James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Non-Deal Roadshow (June 2005)
48 slides from James Hardie Industries's roadshow presentation, Jun 3, 2005
Slide 1: Building On Proven Performance UK Roadshow May/June 2005
Building On Proven Performance UK Roadshow May/June 2005
Slide 2: A Growth Focussed Company
James Hardie Annual net sales US$1,210m Total assets US$1,089m Operations in North America, South America, Asia Pacific and Europe 3000 employees Market cap US$2.2 billion ASX S&P 50 company Note: Net sales and total assets are at 31 March 2005 A Growth Focussed Company PHOTO
Slide 3: Investment Attributes
Focussed on Fibre Cement High growth Unique proprietary technology Sustainable competitive advantage Strong cashflows and balance sheet Growth not reliant on strong housing market Investment Attributes PHOTO
Slide 4: First to Develop Fibre Cement
First to Develop Fibre Cement James Hardie pioneered development of fibre cement technology in the 1980s Fibre Cement Sand Cellulose Fibre Water Portland Cement PHOTO
Slide 5: Business Overview
Business Overview
Slide 6: Many Product Applications
Many Product Applications External siding/soffit lining Internal wall/floor wet area lining Trim and fascia Ceiling lining and flooring External/internal wall systems Commercial facades Drainage pipes Roofing PHOTOS
Slide 7: Unique Technology and Scale
Unique Technology and Scale Sustainable Competitive Advantage Unique plant engineering and proprietary process technology and product formulations Superior capital cost efficiency - plant capital cost less than 1/2 that of competitors Largest, lowest cost manufacturer - plant operating cost 20-30% l
Slide 8: R&D is a Key Driver of Growth
Capabilities and resources 131 scientists, engineers and technicians US$27 million spend - 2.2% of net sales Core projects new proprietary engineered raw materials new proprietary product formulations new engineering and proprietary process technologies lightweight and durable products for all clima
Slide 9: Strategy: Industry Leadership and Profitable Growth
Strategy Industry Leadership and Profitable Growth Aggressively grow the market Secure differentiated position Generate strong top line growth Win high shares of large segments Sustain attractive margins PHOTOS
Slide 10: Operations Overview
Operations Overview
Slide 11: Balanced Growth Portfolio
Balanced Growth Portfolio James Hardie Business Portfolio - FY 05 Total Identifiable Assets*# Sales EBIT1,# USA - - Established high growth/high return 72% 78% 87% Asia Pacific - - Established high return 20% 19% 17% Other - - Potential growth opportunities (Pipes, Roofing, Europe, Chile) 8% 3% (4%)
Slide 12: USA Fibre Cement
USA Fibre Cement James Hardie is the largest lowest cost producer of fibre cement in North America Plant Locations Flat Sheet Plants Flat Sheet Plants Capacity (mmsf1) Fontana, California Fontana, California 180 Plant City, Florida Plant City, Florida 300 Cleburne, Texas Cleburne, Texas 500 Tacoma,
Slide 13: Increased Scale
Increased Scale 1990 1994 1998 2001 2004 mmsf1 60 100 150 200 300 Production Capacity Per Line
Slide 14: Lower Capital Cost
Lower Capital Cost 1990 1995 1997 1998 2000 2004 USD/sf1 Capital Cost/Unit of Capacity
Slide 15: Superior Product Performance: vs Wood
Superior Product Performance Fibre Cement is more durable than wood and engineered wood Fibre Cement Superior Durability Moisture Resistant Fire Resistant Weather Resistant Termite Proof Won't Warp Won't Crack Won't Rot Holds Paint Longer ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Engineered Wood PHOTO PHOTO
Slide 16: Superior Product Performance: vs Vinyl
Superior Product Performance Fibre Cement looks and performs better than vinyl Vinyl Fire Resistant Hail Resistant Won't Warp Won't Buckle Colour Lasts Longer Dimensional Stability Can Be Repainted ? ? ? ? ? ? ? ? ? ? ? ? ? ? Fibre Cement PHOTOS
Slide 17: Numerous Revenue Growth Streams
Numerous Revenue Growth Streams Soffit Growth FY00 FY01 FY02 FY03 FY04 FY05 Retail Volume Growth FY00 FY01 FY02 FY03 FY04 FY05 Trim Growth FY00 FY01 FY02 FY03 FY04 FY05 1/4" Backer Growth FY00 FY01 FY02 FY03 FY04 FY05 1/2" Backer Growth FY00 FY01 FY02 FY03 FY04 FY05
Slide 18: Average Net Sales Price
Average price growth driven by mix and market price increases Average Net Sales Price US$ per MSF1
Slide 19: USA Fibre Cement Top Line Growth
USA Fibre Cement Revenue (USDM) Top Line Growth 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 Volume (mmsf) / Starts (000's Units) $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $900.0 $1,000.0 JH Volume JH Revenue Housing Starts
Slide 20: USA Fibre Cement EBIT
USA Fibre Cement *Excludes restructuring and other operating expenses EBIT1 Compound Annual Growth Rate FY01 - FY05 35% *Excludes US$12.6m restructuring and other operating expenses incurred in FY02 EBIT US$M EBIT MARGIN % FY01 FY02 FY03 FY04 FY05 0 10 20 30 40 50 60 70 80 90 0 5 10 15 20 25 30 35 E
Slide 21: Growth In Revenue Per Employee
Growth In Revenue Per Employee $495 $48 $115 $153 $166 $251 $250 $329 $298 $354 $326 $381 $367 $413 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 Revenue # of Employees Revenue Per Employee
Slide 22: Market Data - Exterior Products
Market Data - Exterior Products Product Category Estimated Market Size (bsf1) New Construction - Siding, Fascia & Soffits 5.4 - Trim 0.8 Total New 6.2 Repair & Remodel - Siding, Fascia & Soffits 6.2 - Trim 0.2 Total R&R 6.4 Grand Total 12.6 Source: National Association of Home Builders - Builder Pra
Slide 23: Exteriors net sales on track to more than double
Exteriors-net sales on track to more than double 02-07 FY02 FY03 FY04 FY05 FY06 FY07 Target Compound Annual Growth Rate 15% Actual Compound Annual Growth Rate 28 % US$M
Slide 24: US Housing Market Remains Stable
US Housing Market Remains Stable Positive demographic factors Immigration Internal migration Household formation Low mortgage rates Strong house prices Growing economy PHOTOS
Slide 25: Backer is Also Growing Fast
Backer is Also Growing Fast USA Interior Cement Board Market (est. 1bsf1) James Hardie 25% - 30% Other 70% - 75% Net sales growing strongly - CAGR* 27% (FY01-FY04) Leading position in 1/4" market - technology advantage for floor applications Hardibacker 500 is driving penetration on wall application
Slide 26: Australia and New Zealand
Australia and New Zealand FY05 net sales US$210m - - up 8% FY05 EBIT1 up 20% to US$42m Higher value differentiated products Lower delivered cost Shift to growth model PHOTOS
Slide 27: Philippines and Asia
Philippines and Asia Manufacturing plant commissioned 1999 FY05 net sales US$26 million up 25% EBIT1 positive Fibre cement as substitute for plywood Established low cost regional manufacturing hub Low GDP per capita is an obstacle for generating unique financial returns PHOTO
Slide 28: Other Fibre Cement: Chile
Other Fibre Cement Chile Manufacturing plant commissioned 2001 Low cost manufacturing, rapid market penetration, strong growth Positive EBIT1 Differentiated products introduced Limited scale opportunity PHOTOS
Slide 29: Pipes
Pipes USA manufacturing plant commissioned 2001 Market recognises product has advantages over reinforced steel concrete pipes in mid- diameters - light, long, strong Lower cost to make and install Manufacturing targets not met but progress being made Cash breakeven - nearing EBIT breakeven Other Fib
Slide 30: Other Fibre Cement: Artisan Roofing
Other Fibre Cement Artisan Roofing US$15M USA pilot plant commissioned FY04 Proving scalability of roofing technology Product design Product performance Manufacturing capability Market positioning PHOTOS
Slide 31: Other Fibre Cement: Europe Market Development
Other Fibre Cement Europe Market Development Initially pursuing a low cost, low risk strategy Differentiated products imported from US G2 Backer XLD Trim ColorPlus Siding Focussed market development UK and France JH business model differentiated from current industry approach PHOTO
Slide 32: Financials
Financials
Slide 33: Results - Full Year March
Results - Full Year 31 March 05 US$Million Net Sales 1,210.4 Up 23% Gross Profit 426.4 Up 19% EBIT1,* 196.2 Up 14% Operating Profit1,* 127.9 Up 2% * Excluding costs related to NSW Government Special Commission of Inquiry of US$28.1m EBIT increased 30% to US$224.3m and operating profit increased 20%
Slide 34: Results - USA Fibre Cement
Results - Full Year 31 March 05 US$Million Net Sales 939.2 Up 27% EBIT1 241.5 Up 24% Volume 1855 mmsf1 Up 22% EBIT Margin1 25.7% Down 0.8pts USA Fibre Cement
Slide 35: Results - Other Businesses
Results - Full Year 31 March 05 Other Businesses ANZ net sales up 8%. EBIT1 up 20% Philippines sales up 25%. EBIT1 positive USA Pipes nearing cashflow breakdown - nearing EBIT breakeven Chile - EBIT1 positive Europe - EBIT1 negative, as expected
Slide 36: Key Ratios
Key Ratios FY'05 FY '04 FY '03 EPS (Diluted) 27.7c 27.2c 18.2c Dividend Paid 3.0c 5.0c 7.5c Return on Shareholders Funds* # 22.4% 27.6% 42.3% Return on Capital Employed# 23.6% 23.4% 20.9% EBIT1/Sales 16.2% 17.5% 16.4% Gearing Ratio1 6.8% 17.0% 21.4% Net Interest Expense Cover 38.5x 17.2x 6.5x Net In
Slide 37: High Growth and Attractive Returns Targeted
High Growth and Attractive Returns Targeted Long Term Financial Targets Target Actual FY04 Actual FY05 Revenue Growth > 15% p.a. 25% 23% EBIT Margin1 > 15% 18% 16%* Return On Capital Employed > 15% 23% 23% * Includes costs related to the SCI and related matters of US$28.1 million. PHOTO
Slide 38: Asbestos Related Progress
Asbestos Related Progress
Slide 39: Long-Term Funding Proposal - Background
Long-Term Funding Proposal - Asbestos Related Personal Injury Claims Background Inquiry into establishment of Medical Research and Compensation Foundation (MRCF) announced by NSW Government - February 2004 Inquiry report released September 2004: Establishment of MRCF legally effective No legal liabi
Slide 40: Long-Term Funding Proposal - Heads of Agreement
Long-Term Funding Proposal - Asbestos Related Personal Injury Claims Heads of Agreement Non-binding agreement signed with NSW Government, union and claimants representatives - December 2004 Funding arrangement intended to allow James Hardie to remain profitable, financially strong and to fund growth
Slide 41: Long-Term Funding Proposal - Key Elements
Long-Term Funding Proposal - Asbestos Related Personal Injury Claims Key Elements Special Purpose Fund (SPF) to be established - James Hardie to appoint majority of Board Initial funding based on KPMG Actuaries updated report- discounted central estimate A$1.68bn at 31 March 2005 Annual contribution
Slide 42: Actuarial Estimates Overview
Actuarial Estimates Overview A$Billions 2004 30 June 2005 31 March Central Estimate - Discounted 1.536 1.685 Central Estimate - Undiscounted 3.586 3.604 Range - Undiscounted 2.0 - 5.7 2.0 - 5.9 Voluntary Asbestos Compensation Funding Proposal
Slide 43: Likely Accounting for Asbestos Liability
Likely Accounting for Asbestos Liability No provision for proposed liability at 31 March 2005 - not probable and estimable at this time (SFAS5) Subject to completion, accounting treatment for take-up of provision likely to be: Based on undiscounted Central Estimate as calculated by KPMG Actuaries Ca
Slide 44: Voluntary Asbestos Compensation Funding Proposal Timing Update
Voluntary Asbestos Compensation Funding Proposal Timing Update Satisfactory progress on Principal Agreement no significant departures from Heads of Agreement Estimated completion date of Principal Agreement June - legal complexities Timetable for late July EGM appearing ambitious
Slide 45: Long-Term Funding Proposal - Claims Outside Australia
Long-Term Funding Proposal - Asbestos Related Personal Injury Claims Australian Media Has suggested claims outside Australia (New Zealand, Asia and USA) could jeopardise SPF SPF only available to Australian-based personal injury claims against former Australia James Hardie subsidiaries In New Zealan
Slide 46: Summary
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 Large upsides due to current R&D invest
Slide 47: Disclaimer
Disclaimer This Presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with the Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering circulars and prospectuses, i
Slide 48: Notes
Notes EBIT and EBIT Margin - EBIT is defined as operating income. EBIT margin is defined as EBIT as a percentage of our net sales. We believe EBIT and EBIT margin to be relevant and useful information as these are the primary measures used by our management to measure the operating profit or loss of
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