James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (December 2005)
152 slides from James Hardie Industries's investor presentation, Dec 6, 2005
Slide 1: USA Tour Overview
@ James Hardie il INTO James Hardie USA Tour Overview Louis Gries December 2005
Slide 2: Mission and Strategy
@ James Hardie Mission and Strategy Mission To aggressively pursue organic growth through a differentiated position in the building products industry” Strategy « Aggressively grow demand for fiber cement in our targeted markets # Grow our overall market position while defending our share in existing
Slide 3: Investment Attributes
@ James Hardie Investment Attributes Focus on growth with differentiated building products # High growth # Strong financial performance, cash flow and balance sheet # Unique proprietary technology * Sustainable competitive advantage » Growth not reliant on strong housing market
Slide 4: James Hardie pioneered development of fibre cement technology
James Hardie pioneered development of fibre cement technology in the 1980s
Slide 5: History - USA Fibre Cement
@ James Hardie History — USA Fibre Cement 1990 - 1995: *« Commenced operations in 1990; one plant, roofing focus * Shifted focus to Siding in 1992; sell and make approach # Moved to high throughput, low unit cost manufacturing « Revenue growth led to investments in new capacity 1995 - 2000: Direct c
Slide 6: Balanced Growth Portfolio
@ James Hardie Mill : Balanced Growth Portfolio James Hardie Business Portfolio — HY06 Total Identifiable Sales EBit"* Assets*# USA Established high growth/high 74% 81% 91% return Asia Pacific Established high return 20% 17% 12% Other Potential growth opportunities g PP 6% 2% (3%) (Pipes, Roofing, E
Slide 7: USA Market Assumptions
@ James Hardie | USA Market Assumptions * Housing Starts, New Construction - expected to decline 5-6% # Manufactured Home Shipments - expected to grow approx 10% * Repair & Remodeling Expenditures (inflation adjusted) - est. rise 2.7% Data (2002) (2003) (2004) | Exteriors Market: U.S. Census Bureau
Slide 8: Continuing to grow share of USA siding market
a ® James Hardie Continuing to grow share of USA siding market 2000 2001 2002 2003 2004 2005est. Siding Market (bsf) * 8.7 9.4 10.1 10.4 11.2 11.3 James Hardie Market Share 7.2% 7.6% 9.2% 10.1% 11.2% 12.6% « bsf = billions square feet * NAHBSources: + Builder Practices Report - Siding Usage/Exterior
Slide 9: Performance - USA Average Selling Price
D James Hardie Performance - USA Average Selling Price 580 > 560 5 5405 5205 500 - 480 5 460 | 4405 420 | 400 - 380 | 360 5 1 1 FYOO FY01 FY02 FY03 FY04 FY0S HY06
Slide 10: Volume, Revenue and Housing Starts
ee James Hardie ym JH Volume === JH Revenue v0... Housing Starts 3 1,200 4 $1,100 + $1,000 $900 $800 $700 $600 $500 $400 4 $300 $200 $100 $0 90 991 92 93 94 958 2% oF 998 99 OO 01 02 03 04 HYFYO6 Volume {mmsf}/ Starts (000s Units) Revenue (US$M)
Slide 11: Revenue and Employees
i @ James Hardie $495 $14 oot d. FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY989 FYOO FYO1 FYO2 FYO3 FY04 FYO5S $48, [7 Revenue Gamg# of Employees —e Revenue Per Employee
Slide 12: EBIT and EBIT Margin
a James Hardie 100 - - 35 (0 EBIT ~~ EBIT/Sales EBIT US$M EBIT MARGIN % FYO1 Fyo2 FY03 FY04 FY05 Q2FY06 *Excludes restructuring and other operating expenses of US$12.6 million in Q3'FY02
Slide 13: Summary
@ James Hardie Il Hl Summary « We have a strong, well established, high growth and return business » We have sustainable competitive advantage # Our model for continued strong growth is based on: » Large market opportunity # Superior value proposition # Proprietary and/or protected technology # Larg
Slide 14: General Management Team
ee James Hardie - General Management Team General Management Team
Slide 15: USA Fibre Cement Emerging Markets Color
@ James Hardie James Hardie USA Fibre Cement Emerging MarketsColor Nigel Rigby December 2005
Slide 16: Exterior Opportunity
Nh @ James Hardie Exterior Opportunity Colour Strategy and Objectives Colour Model Builder segmentation and targeting Installation On the wall cost Capacity, Demand Issues, Challenges and Opportunities Manufacturing
Slide 17: North America: Siding Divisions
@® dames Hardie North America: Siding Divisions
Slide 18: Emerging Markets segment and exterior cladding market
il ) James Hardie » Emerging Markets segment (6.4bsf) = New Construction segment (5.7bsf) # Exterior Cladding Market (12bsf) — expected to be stagnant in FY07 NAHB FYo3) =FY04 = FYO05 FY04 (2002) (2003) (2003) Exterior Cladding, EMM Exterior Cladding, ESM Exterior Cladding, New Construction Exterior
Slide 19: Strategy
@ James Hardie Strategy # Higher value strategy increasing revenue per home by 90% ($1287 / 2500 sf home primed vs. $ 2450 C+ and XLD) « Reduce siding on the wall cost - closing the gap between Hardie and Vinyl — increasing available market opportunity * Increasing the value proposition to the build
Slide 20: Strategy cont...
@ James Hardie Strategy cont... = Value proposition to the builder « Lower OWC by $0.40 — $0.60 a square foot = Professionally developed, complete “system” of colours = Full wrap fibre cement and coating technology backed by one company » Re-engineer the Supply Chain = Deliver a more complex busines
Slide 21: Strategy cont...
@ James Hardie Strategy cont... * Manufacturing - technology # High throughput made to order model * Project packaging on line to the builder = High quality durable coating system = Protection to the wall through on line laminating « Speed of Execution « Difficult fast follower strategy - learning c
Slide 22: Objectives
@ James Hardie Objectives = Terminal share of 30% = 30% - 50% revenue growth » Majority color penetration » XLD penetration on Hardie homes # Best practice quality installation *» OWC and capacity achieving our penetration targets = Leadership / people development program
Slide 23: Dealer or wholesaler model and pallet sizes
James Hardie « District execution of a dealer or wholesaler model « Multiple pallet sizes created Mini Mid Full « Service offering « 7-10 day lead time for Full, Mid or Mini pallet orders (same as siding)
Slide 24: Distribution
@ James Hardie Bill Thi : lim __ Distribution 720 10 Distribution 720
Slide 25: Color Penetration Growth
@ James Hardie Color Penetration Growth Product Offering : = Phase 1 = 12 colors and 12 products - February, 2005 » Phase 2 = 12 colors and 14 products - September, 2005 = Phase 3 = 20 colors and 14 products (MW/NC) — December, 2005 « Phase 4 = 20 colors and 20 products - Q1 FY 07
Slide 26: Color Offering
ee : once i James Hardie ON Color Offering * Various Hardiplank® products available in ALL 12 colors. * Various Harditrim® and Hardisoffit® products available in Sail Cloth, Arctic White, and Navajo Beige 12
Slide 27: ColorPlus colour range
ee i eee James ordi | Sail Cloth Navajo Beige Cobble Stone Soft Green JH20-10+ JH30-10%+ JH40-10* JH60-10 Aretic White JH10-26' Woodland Cream = Autumn Tan Sandstone Beige Monterey Taupe Heatherad Mose Boothbay Blue Countrylane Red JH 10-307 JH20-20"7 JH39-20"T JH40-20°T JHSO-201 SJH7-201 JH9O-20 Tu
Slide 28: Adoption of Hardie Targeted Builders
a, oe Gp) James Hardie Ml Adoption of Hardie Targeted Builders Early Followers Late Followers Stick with the Herd! Move Only when Necessary! | Visionaries Move Ahead of the Herd! Early Followers create the dynarnics for our Color Model. 14
Slide 29: Emerging Markets: Builder Segmentation Model
@® James Hardie ll TMI Emerging Markets: Builder Segmentation Model Competitive Pressure Product Credibility = Quality and features — fotal quality throughout the home = Key brands — 5 key brands above industry standard « Cost per square foot — more square foot for your money 15
Slide 30: Emerging Markets
a e ia @ James Hardie Emerging Markets: » Market development principles are key to our growth * Discipline in targeting the right customer = EMM focus on the top left hand boxes = Compelling reason to buy — right target right proposition » Sell homes faster / for more value / differentiation advanta
Slide 31: Installation
@ James Hardie Installation » Team of 18 installation specialists across emerging markets « Developed and implemented best practice including a site auditing system * 110% installation capacity currently — targeting 150% = QOWC program around efficiency of crews and structure of install companies 17
Slide 32: On The Wall Cost
a Tie: James Hardie Tn On The Wall Cost Chicago XLO Trim Vinyl trim Paint installation Markup. Other Channel Margin Material Labor BEOOmSSEOo
Slide 33: Color Growth: Q2 FY05 - Q3 FY06
@ James Hardie Color Growth: Q2 FY05 — Q3 FY06 EMM C+ Volume MMSF Q3(Fest) 19
Slide 34: North East Growth and Color Penetration
@ James Hardie North East Growth and Color Penetration * North East region consists of New England, New Jersey and Philadelphia * Hardie volume growth 30%+ and colour penetration 40%+ as a percentage of our siding sales in Q2 MMSF Ct+% 20
Slide 35: EMM C+ Volume and Penetration
a @ James Hardie Volume (mmsf) % Penetration @zza EMM C+ Volume —a— %EMM Penetration sons Production
Slide 36: Issues and Challenges
mm , @ James Hardie il!) Issues and Challenges « Balance of demand and capacity with a model that has zero buffer inventory in the channel » Achieve service rates which enable the model » New channel model is a significant shift and will take time to complete the adjustment » Internal capability to
Slide 37: Fibre Cement Manufacturing
@ James Hardie lit Fibre Cement Manufacturing # Pulaski start up is on target for March 2006 # Utilisation in the 3 emerging markets plants is up 4.8% from April 2005 # Summerville is now operating at design efficiencies « Peru is ramping up to a high utilisation plant following 7 expansions in 5 ye
Slide 38: ColorPlus Manufacturing Strategy
@ James Hardie James Hardie USA Fibre Cement ColorPlus Manufacturing Strategy Ryan Sullivan December 2005
Slide 39: ColorPlus Manufacturing Strategy
ColorPlus Manufacturing Strategy = Provide best in class pre-finishing of James Hardie products = Industry leading quality = Made to order — high service level delivery = Low cost position « System designed around 20x20 model # Delivered through ColorPlus Centers » Aggregation of demand to enable sc
Slide 40: ColorPlus Manufacturing Strategy (cont)
a ® James Hardie ColorPlus Manufacturing Strategy (cont) Enabled through Technology * Coating = Customer designed coaters to support Hardie process « Multi-stage coating process ® High paint transfer efficiency * Paint handling » Low waste color changes ® Industry leading color matching capability »
Slide 41: ColorPlus SKU growth
ee James Hardie 1200 1000 800 ie] < a 2 x< 3 v2] °o 3 20 Color; 600 ® ° > i — E CP2 Startup 1 Laminator i uw 2 an 400 9 Add Beaded Plank and ° eaded Plank an dd Soffit, XLD and Job Packs XLD Jobpacks 200 —Total —-* Peru SKUs = Poly. (Total) T T T T T T T 7 T T T T 7 7 7 7 7 7 7 7 7 0 01-Apr-04 01-Ju
Slide 42: ColorPlus Expansion
@ James Hardie ColorPlus Expansion * 4 ColorPlus lines will become operational in the next 3 quarters = Blandon, Pulaski and Reno = Improved logistics and service by having multiple locations = Technology step change in material handling and paint handling » Continue to roll-out new products to the
Slide 43: Challenges
_ : . @ James Hardie » Competitive response from pre-finishers = 1 coat = Low grade materials * Culture change inside Hardie manufacturing « Made to order culture = Accuracy and service over raw production » Speed of execution = Technology change = Rapid expansion » Raw Material Increases = Oil and
Slide 44: ColorPlus Supply Chain
@ James Hardie James Hardie USA Fibre Cement ColorPlus Supply Chain John Zintak December 2005
Slide 45: Value chain benefits
i : @ James Hardie Chicago « JH sells a higher quality product with higher revenue stream » Channel increases revenue base and gains incremental volume @ XLD Trin B Vinyl trim @ Paint bore Newer! # End User gets a higher quality CO Channel Margin ager product at a reduced cost » Gap between vinyl an
Slide 46: Channel Design - Current Primed Model
@ James Hardie Channel Design — Current Primed Model * Inventory heavily stored in channel (Distribution/Dealers) = Long Lead times from JH to Distribution (14+ days) * Distribution “buffers” service with safety inventory » Allows JH to focus solely on manufacturing and allows long cycle times for p
Slide 47: Channel Model Under ColorPlus
@ James Hardie J) Channel Model Under ColorPlus. = New model creates additional opportunity for channel to increase: = Revenue = Volume = Margins = However, new model also increases complexity = 50 skus to over 1000 skus to manage « Traditional stocking strategies challenged ($, storage space) * “Lo
Slide 48: Desired End State ColorPlus Channel
@ James Hardie Desired End State ColorPlus Channel Ill ITT « Consolidation of partners to help drive critical scale through fewer partners * Reduction on inventory within the channel » Channel stocks “core” products (<30 skus) » Bulk of products not stocked, “purchased to order” # Reduction of Lead
Slide 49: Pack Sizes
a ii), eee James Hardie HT Pack Sizes Utilise Mini, Mid, and Full size pallets for sell-to-order requests. Mini Mid Full » Allows Market access to full ColorPlus product line = Pallet sizes are about 2 square increments » Cost average material over projects » No residual inventories « Enables the ch
Slide 50: ColorPlus Channel Margins
ee Il James Hardie SINT ColorPlus Channel Margins Simsf $/Square Bill Through Wholesaler Dealer Builder Builder (8.25) inventory | -pisteibution |») 720. fa} 850. 1,000 wes Distribution. | ba 7200 femme OTS ee 910... 107 pal Distribution 720 750 980 Through stribution. Inventory ws ; Position Dealer
Slide 51: James Hardie Internal Competency Development
@ James Hardie James Hardie Internal Competency Development # Service Model * Reduced inventory in the channel requires high service levels « JH will stock 30-50 skus, remainder “manufactured to order” = Short Cycle Times (4-5 days maximum) = Supports low lead times * Allows JH to “manufacture to or
Slide 52: ColorPlus Supply Chain Current Status
@ James Hardie ColorPlus Supply Chain Current Status = Channel structure initiated = Key wholesalers servicing rural/fragmented markets = Network of market leader dealers (currently 50) to drive model and sales = Regional approach « Programs — ColorPlus focused
Slide 53: Issues and Challenges
@ James Hardie i I Issues and Challenges # Resistance to change = Channel loss of control with reduction of inventory stocking requirements « Ability for JH to develop infrastructure and culture to support model (capacity, service, and planning) a Change in builder buying behavior » Speed of executi
Slide 54: XLD Trim Manufacturing
@ James Hardie James Hardie USA Fibre Cement XLD Trim Manufacturing Dave Merkley December 2005
Slide 55: James Hardie TRIM Capacity Sites
@ James Hardie James Hardie TRIM Capacity 2 Sites = Cleburne 100 mmsf « Integrated into existing flat sheets building » Shared finishing « Peru 160 mmsf « Stand alone facility = 250,000sf building » 20 acre site # 100 employees « Dedicated R&D/engineering resources
Slide 56: Cleburne TRIM
@ James Hardie Cleburne TRIM # 18 generation former « Batch process = Limited expansion potential = Sawing capability in development = Primed only
Slide 57: @ James Hardie
@ James Hardie %Y DESIGN EF SIFIFIEIFIFFIPFISHP
Slide 58: Peru TRIM
@ James Hardie » 1.5 years to construct * Slow start due to scale up of 34% generation former = Continuous forming process » Expandable to 2.5 x Cleburne size = 100% machine edges » 100% C+ capable = 6 Colors = Laminated « Multiple pack sizes
Slide 59: Peru TRIM
ee James Hardie Peru TRIM % DESIGN May-05 dun-05 Jubo5. Aug-05 Sep-05 Oct-05 Nov-05.
Slide 60: Product attributes
@ James Hardie butes Current Attributes * Sanded face » Machined edges * C+ protected using laminate technology * Machineable » Pin fastening * Suitable for edge nailing Future » Longer lengths » Thicker products * More intricate shapes
Slide 61: Pulaski - 10/4 Plant Update
@ James Hardie SL James Hardie PULASKI -— 1074 PLANT UPDATE
Slide 62: Pulaski Plant
@ James Hardie Pulaski Plant = 51.8 acres « = 2 miles from interstate 81 = TOP population 9200 # Surrounding area population 250,000 * 804,000 SF under roof #« $98 million construction cost
Slide 63: Pulaski Plant General Arrangement
@ James Hardie | Pulaski Plant General Arrangement
Slide 64: Plant Equipment Capabilities
@ James Hardie Plant Equipment Capabilities * 600 MMSF annually « Plank — Backer — Panel « Two sheet machines ® Quick felt change * Quick cleanup * Larger buffers * Two finishing lines x 250 MMSF color expandable to 500 MMSF 11
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Slide 66: i. oni
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Slide 68: Progress
@ James Hardie Progress * Civil ® Mechanical » Piping » Electrical » Building (Process) Estimated Timing * Equipment Install Complete Line 1 = Equipment Install Complete Line 2 = Commissioning Complete Line 1 = Commissioning Complete Line 2 80% 75% 20% 30% 90% January 06 March 06 March 06 June 06 15
Slide 69: Plant Start-up
@ James Hardie il PIII Plant Start-up = Began recruiting locally in November # Key leadership and technical jobs staffed internally # New hires trained at existing JH sites = Targeting 115 people for first flat sheet and C+ line = Fully staffed plant approximately 200 people. 16
Slide 70: USA Fibre Cement Established Markets
@ James Hardie James Hardie USA Fibre Cement Established Markets Robert Russell December 2005
Slide 71: Established Markets Overview
ee i James Hardie Established Markets Overview Interior 18% i | | | ! ESM 61% @ Hat Sheet Plants Capacity (“MSTDFT) JHBP USA Sales Volume Growth Fontana, California 180 ; Plant City, Florida 300 Pan C interior Cleburne, Texas S00 2000 EMM Tacoma, Washington 200 wESM Vvaxahachie, Texas 360 Reno, Neva
Slide 72: Established Markets (ESM)
— Wiis @ James Hardie ail ii ee Iii Established Markets (ESM) Current State woRtHMEST FSM Say Fatt Other outa st SULLA SOUTHEAST. ASN — Bia even FES "rai Ralchterd JHFG Sourcas: (2
Slide 73: ESM - Pacific Northwest Region
a il) James Hardie LT i) a von ESM - Pacific Northwest Region 2005 James Hardic® Exteriors Ma Current State NORTHWEST RSM Gary Prssset Other- Brick Stone Wood se a TSA Ci econ Vinyl Non-JH FC
Slide 74: Aggressive Growth
@ James Hardie Aggressive Growth # Primary growth positioned around wood and vinyl conversions # Specialty product growth aimed at existing customer base * Continued push for Rural Market penetration VEL # Drive Repair and Replacement Initiative alilols * Color available in Q1 FY07 s|/4T5 16 c|7 c=
Slide 75: Current State
a @ James Hardie Current State MOREE ROMS bare Hasse SOUTHWEST RSM Stove Heaton SOUEHEASE ES Ce ates Sourves:
Slide 76: South West Focus
@ James Hardie South West Focus Aggressive Growth = Elimination of Hardboard and other wood-based technologies « Hardboard holdout markets such as Denver starting to turn # Tremendous opportunity against stucco « OTWC initiative under way # Architectural design trending in our favor # Color availabl
Slide 77: Current State
ee James Hardie Current State Other agree EES Goes Veins Wood Vinyl} Non-JH FC JHFC
Slide 78: South Central Focus
@ James Hardie i) South Central Focus Aggressive Growth « Elimination of Hardboard and other wood-based technologies # Continued push for Rural Market penetration « Effectively drive Repair & Replacement initiative » Initiative against Brick underway # Marketing programs aimed at driving Specialty P
Slide 79: ESM - South East Region
/ / a James Hardie _ ee TIMMMINIM ee ESM - South East Region Current State eatrinwe st Bat bas soe Fae Beowe esa SOLTHEAST PRI Rin Gowes iis Craig Fatcanora Soereas. i Ropalr & 10
Slide 80: South East Focus
@ James Hardie “nt South East Focus Aggressive Growth * Target Hardboard, Vinyl and Stucco = Rural Market penetration » Effectively drive Repair & Replacement initiative » Specialty Products growth * Active Role in the Rebuild of the Mid South (LA, MS) « Positioned well with regards to architectural
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James Hardie Industries — Investor Presentation (December 2005) on 6ix