanks Brian, and good morning everyone. As Brian commented, Owens Corning delivered another outstanding quarter and record financial performance for 2021. While demand conditions remained strong across the markets we serve, our ongoing commercial and operational execution across the company was fundamental to driving this performance. Despite ongoing supply chain challenges and accelerating inflation, we generated record revenue and adjusted EBIT, as well as earnings per share and free cash flow. Beginning on Slide 5, we can take a closer look at our results. We reported consolidated net sales of $2.1 billion for the fourth quarter, up 11% over 2020 with revenue growth in all three segments. Adjusted EBIT for the fourth quarter of 2021 was $325 million, up $19 million compared to the prior year. Adjusted earnings for the fourth quarter were $224 million or $2.20 per diluted share compared to $207 million or $1.90 per diluted share in the fourth quarter of 2020. For the full year 2021, consolidated net sales grew to $8.5 billion, up 20% from 2020, and adjusted EBIT for the full year was $1.4 billion, up $537 million over the prior year. Our full year adjusted earnings were $969 million or $9.29 per diluted share compared to $566 million or $5.21 per diluted share in 2020. Slide 6 shows the reconciliation between our full year 2021 adjusted and reported EBIT. Adjusting items totaled approximately $33 million. During the year, we recognized $53 million of gains on the sale of precious metals with $12 million recognized in the fourth quarter. We also recognized a $15 million gain on the land sale related to a previously announced facility closure. In addition, we recorded $34 million of restructuring charges with $12 million being recorded in the fourth quarter. Seven million dollars of the charges in the fourth…

Thank you Ken. Our performance in 2021 demonstrated the resiliency of our global teams, the strength of our commercial and operational execution, and the durability of our earnings power. As we move into 2022, we are well positioned to build on our momentum and deliver another strong year. For the first quarter of 2022, we expect continued strength in U.S. residential and commercial markets as well as our global building and construction end markets. Based on current trends, we anticipate inflation to continue accelerating in the first quarter. Benefiting from our pricing actions in 2021 and to date this year, we expect to maintain a positive price-cost mix in each of our businesses in Q1. Moving through the quarter, we will continue to closely manage the ongoing impacts of inflation, supply chain disruptions, and the regional impacts of COVID on our businesses. Overall for the company, we expect to grow net sales and adjusted EBIT in the quarter versus prior year. Now, consistent with prior calls, I’ll provide a more detailed business-specific outlook for the first quarter. Starting with insulation, we expect revenue to grow high teen versus prior year, driven by a combination of price appreciation and volume growth. In our North American residential fiberglass insulation business, we anticipate our volumes to be up low single digits versus prior year. This growth is being driven by increased productivity and realizing the full quarter benefit of bringing up a line in our Kansas City plant late first quarter last year. We expect price realization to continue to grow sequentially as we begin to see the impact of our December increase. In our technical and global insulation businesses, volumes should be up modestly versus prior year as demand for our products in global building and construction applications remain solid. Like residential…

Thank you Brian. We are now ready to begin the Q&A session.

[Operator instructions] Our first question comes from Anthony Pettinari from Citi. Please go ahead.

Good morning. In the release, you talked about margins for the composites business benefiting from favorable mix in the quarter and roofing seeing some unfavorable mix. Can you just talk a little bit more about what drove those mix shifts and maybe the extent to which they continue in 1Q or reverse?

Sure, good morning Anthony. Thanks for the questions. Let me start off with composites. It’s really a continuation of what we’ve been talking about through the year. As you heard at investor day, we’re really pivoting that business and starting to move down higher value applications with our customers. We believe this plays well with our local production for local demand environment, and so we’ve just continued to see our ability to service our customers with higher quality products, higher value products and shifting more of our business into those areas. We called out at investor day that approximately 40% of our composites volumes are really tied to the building construction markets and about 20% are tied to sustainable energy, specifically wind, and another call it 15% to 20% are tied to infrastructure. You heard Brian call out that those are really three of the key trends that we’re watching as we move forward, and as we have evolved and continued to pivot the composites business, we’ve seen the benefit on our volumes that we sell, our solutions we provide to our customers, and really shifting up in the margin that we contribute.

Anthony, then on roofing, on the quarter nothing really unexpected in that mix. We talked coming into the quarter about some of our roofing components sales volumes we thought were going to trend down a little bit more in the quarter versus the prior year, just based on the amount of purchases, and so we get a bit of mix shift inside our components. We have different price points, different margin profiles within those, and so we anticipated that coming into the quarter and that did come through pretty much as we thought, but no major shifts, no long term trends inside that mix shift that we saw.

Our next question comes from John Lovallo from UBS. Please go ahead.

Good morning guys, and thank you for taking my question. Really, it’s on revenue and the revenue growth outlook, which is really encouraging from where we sit. It seems like a good percentage of that is pricing. I’m just curious how much of that pricing is already in place and how much still needs to be implemented.

Morning John, thanks. For us coming into the quarter, I’d say you’re right, that a lot of the revenue growth that we’re projecting for Q1 is going to be based on pricing realization that we’ve seen. Those actions are really an accumulation of actions we’ve taken throughout 2021. We’ve taken a few increase announcements out into the market in our roofing business, some in our composites here to start the year, but that price realization and that price expectation we have for Q1 is based on already announced increases, and then we’ll continue to look at that as we move forward throughout the year as we continue to monitor inflation trends.

The next question comes from Matt Bouley from Barclays. Please go ahead.

Hey, good morning everyone, thank you for taking the question. On that composites Q1 guide of mid to high teens EBIT margin, it’s obviously tracking a little above the mid-teens through cycle target that you gave at the investor day. Can you maybe just speak to the sustainability of that Q1 margin, if there’s any reason as you go through the year that would normalize at some point, or can it be sort of sustained as long as these market conditions remain relatively consistent? Thank you.

Yes, thanks Matt, great question. This has been driven--I already talked about the mix impact, and we also have positive pricing, as Brian just talked about, across the businesses. I think the sustainability of the margins that we’re seeing within composites, we’re moving to a much more sustainable place. We have continued to talk about that business being kind of in the mid-teens operating margins, and we think in this environment with strong demand, with good pricing actions and executions across the globe and across the teams, and watching for inflation to occur and then pricing as we see inflation coming at us, we believe that the kind of margins that we’re going to be generating in the fourth quarter are probably pretty sustainable at these type of market levels.

And maybe I’d just add on, Matt, I think it’s also just longer term why we see some of that, as Ken talked about, really the repositioning of our composites business overall. We talked about that at investor day, but when we look at the end markets we are playing in today versus a few years ago, when we look at where we’re making product innovation investments, we look at our localized supply chain, I think all of those things are coming together, so we’re not just seeing the benefits of near term price realization, we’re seeing the benefits of the shifts we’re making in terms of the end market applications, the innovation efforts, and I think that’s true really across the company. When we look at our pricing durability that we’re seeing in the market, it is partly driven by the demand environment, but a big part of it is our commercial focus in terms of how we’re bringing value to customers. We’ve invested heavily in product innovation and we continue to bring out new products. We’ve invested in our service, we’ve invested in our quality levels, we’ve invested in our commercial strength to partner with customers around digital tools and other elements that will help them grow their business, so I think it’s really a full commercial model that we’re implementing in composites and then really across the company to bring more value to our customers, and we see that resulting in better pricing.

The next question comes from Mike Rehaut from JP Morgan. Please go ahead.

Thanks, good morning everyone, and congrats on the results. My question has to do with volume as you think about throughout 2022. I was curious if you could opine on how to think about roofing industry buying for the year, as well as to the extent you’re comfortable, you kind of talked about first within your own first quarter guide volumes being up modestly in insulation, kind of flattish in composites, maybe up slightly at least shingle volumes in roofing. Given the comps, given industry capacity, your own capacity as you plan out this year, any forward-looking guidance about how to think about 2022 holistically would be very helpful by segment.

Sure Mike, I’ll start and then Ken can jump in. I think overall we are seeing very good--a very good demand environment in most of our product categories. That would be my general statement. If we start to look inside the end markets more specifically, in roofing the demand fundamentals we are seeing remain very strong. When we look at new construction growth, when we look at the core of the roofing market is driven by repair and remodeling business, we see continued investments in the home, we continue to see remodeling activity stray strong, and so I think we believe that we would see a continuation of that through the course of the year. In roofing, the wildcard for us always is our storm demand and storm outlook, and that will materialize through the rest of the year and we’ll be able to give a better guide on our market shipments and the overall industry outlook as we go forward, but to start the year, good demand fundamentals, good new construction growth, good remodeling investments. We see contactors backlogs strong, I think distributors are expecting to see a good year. We continue to see good out-the-door sales trends, particularly in southern states, so again fundamentally starting off the year strong, and we think that could and should continue. In insulation, I’ll split it between probably our residential outlook. Most expectations are that housing starts will stay in this 1.6 million range for the year and for the foreseeable future. We think that’s a good outlook for residential roofing given the big supply-demand gap for single-family housing. We see demographics continuing to drive for new construction, so we do expect that there’s going to be potentially some impact on interest rates as they move up through the year, but I think that’s going to be offset through the demographic push and the large gap, that housing’s been under-built for so many years in the U.S. We think we’re set up for another good res insulation year, given the market demand. Our global technical businesses, we’re seeing good strength in commercial backlogs, particularly in Europe. Leading indicators, when we look at the Architectural Billings Index, Dodge index continue to trend favorably. We look at our project backlogs there, they continue to trend favorably, so we are set up for a good start to the year and believe that fundamental demand drivers in those markets continue to stay strong. Over to composites, I guess I’ll let Ken maybe make some comments, but I think very similar trends in the demand outlook.

Yes, very similar trends. I think part of what we’ve talked about so far is just kind of the continuation of the pivot to the markets that we see, great opportunity to grow in and where the great secular trends are supporting it, so whether it be the sustainable parts of the business, which is kind of the wind power that we support, infrastructure rebuilds not only in the U.S. but around the world, as well as building and construction markets, and again not only in the U.S. but in Europe and in Asia where we play, we see good strength in those markets and we see good pull for our products because we are kind of bringing value to the customer through solutions, as opposed to just providing material. Then the only other thing that I would add, just kind of across the company and it’s kind of a corollary to this volume question, is we tend to get asked a lot, you’re running pretty heavily as far as the production out of your facilities, and can you get more volume out of your facilities if demand stays strong. I think the point I would make is we’re really, really pleased with the performance of our operating organization and their ability to continue to produce not only through the last 18 months of COVID but as we look forward, to continue to drive a few points of productivity each year, and that provides us additional capacity to meet this growing demand, so by no means do we think the volumes that we’re seeing today are kind of the max that we can deliver on. We see good volume projections going forward in each of the three businesses, and we see the strength of our operating business being able to continue to keep up through additional productivity opportunities. Thanks for the question, very good question.

The next question comes from Yves Bromehead from BNP Paribas. Please go ahead.

Good morning gentlemen. Just a quick question on working capital. Inventory levels are still relatively low, and given the demand outlook that you’re putting out there, can you maybe explain to us what you can do there? Should we expect working capital to increase or are you running at tight levels and with the demand coming in, it’s just straight out ship to the door for the customers rather than building inventory levels? Can you maybe give us your view on that?

Sure. We’d actually love to be able to build a bit more inventory across the business. We’ve been running relatively tight over the last couple of years as we’ve seen the demand step up so strongly, but I will tell you, I think that there’s a couple of things to think about when you think about working capital. A/R and A/P are going to be managed very, very tightly, as they always are in the company. Inventory, we’re going to make a concerted effort across the businesses to go from what we would call today historically low levels of inventory across the business. We have seen a little bit of improvement - when I say improvement, meaning they’ve stepped up across not only our own internal inventory levels but maybe a little bit with our customers as we’ve ended 2021. We would anticipate and have kind of built into our thinking for 2022 that we’ll absorb some inventory increases. Some of that inventory increase, as you would guess, is anticipated to be just volumes of inventory, but just like we’ve seen in 2021, there is also an impact on working capital of inflation because as our input costs are going up, our value of inventory does go up for that as well. But we have that all built into our outlook and that is not taking us off of our trends of continuing to deliver strong free cash flow and always trying to convert it more than 100%.

The next question comes from Garik Schmois from Loop Capital. Please go ahead.

Hi, thanks, and thanks for taking my question. You mentioned that you saw inflation accelerate in 4Q, and it sounds like it’s accelerating further here in the first quarter across most of your businesses. Just any color on the particular drivers of the inflation and if there is any expectation around moderation at all as we move through the second half of the year.

We are definitely--you know, I’ll give you some comparisons. If you look back at our results over the last four or five quarters, if you looked at the fourth quarter of 2020, we were actually still in a deflationary environment and probably saw across the businesses around, I’m going to say about $25 million of deflation in all three businesses in aggregate, whereas if you see what we put in the K and in our release, you’ll see that that move to the fourth quarter of the $185 million of inflation in the fourth quarter alone, and the teams have done an excellent job at kind of staying ahead of that, both with managing the input costs as well as watching the price environment where we can. As far as buckets of where that’s happening, we do see it--I would kind of categorize it this way. Anything that’s really petroleum based, whether it’s asphalt, some of our input chemical costs that go into our different products both in roofing, insulation as well as composites, then there is transportation costs - that has been a headwind, and we see that kind of continuing, whether it’s domestic transportation or on-the-water inflation transportation. Looking out into 2022, I think we’re going into at least the early parts of 2022 anticipating that that will continue, and that we’ll continue to see that inflation occur. The one that I didn’t mention, which is the one that’s kind of on everybody’s mind, is energy costs. Energy costs, we spend call it 6% or 7% of our total cost of goods sold is tied to energy costs, whether it’s electricity or natural gas, and I would say about a quarter of that, maybe a little bit more, is sitting in Europe even at the inflated rates that happened in 2021, so we continue to manage that. We manage it through obviously continuing to try to get efficiencies out of our facilities, but we do have some hedges in place both in the U.S. and in Europe to keep that cost in check. We’re expecting that the underlying drivers of what’s happening in those input costs are going to be the same, and we’re going to manage them through our efficiencies as well as through hedging programs.

The next question comes from Phil Ng from Jefferies. Please go ahead.

Hey guys, congrats on really strong results. You’ve seen a nice acceleration in your technical insulation business the last few quarters. Can you provide a little more color on how you’re thinking about the demand outlook this year? I think your 1Q guide just assumes more flattish type volumes. I would imagine you have a fair amount of capacity here, so any color on how you’re thinking about demand as you kind of look out through this year? Then separately, you mentioned--you called out inflation potentially in energy particularly in Europe. The technical insulation piece, I believe you normally don’t announce as much increases throughout the year on resi, your comfort level to kind of staying in front of inflation in that technical insulation business.

Thanks Phil for the comments and the questions. Starting the year, we see continued demand strength in our technical insulation businesses, so I’ll step back with just a little bit of a reminder - inside our technical insulation portfolio, about a third of that business actually goes into residential applications, so for example mineral wool in Europe goes into residential, we have flex duct insulation that goes into HVAC ducts in homes, we use our foam products in residential applications, so about a third of that business tied there and then about two-thirds into very broad commercial and some industrial applications - data centers, airports, museums, office buildings. It’s good mix, so the demand outlook really cuts across both residential and commercial outlooks. When we look inside the business in terms of the demand outlook, we’re seeing relatively modest increases in Q1. I think part of that is tied to what we’re seeing in the market. We’re seeing good project backlogs and we’re seeing increases there. We do still see a lot of these applications getting impacted by construction delays, either materials that aren’t arriving on site and all of them have to be there in terms of finishing the job, or other elements of construction delays, so we think the demand is there, the project backlog is growing and becoming stronger, but in terms of how that gets executed and materializes into shipments for us, we do see some puts and takes on that as we go through the quarter. So underlying demand drivers, we think are strong. I think some of our volume growth is going to be dependent on the construction cycles for the project work we’re doing, and then on the residential side, we see that continuing to grow pretty strong. In terms of our price realization, we have lagged in our technical insulation business broadly the cost inflation we have seen in the business, so this set of products and applications generally creates more stable pricing, more stable margins, it’s more project based, it’s more specified, so the upside is that the margin performance stays pretty consistent even when you see some volume moves. The downside of that is it takes us a little bit longer to catch up on inflation that we’re seeing here, because these are longer term projects, these are specified products, and so it takes a little time to work through the channel. We think we’re getting to a point where we can start to realize a positive price-cost mix starting in 2022. A lot of that is dependent on inflation. We continue to see inflationary trends accelerate, so we believe we’re in a good position to start getting a positive price-cost mix in our technical insulation business as we go through the year, and we think demand is going to continue to support those pricing dynamics.

Our next question comes from Deepa Raghavan from Wells Fargo. Please go ahead.

Hey, good morning. Thanks for taking my question. Congrats on the great results. This question is probably a little contrary to what you printed today, but just given the rate environment and related slowdown concerns to your largest market, just residential, if things do slow down, how do we think about which of your segments get impacted first, and how many months or quarters of a lag can that be? Also, how do we think about your defensive characteristics and what active steps you can take should a market slowdown materialize? Thank you.

Thanks Deepa. When I think about our markets, particularly in the U.S. on residential, I guess I’d say if we’re going to start to see a slowdown in residential, it generally impacts us more on the new construction products that we see versus our repair/remodeling products, which tend to stay pretty strong through economic cycles, and we’ve seen that historically. We would look inside residential products or residential insulation product line as one that has been impacted in the past when we’ve started to see housing slow down. If we start to see slowdowns in global IP and GDP, that will tend to impact some of our composites end markets, although again, part of our focus has been to shift into higher value applications, more specified products. When we think about our defensive moves, to your question, I think the things we’ve done is, one, a very robust product innovation agenda that continues to innovate products, brings value to even those applications, so even if the demand cycle tends to turn, I think the demand for OC products can stay relatively strong because of the value we bring through our innovation, and that’s one big defense mechanism we have, is our core innovation capability, and we continue to invest in innovation in good times or bad, continue to drive product development that improves performance, durability, sustainability, those key pieces, continue to work and invest in digital tools and other applications to partner with our customers. Those are all the things we do commercially as good defense mechanisms, and I think we’re in a much stronger place as a company than we would have been four or five years ago on that front. I think on the manufacturing performance, we’ve invested quite a bit to optimize our production networks across the company, and we’ve seen that come through in better efficiencies, better productivity, and so we’ve lowered our overall cost position that has put us in a much better position as a defensive measure, if and when we do see a time where demand starts to come down, we feel like that work to optimize our networks, to invest in automation, invest in productivity, invest in streamlining our manufacturing operations is going to pay off for us. I think we saw a little bit in the first part of last year, when we saw the first impacts of COVID having a pretty dramatic impact on our revenues even across our insulation business, our composites business, which has generally been hit a little harder. When we see revenues decline, we were able to post better results, we were able to post positive earnings through that cycle, and I think that’s a good indication, near term indication of the work we’ve done on the operating cost side and the manufacturing performance side of the model to be in a great position as we go forward.

The next question comes from Mike Dahl from RBC. Please go ahead.

Hey, this is actually Chris on for Mike. Thanks for taking my questions. Just two quick follow-ups, one of the cost side of things. I was hoping you could maybe help us understand the structure of your hedging contracts on the energy side of things, particularly in Europe. I know you guys said that’s kind of limited the exposure from the headwinds there, but how often do those kind of roll over, what’s the duration of those contracts, and if prices were to hold where they are today, any way you could help quantify what the incremental headwind would be?

Sure. A little bit more color on those is that, first of all, I would tell you that they’ve been in place for a while, so it’s not that we’ve started to enter hedging contracts as we’ve seen the inflation occur in Europe specifically, but we keep them in place because from a strategic approach, we think it’s the right thing to do to kind of keep a constant management on our costs. I’ll tell you they’re about a year in nature. We tend to hedge the four quarters out and we look at the closer quarter and hedge a bit more of the closer quarter, and then hedge a slightly lesser percentage as we move out to the second, third and fourth quarter out, always rolling a year forward. Imagine us hedging, call it 60%, 70% of the next quarter’s needs, and then as we move into the next quarter again, we top it up to that 60% to 70% for that quarter, but we’re always kind of moving through that type of cycle, and again that’s both for Europe and for the U.S. I would tell you that in 2021, the order of magnitude of thee hedges, because clearly you’re driven by the dynamics of what the outlook is for obviously the commodity that you’re hedging at the time that you’re putting it in, it’s probably saving us in the tens to twenty millions of dollars on our cost overall, and we would expect that to continue, that kind of order of magnitude to continue into our hedging environment in 2022 if the costs continue to accelerate, as they are now.

The next question comes from Keith Hughes from Truist. Please go ahead.

Thank you. Given your outlook for the first quarter in roofing and where you ended the year in inventory, can you give some idea of where you think you’ll be in terms of your normal seasonal inventory heading into the spring? Are you going to be caught up or close to caught up over the winter months here?

Hi Keith, thanks for the question. I would say we are still running with lean inventories internally, so we’re going to need to continue to operate as we’re operating. We’re continuing to make some capacity investments at our plants to try to get more capacity through our production lines here in ’23. We talked a little bit about that at investor day, that we see opportunities to invest in some process automation and productivity capabilities to get some more capacity through our manufacturing plants. I think we’re looking to operate with fairly lean inventories for the near term. Generally with the roofing business, we see a seasonal uptick in demand from our distribution customers coming into the roofing season, so we expect to have good demand so it’s not going to give us an opportunity to build inventories in the near term. But I would say we continue to make progress on improving our service levels - that is very, very important to us, so we’re going to be able to utilize, I think, some of this improved capacity that we’re continuing to unlock in some of our facilities to help in our inventory position, to help sustain our service cycles, but I think we’re going to be running with pretty lean inventories for the near term in our roofing business.

Our next question comes from Truman Patterson from Wolfe Research. Please go ahead.

Hey, good morning everyone. Thanks for taking my question. In composites, pricing has remained really strong through the fourth quarter. Could you help us think through what sort of pricing is embedded in your spot business at year end, and then historically are there any metrics you can share with how year-end contracted pricing historically follows prior year spot levels?

Yes, good morning Truman, thanks for the question. The pricing in the spot business, as we’ve talked about throughout 2021, has continued to be relatively strong. I think that the demand outlook that we’re trying to service and these value applications that we’re providing, and we keep referring to the local production for local demand, has allowed us to have good pricing in the spot markets. We also talked about as we move through 2021 that even our contractual business, which is about 60% of the business that we have in the composites business, has also had some positive pricing beyond where the contract terms were before we went into negotiations at the end of the year, so it’s kind of hard to start bifurcating it because we have seen good positive movement on spot pricing, we’ve seen even some positive movement on contract pricing based upon watching the inflationary environment and working with our customers, and then as we went through the end of the year, because the demand levels that we’re seeing today and that our customers are expecting to see as we move into 2022 in this inflationary environment, we’ve seen incremental favorable contract discussions that provided incremental contract pricing that will take effect as we have started the first quarter of 2022. It’s hard to take it apart, but what I would tell you is that the pricing across the composites business is healthy and it’s probably as healthy as its been in the recent past, and it’s been worked really hard with the customers just because we’re able to kind of show them what’s happening on the inflationary side, and we expect that good pricing to continue as long as we see this demand pattern that we’re seeing in the early parts of the year and hopefully continuing through the end of the year.

This concludes our question and answer session. I’d like to turn the conference back over to Brian Chambers for any closing remarks.

Thank you, and thanks everyone for your time today and for your questions. We certainly believe our financial performance in 2021 demonstrates the market and financial strength of the company and are excited by the many opportunities to accelerate our growth and increase our earnings as we execute our enterprise strategy and continue to help our customers win and grow in the market. We look forward to speaking with you again in April during our first quarter call, and until then, I hope you and your families remain healthy and safe. Thanks.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.