James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — H1 FY2008 Earnings Presentation
60 slides from James Hardie Industries's earnings presentation, Nov 28, 2007
Slide 1: James Hardie FY08 2nd Quarter and Half Year Results
James Hardie FY08 2nd Quarter and Half Year Results 19 November 2007 In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures included in the Definitions section of this document starting on page 53. The co
Slide 2: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda
Slide 3: Overview
US$ Million Q2 FY08 Q2 FY07 % Change HY FY08 HY FY07 % Change Net operating profit 19.1 21.1 (9) 58.2 56.6 3 Net operating profit, excluding asbestos 46.5 68.3 (32) 115.1 131.0 (12) Diluted earnings per share, excluding asbestos (US cents) 10.0 14.7 (32) 24.6 28.1 (12) Further deterioration in most
Slide 4: 2nd Quarter Overview
2nd Quarter USA Fibre Cement - EBIT lower due to impact of weaker housing market on volumes and higher costs, but a solid performance given market conditions Asia Pacific Fibre Cement - EBIT up due to stronger A$ and strong sales performance in Australia and New Zealand, despite weak housing constru
Slide 5: Half Year Overview
Half Year USA Fibre Cement - improved market penetration, price growth and cost management helped deliver a strong half year EBIT result in challenging business environment Asia Pacific Fibre Cement - sales and EBIT up despite weak Australian and New Zealand housing and renovation markets Strong ope
Slide 6: Operating Review
Operating Review Louis Gries, CEO
Slide 7: US Southern Living Idea House, with Artisan lap
USA Fibre Cement US Southern Living Idea House, with ArtisanTM lap
Slide 8: 2nd Quarter Result
2nd Quarter Result Net Sales down 9% to US$308.0 million Sales Volume down 11% to 511.7 mmsf Average Price up 2% to US$602 per msf EBIT down 14% to US$84.3 million EBIT Margin down 1.4 pts to 27.4% USA Fibre Cement
Slide 9: Half Year Result
Half Year Result Net Sales down 5% to US$654.1 million Sales Volume down 8% to 1,085.1 mmsf Average Price up 3% to US$603 per msf EBIT down 1% to US$198.7 million EBIT Margin up 1.2 pts to 30.4% USA Fibre Cement
Slide 10: 2nd Quarter Market Conditions
2nd Quarter Market Conditions Further weakness in new housing construction activity Starts down 24% and 21% for September and June quarters, respectively Market demand affected by affordability issues Higher interest rates Tighter lending standards in the mortgage market Inventory levels of new home
Slide 11: Key Points
Key Points Sales lower due to significant drop in US housing activity Continued to outperform the broader market through market penetration and price growth Sales volumes lower in all operating divisions, but Western Division continued to perform particularly well Within exterior products, moderate
Slide 12: Suspension of operations at Blandon, Pennsylvania, plant
Suspension of operations at Blandon, Pennsylvania, plant Announced on 31 October 2007, in response to further deterioration in US housing market Blandon, a 200 mmsf per annum plant, has been operating at reduced levels since the business reset in late 2006-early 2007 Acquired plant from Cemplank in
Slide 13: Outlook
Outlook Further weakness in housing construction activity through to at least the end of this fiscal year Softer repair and remodelling activity expected in short to medium-term Continuing to invest in growth initiatives Further market penetration against alternative materials Cost pressures, partic
Slide 14: Top Line Growth
1 Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau. USA Fibre Cement Top Line Growth 0 400 800 1,200 1,600 2,000 2,400 2,800 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 HY FY08 JH Volume (mmsf), Starts (000's Units) $0 $200 $400 $600 $800 $1,000 $
Slide 15: Primary Growth Performance
USA Fibre Cement Primary Growth Performance - -30% - -20% - -10% 0% 10% 20% 30% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 %JHBP Growth (sft) NC/R&R Growth Rolling 4Qtr - JHBP Growth (sft) Rolling 4Qtr - NC/R&R Growth
Slide 16: Average Net Selling Price
USA Fibre Cement Average Net Selling Price US$ per MSF 360 380 400 420 440 460 480 500 520 540 560 580 600 620 FY02 FY03 FY04 FY05 FY06 FY07 HY FY08
Slide 17: Strategy
Strategy Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors, introducing differentiated products to reduce direct price competition
Slide 18: EBIT and EBIT Margin
*Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02 USA Fibre Cement 0 20 40 60 80 100 120 140 FY02 FY03 FY04 FY05 FY06 FY07 Q2 FY08 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales EBIT and EBIT Margin*
Slide 19: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement Holiday house in Western Australia with PrimeLine weatherboards and ScyonTM Matrix cladding.
Slide 20: 2nd Quarter Result - Asia Pacific Fibre Cement
2nd Quarter Result Net Sales up 19% to US$76.1 million Sales Volume up 4% to 104.5 mmsf Average Price up 3% to A$859 per msf EBIT* up 8% to US$12.4 million EBIT* Margin down 1.7 pts to 16.3% Asia Pacific Fibre Cement * EBIT includes US$2.7m lease cost adjustment related to prior periods.
Slide 21: Half Year Result - Asia Pacific Fibre Cement
Half Year Result Net Sales up 20% to US$147.3 million Sales Volume up 5% to 202.5 mmsf Average Price up 2% to A$866 per msf EBIT* up 14% to US$24.8 million EBIT* Margin down 0.9 pts to 16.8% Asia Pacific Fibre Cement * EBIT includes US$2.7m lease cost adjustment related to prior periods.
Slide 22: Strategy - Asia Pacific Fibre Cement
Strategy Grow primary demand for our products Leverage our superior technology to offer differentiated products and systems with superior value to those of competitors Promote a smarter way to build composite construction houses using our products Vigorously defend our position in existing market se
Slide 23: Key Points - Asia Pacific Fibre Cement
Key Points Residential construction activity slightly weaker in Australia, flat in New Zealand and stronger in the Philippines US$ financial results assisted by appreciation of Asia Pacific currencies Q2 net sales up 7% in A$; volumes up 4% due to market share gains; and average sales price up 3% du
Slide 24: Outlook - Asia Pacific Fibre Cement
Outlook Further weakness in new housing and renovations activity in Australia and New Zealand in short-term Further growth in primary demand for fibre cement in Australia and New Zealand Non-differentiated products to remain subject to strong competition More manufacturing efficiencies and other cos
Slide 25: Other: USA Hardie Pipe and Europe Fibre Cement
USA Hardie Pipe Q2 net sales lower due to weaker residential and non-residential construction activity in Florida Impact of lower volumes partly offset by higher average net sales price and improved manufacturing performance Small EBIT loss for the quarter Europe Fibre Cement Sales continuing to gro
Slide 26: Overall Outlook for Operations
USA Fibre Cement Further weakness in US housing activity expected at least through the remainder of fiscal 2008 Expect to continue outperforming the broader market Asia Pacific Fibre Cement Market conditions to remain challenging in Australia and New Zealand, but further growth in primary demand for
Slide 27: Financial Review
Financial Review Russell Chenu, CFO
Slide 28: Overview
Solid Q2 and half year operating performance given weaker market conditions Comparison of net operating profit excluding asbestos for Q2 and half year affected by low effective tax rate in Q2 FY07 due to write back of tax provisions Current year tax rate increased slightly due to change in geographi
Slide 29: Capital Management
Strong balance sheet Net debt - US$89.9m Cash and unused term facilities - US$265.1m Announced significantly increased interim dividend of US 12 cents (FY07 US 5 cents) - up 140% Record date 4 December 2007; Payment date 18 December 2007 Commenced share buy-back Capital Management
Slide 30: Share Buy-Back
Share Buy-Back Announced share buy-back of up to 10% of issued capital (up to approximately 46.8 million shares) on 15 August 2007 Purchased 2.5% of issued capital between 18 September 2007 and 12 October 2007 at average price of A$7.26 / US$6.36 7.5 million shares purchased as at 30 September 2007
Slide 31: Asbestos Fund Update
Asbestos Fund Update AICF holdings at 30 September 2007 A$158.6m - cash and short-term investments Net claims paid HY FY08: A$ millions AICF HY FY08 KPMG Actuarial Estimate* MRCF HY FY07 Claims Paid 32.4 36.2 31.9 Legal Costs 3.3 2.8 3.7 Insurance and cross claim recoveries (11.0) (7.0) (7.4) Total
Slide 32: Results - Q2
US$ Million Q2'08 Q2'07 % Change Net sales 390.1 411.4 (5) Gross profit 138.8 155.2 (11) SG&A expenses (58.1) (57.2) (2) Research & development expenses (7.1) (6.6) (8) SCI and other related expenses - (3.2) - Asbestos adjustments (28.9) (47.2) 39 EBIT 44.7 41.0 9 Net interest income 2.0 1.0 - Incom
Slide 33: Results - Q2 (excluding asbestos)
US$ Million Q2'08 Q2'07 % Change Net operating profit 19.1 21.1 (9) Asbestos: Asbestos adjustments 28.9 47.2 (39) AICF SG&A expenses 1.1 - - AICF interest income (2.6) - - Net operating profit excluding asbestos 46.5 68.3 (32) Results - Q2
Slide 34: Results - Half Year
US$ Million HY'08 HY'07 % Change Net sales 814.5 826.9 (1) Gross profit 305.7 312.9 (2) SG&A expenses (113.6) (108.9) (4) Research & development expenses (13.4) (14.1) 5 SCI and other related expenses - (5.6) - Asbestos adjustments (59.0) (74.4) 21 EBIT 119.7 109.9 9 Net interest income (expense) 2.
Slide 35: Results - Half Year (excluding asbestos)
US$ Million HY'08 HY'07 % Change Net operating profit 58.2 56.6 3 Asbestos: Asbestos adjustments 59.0 74.4 (21) Tax expense related to asbestos adjustments 0.4 - - AICF SG&A expenses 1.7 - - AICF interest income (4.2) - - Net operating profit excluding asbestos 115.1 131.0 (12) Results - Half Year
Slide 36: Segment Net Sales - Q2
US$ Million Q2'08 Q2'07 % Change USA Fibre Cement 308.0 339.0 (9) Asia Pacific Fibre Cement 76.1 63.8 19 Other 6.0 8.6 (30) Total 390.1 411.4 (5) Segment Net Sales - Q2
Slide 37: Segment Net Sales - Half Year
US$ Million HY'08 HY'07 % Change USA Fibre Cement 654.1 687.9 (5) Asia Pacific Fibre Cement 147.3 123.0 20 Other 13.1 16.0 (18) Total 814.5 826.9 (1) Segment Net Sales - Half Year
Slide 38: Segment EBIT - Q2
US$ Million Q2'08 Q2'07 % Change USA Fibre Cement 84.3 97.8 (14) Asia Pacific Fibre Cement 12.4 11.5 8 Other (1.9) (1.5) (27) R & D1 (4.8) (4.1) (17) Total Segment EBIT 90.0 103.7 (13) General Corporate (15.3) (15.5) 1 Total EBIT excluding asbestos 74.7 88.2 (15) Asbestos adjustments (28.9) (47.2) (
Slide 39: Segment EBIT - Half Year
US$ Million HY'08 HY'07 % Change USA Fibre Cement 198.7 201.1 (1) Asia Pacific Fibre Cement 24.8 21.8 14 Other (3.2) (4.2) 24 R & D1 (8.9) (8.7) (2) Total Segment EBIT 211.4 210.0 1 General Corporate (31.0) (25.7) (21) Total EBIT excluding asbestos 180.4 184.3 (2) Asbestos adjustments (59.0) (74.4)
Slide 40: Corporate Costs - Q2
US$ Million Q2'08 Q2'07 % Change Stock compensation expenses 1.6 1.2 (33) Earnings-related bonus 2.0 0.5 - SCI and other related expenses - 3.2 - ASIC proceedings 1.9 - - Australian pension plan 0.5 0.8 38 Other costs 9.3 9.8 5 Total 15.3 15.5 1 Corporate Costs - Q2
Slide 41: Corporate Costs - Half Year
US$ Million HY'08 HY'07 % Change Stock compensation expenses 3.1 2.7 (15) Earnings-related bonus 2.9 (1.3) - SCI and other related expenses - 5.6 - Non-US warranty provision 4.0 - - ASIC proceedings 3.1 - - Australian pension plan 1.1 1.5 27 Other costs 16.8 17.2 2 Total 31.0 25.7 (21) Corporate Cos
Slide 42: Net Interest Income (Expense)
Net Interest Income (Expense) US$ Million Q2'08 Q2'07 HY'08 HY'07 Gross interest expense (2.6) (2.7) (4.4) (5.6) Make-whole payment - - - (6.0) Capitalised interest 0.2 2.5 0.6 5.8 Interest income 1.8 1.2 2.1 4.8 Net interest income (expense) excluding AICF net interest income (0.6) 1.0 (1.7) (1.0)
Slide 43: Income Tax Expense - Q2
US$ Million Q2'08 Q2'07 Operating profit before income taxes 46.7 42.0 Asbestos: Asbestos adjustments 28.9 47.2 AICF SG&A expenses 1.1 - AICF interest income (2.6) - Operating profit before income taxes excluding asbestos 74.1 89.2 Income tax expense 27.6 20.9 Tax provision write-back - 7.4 Income t
Slide 44: Income Tax Expense - Half Year
US$ Million HY'08 HY'07 Operating profit before income taxes 122.2 108.9 Asbestos: Asbestos adjustments 59.0 74.4 AICF SG&A expenses 1.7 - AICF interest income (4.2) - Operating profit before income taxes excluding asbestos 178.7 183.3 Income tax expense 64.0 53.2 Asbestos: Tax expense related to as
Slide 45: EBITDA - Q2
US$ Million Q2'08 Q2'07 % Change EBIT USA Fibre Cement 84.3 97.8 (14) Asia Pacific Fibre Cement 12.4 11.5 8 Other (1.9) (1.5) (27) R & D (4.8) (4.1) (17) General Corporate (15.3) (15.5) 1 Depreciation and Amortisation USA Fibre Cement 9.3 10.0 7 Asia Pacific Fibre Cement 1.9 2.6 27 Other 2.3 0.6 - T
Slide 46: EBITDA - Half Year
US$ Million HY'08 HY'07 % Change EBIT USA Fibre Cement 198.7 201.1 (1) Asia Pacific Fibre Cement 24.8 21.8 14 Other (3.2) (4.2) 24 R & D (8.9) (8.7) (2) General Corporate (31.0) (25.7) (21) Depreciation and Amortisation USA Fibre Cement 20.1 17.9 (12) Asia Pacific Fibre Cement 4.6 5.1 10 Other 3.0 1
Slide 47: Cash Flow - Half Year
Cash Flow - Half Year US$ Million HY'08 HY'07 % Change EBIT 119.7 109.9 9 Non-Cash items - Asbestos adjustments 59.0 74.4 21 - Other non-cash items 60.1 43.6 (38) Net working capital movements 41.5 (50.2) - Cash generated by trading activities 280.3 177.7 58 Tax payments (43.9) (51.6) 15 Deposit wit
Slide 48: Capital Expenditure - Half Year
US$ Million HY'08 HY'07 % Change USA Fibre Cement 20.7 54.0 62 Asia Pacific Fibre Cement 3.2 5.3 40 Other 0.3 2.1 86 Total 24.2 61.4 61 Capital Expenditure - Half Year
Slide 49: Key Ratios
HY' FY08 FY07 FY06 EPS (Diluted)1 24.6c 47.6c 44.9c Dividend Paid per share 15.0c 9.0c 10.0c Return on Shareholders' Funds1 23.0% 24.0% 29.1% Return on Capital Employed2 30.1% 26.6% 28.9% EBIT/ Sales (EBIT margin)2 22.1% 20.7% 18.9% Gearing Ratio1 8.6% 12.8% (1.6)% Net Interest Expense Cover3 106.1x
Slide 50: Summary
Solid overall operating performance for the half year considering business environment Strong cash generation The company's financial position remains strong Share buy-back underway Increased interim dividend declared Estimated charge of US$33.5m related to write down of Blandon plant to be recorded
Slide 51: Questions & Answers
Questions & Answers
Slide 52: Disclaimer
Disclaimer This Management Presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders,
Slide 53: Endnotes: Definitions
Endnotes This Management Presentation forms part of a package of information about the company's results. It should be read in conjunction with the other parts of this package, including Management's Analysis of Results, a Media Release and a Financial Report. Definitions Financial Measures - US GAA
Slide 54: Endnotes: Financial Ratios
Endnotes Financial Ratios Gearing Ratio - Net debt/cash divided by net debt/cash plus shareholders' equity. Net interest expense cover - EBIT divided by net interest expense. Net interest paid cover - EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payb
Slide 55: Non-US GAAP Financial Measures: EBIT and EBIT margin excluding asbestos
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos - EBIT and EBIT margin excluding asbestos are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has included these financial measures to
Slide 56: Non-US GAAP Financial Measures: Net operating profit excluding asbestos
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos- Net operating profit excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than net income. The company has included this financial measure to p
Slide 57: Non-US GAAP Financial Measures: Diluted EPS excluding asbestos
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos - Diluted earnings per share excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than diluted earnings per share. The company has include
Slide 58: Non-US GAAP Financial Measures: Effective tax rate excluding asbestos
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos - Effective tax rate excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The company has included this financial measure
Slide 59: Non-US GAAP Financial Measures: EBITDA
Non-US GAAP Financial Measures (continued) EBITDA - is not a measure of financial performance under US GAAP and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by US GAAP or as a measure of profitability or liquidity. N
Slide 60: James Hardie FY08 2nd Quarter and Half Year Results
James Hardie FY08 2nd Quarter and Half Year Results 19 November 2007 In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures included in the Definitions section of this document starting on page 53. The co
Hardie James Industries — H1 FY2008 Earnings Presentation on 6ix