Insulation Makers Could See Sales Heat Up In 2012

Includes: LOW, OC, RKWBF
by: Robert Loftus

Americans are sick of high energy prices. A glut of oil in the WTI Crude storing facility in Cushing, Oklahoma, has pushed down prices, and liquid fuel suppliers are fighting back with plans for pipelines - in hopes of turning the US into a major exporter of refined fuel products.

A review of the last few weeks worth of EIA Oil Inventory Reports show an anomaly, something not usually seen in the EIA Report - a negative figure under the Net Imports: Petroleum Products heading. the "-707" number seen in last week's report means that Petroleum Refiners in the US are now exporting over 700,000 barrels per day of refined petroleum products. This is creating a significant drawdown in inventories of raw petroleum waiting to be refined and finished petroleum products and putting upward pressure on energy prices in the US.

Just as consumers have taken action against high gas prices by replacing their large SUVs with small and mid-sized sedans, we should expect similar action to be taken regarding home efficiency. It is reasonable to assume that if fuel prices for heating oil begin trending higher due to supply manipulations that consumers will begin looking for whatever "Do It Yourself" options that are readily available.

Anyone who is feeling like doing some research on different companies can begin by working their way through the list of firms included on the North American Insulation Manufacturers Association Member Companies page. For the sake of space I'll limit the highlights to a pair of firms whose brands are most likely to be familiar to Big Box store shoppers in the US.

Certainteed Insulation, a division of the London-listed multinational firm Saint-Gobain, is a major manufacturer of spray-on, pre-formed foam and fiberglass mat insulation products for the US and European markets. Owens-Corning (NYSE:OC) is one of the most well known manufacturers of fiberglass insulation in the US. Their Pink Panther ads are popular with consumers, and their products are frequently found in big box hardware stores.

News of increased housing starts in the US is also good news for this firm, and this is another one that's likely to see a bump in Q1 of 2012. Rockwool International (OTC:RKWBF) is another company whose Roxul insulation products are frequently seen in the suburban big box home centers. The company announced a distribution deal with Lowe's (NYSE:LOW) in July of 2011 and is heading into it's first winter in the US market with that distribution deal in place.

All of these firms took a major hit to their residential consumer business after the housing bubble burst, and have been trading in the bottom half to bottom third of their historic ranges. A rise in share valuations for this sector is contingent upon consumer dissatisfaction with energy prices and a continuation of at least modest growth in the North American economy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.