North America decelerated a little bit towards the end of the fourth quarter. And as a result of that, where — customers were looking and Brian mentioned this in his comments, customers looking at their inventory levels in a more uncertain market environment, they started to adjust their patterns of buying, again, specifically in North America. What we are really pleased about is the team actually, as that started to happen, started to actually take a look at where the production needed to be in order to keep inventory levels where we wanted them to be across the business. And that’s part of the reason that you saw operating margins step down the way they did in the fourth quarter. Very simply put, lower volumes, reacting to that by making sure that we take proactive measures to curtail where we needed to curtail.
And that will actually carry a bit into the first quarter because you heard us guide to maybe even a slightly lower operating margin level as we move into the first quarter. I’ll give you just a color — a couple of color points on that because I think they’re important as you think about Composites in 2023. One is we’ll continue to take curtailment actions in early 2023, specifically the first quarter, as a result of what the trends were in the fourth quarter. So that puts a little bit of pressure on margins. I’ll also take an opportunity to make a comment about energy costs which are affecting the Composites business as well as the Insulation business but the Composite business a little more heavily just because of their use of natural gas.
You heard me in my scripted comments say that natural gas costs or energy costs kind of peaked in the — the impact on us in the fourth quarter. And the way that our hedging program works is exactly what you would expect. Hedging programs kind of defer and moderate kind of the fluctuations of hedging gains and losses. We’re expecting energy cost impact on us to be relatively similar in Q1 as what we saw in Q4 just because of the way that the hedging program works. But we would anticipate, based upon what we’re seeing in the market, for rates for both European and U.S. natural gas cost that we’ll start to see some benefit from that as we move out of Q1 into Q2. So, I think that hopefully gives you a little bit of color on the demand within Composites and how the team is kind of proactively making sure that we work through that.
Maybe with that, I’ll give it to Brian to talk about Insulation.
Brian Chambers: Yes. Thanks, Ken. I think on the technical and global insulation business, Stephen, we continue to see good trends in our U.S. commercial business. I’d say we’ve got a very diversified product offering there. We’re in data centers, airports, hospitals, a lot of different areas. So I’d say that the high-rise kind of office construction trends are showing a bit of weakness. But overall, for us, we like the category and we’re seeing some good strength there. One area you mentioned, Pitt Corning, that we do see a strength and — big strength and big pickup in quoting activity, is around our FOAMGLAS product line and specifically for LNG applications. So we’ve seen that pick up quite a bit over the last 6 months and that project is used extensively in these LNG terminals around the base tank and then all the piping.
So we see that order — or sorry, quote activity picking up and we think that’s going to lead to an increase in orders as we go along. And that’s — these are multiyear projects but I think it is a good segment for us that can grow as we go forward.
Operator: Our next question comes from John Lovallo from UBS.
