James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2013)
150 slides from James Hardie Industries's investor presentation, Sep 19, 2013
Slide 1: Business Overview
For personal use only BUSINESS OVERVIEW Louis Gries USA Investor/Analyst Tour – Wednesday 18th September 2013 1
Slide 2: Disclaimer
For personal use only DISCLAIMER This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 3: Tour Agenda
For personal use only TOUR AGENDA Day One Louis Gries • USA Business Overview Wed 18th Sept Mike Murtagh • R&D Overview Mike Murtagh/ All • R&D and Plant Tour Day Two Dave Donofrio • Products, Segments and Competitive Environment Thurs 19th Sept Ryan Sullivan • Southern Division • Current state • Go
Slide 4: FY13 Focus
For personal use only FY13 FOCUS • Resourcing the business to capture upside of recovering market • Regaining market share growth momentum • Correcting pricing inefficiencies • Committing to increased product development, product capability and manufacturing capacity • Building operating capabilitie
Slide 5: FY14 Performance Update
For personal use only FY14 PERFORMANCE UPDATE USA and Europe Fiber Cement Quarter 1 - Summary • Business on track to deliver a +20% FY14 EBIT margin • Positive pricing momentum re-established • Volume performance in line with forecast • Primary demand growth (PDG) flat for the quarter Quarter 2 - Tr
Slide 6: Global Strategy
For personal use only GLOBAL STRATEGY Industry leadership and profitable growth Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Australia Introduce differentiated products to deliver a
Slide 7: New Management Structure
For personal use only NEW MANAGEMENT STRUCTURE Louis Gries CEO Joe Blasko Matthew Dave Sean Gadd Ryan Sullivan Mark Fisher Mike Murtagh Sean Sandra General Marsh Donofrio General General General Director, O’Sullivan Lamartine Counsel Chief Financial Director, Manager, Manager, Manager, R&D Vice Dire
Slide 8: New Management Structure: One company / focused strategy
For personal use only NEW MANAGEMENT STRUCTURE One company / focused strategy • Product leadership • Organic growth • Develop and maintain ownership of core technology • Unique financial returns • Return excess cash to shareholders • Organizational capability, depth and culture to drive the above 8
Slide 9: New Management Structure: North, South, International
For personal use only NEW MANAGEMENT STRUCTURE North • Significant market share growth potential against vinyl • ColorPlus is the core product line • Largely HZ5 markets • High percentage of post-production value-add costs • Less than truckload freight prevalent South • Many large metro markets have
Slide 10: USA Plant Locations & Regional Market Share
For personal use only USA PLANT LOCATIONS & REGIONAL MARKET SHARE NORTH Tacoma, WA Vinyl/wood siding 64% market share1 % of JH sales 63% headcount Blandon, PA % of JH volume 41% Reno, NV Peru, IL Pulaski, VA Fontana, CA SOUTH Summerville, SC Vinyl/wood siding 33% Cleburne, TX market share 1 Waxahach
Slide 11: Questions?
For personal use only QUESTIONS? 11
Slide 12: Research and Development
For personal use only RESEARCH AND DEVELOPMENT Mike Murtagh USA Investor/Analyst Tour – Wednesday 18th September 2013 1
Slide 13: Agenda
For personal use only AGENDA • R&D Overview – US and Asia-Pacific • FC Technology – Product Performance – New Products – Platform Development • Non-FC Technology • Summary/Key Takeaways 2
Slide 14: Research and Development Overview
For personal use only RESEARCH AND DEVELOPMENT OVERVIEW 3
Slide 15: Technology Organization
For personal use only TECHNOLOGY ORGANIZATION Three Research Centers – US and Australia • Research: Core understanding of technologies and the science behind them • Development: Focused organization around implementing new technology products Resources • Diverse workforce of 130 technologists – Font
Slide 16: Technology Strategy
For personal use only TECHNOLOGY STRATEGY Enable James Hardie Product Leadership Strategy • Provide a continuous pipeline of innovative new products and technologies with sustainable advantages to achieve our category and market share goals • Our role is to act as the technology pipeline for the org
Slide 17: JH Innovation Process
For personal use only JH INNOVATION PROCESS • Enable effective development and implementation of key initiatives • Ensure continuous pipeline of new concepts and ideas 6
Slide 18: Fiber Cement Research and Development
For personal use only FIBER CEMENT RESEARCH AND DEVELOPMENT 7
Slide 19: FC Strategic Priorities
For personal use only FC STRATEGIC PRIORITIES Product Technical Support Performance • Substrate Development • Best Practices/Install • Coatings Development • Raw Material Sourcing • Raw Materials Formulation • Manufacturing Process Optimization • Test Method Development • Zero-to-Landfill • Competit
Slide 20: Fiber Cement Product Performance
For personal use only FIBER CEMENT PRODUCT PERFORMANCE 9
Slide 21: Hardie Zone – Engineered for Climate
For personal use only HARDIE ZONE – ENGINEERED FOR CLIMATE James Hardie® 10
Slide 22: Product Durability
For personal use only PRODUCT DURABILITY • Multi-faceted approach to product durability 11
Slide 23: Product Performance Evaluation
For personal use only PRODUCT PERFORMANCE EVALUATION 12
Slide 24: Product Performance
For personal use only PRODUCT PERFORMANCE HZ5® performs 5X better than generic FC in system testing Source: James Hardie internal research and testing 13
Slide 25: Competitor Analysis (OSB)
For personal use only COMPETITOR ANALYSIS (OSB) 14
Slide 26: Competitor Analysis (OSB)
For personal use only COMPETITOR ANALYSIS (OSB) Source: James Hardie internal research and testing 15
Slide 27: Competitor Analysis (Vinyl)
For personal use only COMPETITOR ANALYSIS (VINYL) 16 16 Source: James Hardie internal research and testing
Slide 28: Competitor Analysis (CFC)
For personal use only COMPETITOR ANALYSIS (CFC) Source: James Hardie internal research and testing 17
Slide 29: Raw Material Strategy
For personal use only RAW MATERIAL STRATEGY • Secure Supply – Pulp, Cement, Silica, et al - Raw Material Sourcing - New Formulations • Ensure Quality - Consistent Supply - Universal Specs • Improve Utilization • Enhance Product Performance 18
Slide 30: Pulp Price Index
For personal use only PULP PRICE INDEX 19
Slide 31: Low Density Additives
For personal use only LOW DENSITY ADDITIVES ® ® 20 20
Slide 32: Fiber Cement Product/Platform Development
For personal use only FIBER CEMENT P R O D U C T / P L AT F O R M D E V E L O P M E N T 21
Slide 33: FC Product/Platform Development
For personal use only FC PRODUCT/PLATFORM DEVELOPMENT Objective: Balanced mix of step-change products/platforms and product line extensions to drive category and market share growth strategy PLATFORMS PRODUCTS Form Function Features • Aesthetics • Water • Concealed • Texture Management Fastening •
Slide 34: FC Product/Platform Development - US
For personal use only FC PRODUCT/PLATFORM DEVELOPMENT - US ® ® 23 23
Slide 35: FC Product/Platform Development - AUS
For personal use only FC PRODUCT/PLATFORM DEVELOPMENT - AUS ® ® ® ® ™ ™ ™ 24 24
Slide 36: Non-Fiber Cement Product/Platform Development
For personal use only NON-FIBER CEMENT P R O D U C T / P L AT F O R M D E V E L O P M E N T 25
Slide 37: Non-FC Product/Platform Development
For personal use only NON-FC PRODUCT/PLATFORM DEVELOPMENT Strategy: Evaluate emerging technologies for fit with current and future JH business • Color Expertise – Develop internal top-coat expertise to support ColorPlus® technology • Shapes Product Line – Test launch of shapes product line with non–
Slide 38: Color Expertise
For personal use only COLOR EXPERTISE • Chicago Technology Center Current has been operational since Q4 Product Improvements FY13 - Resources - Lab capability - Pilot line capabilities Superiority of Products with ColorPlus® Technology Showcase Future Product Coating Superiority Developments 27
Slide 39: Shapes & Pultrusion
For personal use only SHAPES & PULTRUSION Shapes – Multiple shapes developed and launched in test markets for product evaluation – Sales in current test markets up 76% vs. PYTD – Long-term manufacturing capability initiated – Product offers similar performance and value propositon as FC against wood
Slide 40: Summary/Key Takeaways
For personal use only SUMMARY/KEY TAKEAWAYS Ensuring Product Performance • JH products demonstrate superior durability vs. the competition Maintaining Product Leadership • Differentiated products are being created to enable future PDG vs. wood and vinyl options Enabling Platforms • New FC and Non-FC
Slide 41: Questions?
For personal use only QUESTIONS? 30
Slide 42: US Products & Segments
For personal use only US PRODUCTS & SEGMENTS David Donofrio USA Investor/Analyst Tour – Thursday 19th September 2013
Slide 43: Disclaimer
For personal use only DISCLAIMER This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 44: Outline
For personal use only OUTLINE Management Presentation • Product & segment overview • Market opportunity • Competitive insights • US Segment focus • Questions 3
Slide 45: Products & Segments
For personal use only PRODUCTS & SEGMENTS Management Presentation • Drive and maintain our product leadership position • Provide strategic direction and concept design • Focus on key growth segments / initiatives • Program development to market execution 4
Slide 46: Product & Segment Flow
For personal use only PRODUCT & SEGMENT FLOW Centralized focus Divisional focus • Strategic direction • Market execution Feasibility Development Implementation Post 5
Slide 47: Market Landscape
For personal use only Market landscape 6
Slide 48: Market Landscape
For personal use only MARKET LANDSCAPE Market indicators suggest the market is in recovery • Single-family new construction & multifamily starts growing at a faster rate than the repair and remodel segment 7
Slide 49: Wood-Look Share of Total Market Opportunity
WOOD-LOOK SHARE OF TOTAL MARKET For personal use only OPPORTUNITY Wood-look products continue to maintain ~ 2/3rds of the of the wall against stone, stucco, and brick Based on product usage estimates provided by NAHB 8
Slide 50: Wood Look Siding Share
For personal use only WOOD LOOK SIDING SHARE • Growth opportunity varies by region, vinyl & wood in the north, wood and competitive cement in the south and west Internal estimates based on NAHB product usage data adjusted for regional market intelligence 9
Slide 51: Market Size / Opportunity
For personal use only MARKET SIZE / OPPORTUNITY We estimate the total wood-look siding market in FY14 to be 4.6 bsf Internal estimates based on NAHB product usage data adjusted for regional market intelligence 10
Slide 52: Vinyl Is Underperforming US Housing Starts
For personal use only VINYL IS UNDERPERFORMING US HOUSING STARTS Industry data 11
Slide 53: Vinyl
For personal use only VINYL Consolidation in the vinyl siding segment Associated Materials Product Mix 2000 2012 * Company Reports 12
Slide 54: Wood based siding is growing in markets where it is well positioned
For personal use only Wood based siding is growing in markets where it is well positioned Wood strength in its core markets is driven by; Vinyl standard markets - Strong channel position - High paint costs - Trim & panels - Fragmented customer base - Pre-Finishers - Predominance of 1-Stepper - Insta
Slide 55: Competitive fiber cement is growing with the category but not taking share
For personal use only Competitive fiber cement is growing with the category but not taking share Holding through Lost Category Regained through Cemplank price Share Channel/Cemplank increases 14
Slide 56: US Segment Focus
For personal use only US Segment focus 15
Slide 57: Our 35/90 strategy focuses on product leadership
For personal use only Our 35/90 strategy focuses on a product leadership platform and a unique position in our channel that enables growth within our 4 targeted customer segments • Repair & remodel segment • Single family new construction segment • Multi Family segment • Retail & interiors segment 1
Slide 58: Focus on single-family repair and remodel segment
For personal use only We continue to focus our efforts around growth within the single-family repair and remodel segment • Growth opportunity primarily from vinyl • End-user is the decision maker • Shift the mix to James Hardie differentiated products in mature fiber cement markets • Momentum in vin
Slide 59: Hardie Ambassador Program
For personal use only HARDIE AMBASSADOR PROGRAM Concept JH builds awareness & drives the preference for Hardie Products in vinyl battleground neighborhoods • Partner with contractors for scale in battlegrounds • Build lead generation and neighborhood competencies • Leverage “2 thru 10” strategy • Sc
Slide 60: Neighborhood Deep Dive
For personal use only NEIGHBORHOOD DEEP DIVE • Population 120,000 • Why? - what was the approach • We broke into 12 sub neighborhoods • Current investment of 20 days in canvasing & events • 10,000 doors knocked • 7,000 door hangers left • 2 paid events • 4 box events • 2 Neighborhood events 19
Slide 61: Neighborhood Deep Dive
NEIGHBORHOOD DEEP DIVE For personal use only 20
Slide 62: R&R Consumer Lead Generation – Trial Markets
For personal use only R&R CONSUMER LEAD GENERATION – TRIAL MARKETS 21
Slide 63: R&R Consumer Web Traffic – Trial Markets
For personal use only R&R CONSUMER WEB TRAFFIC – TRIAL MARKETS Unique Visitors 82% 17% 84% 63% 17% 58% Naperville Wheaton Arlington Paletine Downers Average Heights Grove Chicago = + 2012 2013 % Difference 17% US = +17% 22
Slide 64: R&R Contractor Growth – Trial Markets
For personal use only R&R CONTRACTOR GROWTH – TRIAL MARKETS 23
Slide 65: ColorPlus Full Wrap provides best value in repair and remodel
For personal use only ColorPlus “Full Wrap” provides the best value to the consumer in the repair and remodel segment • Unique formulation – HardieZone engineered for climate • Superior finish technology – Colorplus Technology platform • Design flexibility – all products 24
Slide 66: Full Wrap Enabled
For personal use only “FULL WRAP” ENABLED • ColorPlus Siding & Accessories Moulding Profiles: • Trim Innovation (Mouldings) • Job Packs • Quality Installation • Channel 25
Slide 67: Single-family new construction segment is resurging
For personal use only Single-family new construction segment is resurging, focus remains on our position with the production, regional & custom builders. • Drive conversions from wood & vinyl Risk Tolerance • Maintain 90% share Visionary Early Follower Late Follower (V) (E) (L) Business Strategy Qua
Slide 68: Product strategy in single-family new construction
For personal use only 3 Product strategy in single-family new construction • ColorPlus • Hardie brand primed • Cemplank 27
Slide 69: Continue to Drive the Value of a 100% Hardie Home
For personal use only CONTINUE TO DRIVE THE VALUE OF A 100% HARDIE HOME 28
Slide 70: Production and custom builders serviced by lumber dealers
For personal use only Production new home builders are primarily serviced by the volume lumber dealer or thru turnkey install from the vinyl distributors; Custom builders are primarily serviced thru the Independent lumber dealer. • Held our position with the volume lumber dealer & vinyl distributors
Slide 71: Market initiatives targeting the Independent lumber dealer
For personal use only Market initiatives targeting the Independent lumber dealer who services the top end of the single-family new construction market 30
Slide 72: MultiFamily segment: early stage market development
For personal use only We have built a late stage infrastructure to manage our category share in the MultiFamily segment – our focus moves to early stage market development • Growth from wood, vinyl & stucco • Job bid model • Largely metro biased • Early stage efforts to drive a differentiated positi
Slide 73: Dual brand strategy in MultiFamily
For personal use only Dual brand strategy to target late stage category share and drive our product strategy around a differentiated position in the segment • Prevail • ColorPlus • Commercial panel product line 32
Slide 74: Product Strategy
For personal use only PRODUCT STRATEGY • MF design trends in urban metro moving to modern panelized look 33
Slide 75: Retail and interior rigid backerboard segment is maturing
For personal use only Management Presentation The retail and interior rigid backerboard segment is maturing; continued focus on share growth and maximizing returns Source: 2013 Ciprus Report 34
Slide 76: Execute a Product Strategy
For personal use only EXECUTE A 2 PRODUCT STRATEGY • Strong value proposition to the user • Price premium vs. competitors Source: 2013 Ciprus Report, JH financial results 35
Slide 77: Delivered through retail & protile specialty channel
For personal use only Delivered thru the retail & protile specialty channel Retail Protile Source: 2013 Ciprus Report 36
Slide 78: Summary
For personal use only SUMMARY • Recovering market • Wood look siding is greater than 2/3 of the cladding opportunity in the US • Vinyl share declining as the US housing recovery take place • Engineered wood has taken some share in the downturn and presents itself as a competitive threat in markets s
Slide 79: Questions?
For personal use only Questions? 38
Slide 80: South Division
For personal use only SOUTH DIVISION Ryan Sullivan USA Investor/Analyst Tour – Thursday 19th September 2013
Slide 81: Agenda
For personal use only AGENDA • South Division Overview • Division Overview • Market • Trim • ColorPlus • Channel • Manufacturing • Capability • Capacity 2
Slide 82: South Division Overview
For personal use only SOUTH DIVISION OVERVIEW South Division Quick Facts FY13 Numbers Volume (MMSF) ~780 % of North American Volume ~60% Organization Sales Employees ~100 Manufacturing Employees ~550 South Product Mix % of FY14TD Volume (South) Exteriors vs. Interiors (FY14TD) Exteriors Interiors %
Slide 83: South Market
For personal use only SOUTH MARKET • 4 market sub-divisions Stucco share ~6% Brick/stone share ~20% Wood/vinyl/CFC ~59% share Stucco share ~41% JH Share ~14% Brick/stone share ~10% Wood/vinyl/CFC ~33% Stucco share ~15% share Brick/stone share ~12% JH Share ~10% Stucco share ~7% Wood/vinyl/CFC ~49% B
Slide 84: South Market: Exterior Product Mix
For personal use only SOUTH MARKET South Exterior Product Mix 100% Product focus areas 90% • Grow accessories through market 80% development 70% 60% • Grow JH brand siding share of fiber cement 50% siding through sales development vs. generic 40% fiber cements 30% 20% • Targeted growth vs. alternati
Slide 85: Trim Growth
For personal use only TRIM GROWTH HardieTrim® Value Proposition (vs Wood Trim Reference Product) South Trim Product Innovation Path 1992 – Launched Siding w/o Trim Full Wrap Value 1997 – 7/16” “Layover” Trim Design Durability Maintenance 1999 – 4/4” Trim 2003 – 5/4” Trim 2007 – Battens 2012 – Sanded
Slide 86: Trim Attachment
For personal use only TRIM ATTACHMENT We continue to see growth in our South trim business across all regions and all customer segments and are now the market standard on JH-sided homes Trim Attachment by Region Trim Attachment by Segment FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 98 99 00 01 0
Slide 87: Trim Growth
For personal use only TRIM GROWTH Despite our success to date, there is still opportunity for trim growth in the future - Future product innovation - Trim capacity expansion - “Full Wrap” marketing 8
Slide 88: ColorPlus
For personal use only COLORPLUS High Paint-Cost Markets in South • History • Launched in the north in 2004 • South focus began in 2008 • South capacity installed in 2008 (Reno) and 2010 (Cleburne) • Few areas in South have high field Typical field paint costs to builder ($) paint costs 3500 • Coasta
Slide 89: ColorPlus
For personal use only COLORPLUS Success is linked to how close customer is to end user • STP, prioritizing MF and RR segments • Clear value proposition driving willingness to pay • Pricing and sales discipline 50% 45% 40% 35% 30% % 25% Current ColorPlus % Penetration 20% Potential ColorPlus % Penetr
Slide 90: South Initiative – Grow vs. Alternatives
For personal use only SOUTH INITIATIVE – GROW VS. ALTERNATIVES Channel Focus • Role of channel for the business: Channel Objectives That Support Growth JH Full Market Lowest Cost Value-Added Affordability Access Value Chain Services to the Market • Revised distribution rules of engagement reset in M
Slide 91: South Manufacturing
For personal use only SOUTH MANUFACTURING South Manufacturing • Network • Capacity 12
Slide 92: South Manufacturing Division
For personal use only SOUTH MANUFACTURING DIVISION Plant Key Capabilities Sheet Machines: 4’ wide, 5’ wide • Keys to operational strategy Low Density Production Primary products: Panel, Backer Fontana, CA Key Imports: Trim, Heritage® , Artisan® and • Safety ColorPlus® Products • Customer service del
Slide 93: South Manufacturing Locations
For personal use only SOUTH MANUFACTURING LOCATIONS HZ10 Manufacturing Facility ColorPlus ® VMI Distribution Center Products Facility Big Box Distribution Center14
Slide 94: Capacity Addition Methodology
For personal use only SOUTH MANUFACTURING - REJECTS CAPACITY ADDITION METHODOLOGY Process • Maintain network at less than 85% of total flat sheet capacity • Maintain single sourced products at less than 85% of their capacity • Minimize total network cost (product, freight & facility) • Reduce single
Slide 95: South Capital Spend Estimate
For personal use only SOUTH CAPITAL SPEND ESTIMATE The South will require capital expansion to meet future demand and ensure plant capability around specialty products. Our ability to expand current sites reduces the total spend required and reduces risk Expected Capital Spend Estimate FY15 - FY18 A
Slide 96: South Division Summary
For personal use only SOUTH DIVISION SUMMARY Summary • Largely HZ10 prime product line • Many large fiber cement standard markets • Main growth opportunities in non-metro markets and accessories attachment • Product mix shift will continue as business evolves 17
Slide 97: North Division
For personal use only NORTH DIVISION Sean Gadd USA Investor/Analyst Tour – Thursday 19th September 2013
Slide 98: North Division Overview
For personal use only NORTH DIVISION OVERVIEW 1. North division overview 2. Market execution 3. Manufacturing philosophy 2
Slide 99: Overview
For personal use only Overview 3
Slide 100: North Division Overview
For personal use only NORTH DIVISION OVERVIEW North Division Quick Facts Employees ~900 Manufacturing Facilities 4 Predominantly HZ5 volume Market Dynamics % of James Hardie Volume ~40% approximately 1/3 of target market share Wood look share of market ~65% 4
Slide 101: North Division Overview
For personal use only NORTH DIVISION OVERVIEW • 4 Sub-divisions • Approach differs across markets due to opportunity Vinyl share 50 % Wood share 11 % Vinyl share 7% Wood share 38% Vinyl share 46 % Vinyl share 51 % Wood share 21 % Wood share 16 % Note: Vinyl and wood market shares are James Hardie es
Slide 102: Market Execution
For personal use only Market Execution 6
Slide 103: Sales Execution Model
For personal use only SALES EXECUTION MODEL Growth, Mix Shift, Execution Market Starts, opportunities, segments Competition Wood-look design alternatives Channel Roles of 1-step & 2-step distribution Pricing Single Family: Segment - Target - Position, Multifamily early stage, Repair and Remodel Orga
Slide 104: Market Analysis - Starts
For personal use only MARKET ANALYSIS - STARTS • New construction starts continue North Addressable Starts to increase in all regions that make up the North division • Canada starts lagging, particularly Ontario and Quebec FY12 FY12 FY12 FY12 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 Q1 Q2 Q3 Q4 Q1 Q2
Slide 105: Market Share and Opportunity
For personal use only MARKET SHARE AND OPPORTUNITY • The north at approximately 1/3 of our target market share goals • Growth needs to come from both vinyl and wood Market Share by Cladding Type (North) Source: JH estimates Brick/Stone/Other Stucco Wood Vinyl FC 9
Slide 106: Market Share and Opportunity
For personal use only MARKET SHARE AND OPPORTUNITY Vinyl and wood trim Vinyl and wood Wood trim and shingle Hardboard OSB siding and Vinyl 10
Slide 107: Market Dynamics
For personal use only MARKET DYNAMICS Market A Metro Non-Metro Market Market Single Family Single Family Single Family Single Family New Construction Repair & Remodel New Construction Repair & Remodel Interiors Interiors (Box) Multifamily (Box and Pro Tile) Specialist model, Generalist model, market
Slide 108: Metro Markets
For personal use only METRO MARKETS • Make up roughly 60% of starts in the North • Scale: • Large concentrated population • Very competitive landscape • 1-step and 2-step distribution • Challenges to execute: • Specialist model • Heavy market development • Price and category management 12
Slide 109: Non-Metro Markets
For personal use only NON-METRO MARKETS • Make up 40% of the starts in the North • Attractive business: • Lower on S curve • Positive pricing dynamics • Low coverage by manufacturers • Challenges to execute: • Generalist model • Channel partners key • Aggregation at dealer level 13
Slide 110: Channel Partners
For personal use only CHANNEL PARTNERS Role of our channel partners • Full market access • Lowest cost value chain • Value-added services • James Hardie affordability to market 14
Slide 111: Channel Partners
For personal use only CHANNEL PARTNERS Distributor Lumber yards Builder Metro Model One - steppers Contractor Non-Metro Model 15
Slide 112: Channel Partners
For personal use only CHANNEL PARTNERS • Significant focus in the North • Cultural shift towards channel positive • North metro-markets driven by predominantly regional distribution • Access to fragmented dealer and contractor • Product line availability and breaking down packs to support pull-strat
Slide 113: Product Mix - Interiors
For personal use only PRODUCT MIX - INTERIORS Product Mix Exteriors vs. Interiors Lumber Yards Big Boxes Exteriors Interiors • We are at ~70% of our target share in interiors Tile • Opportunity exists in Boxes and Pro-tile segments Dealers • Returns are good in the segment 17
Slide 114: Exterior Volume, Price Analysis
For personal use only EXTERIOR VOLUME, PRICE ANALYSIS • Exterior volume predominantly through Northern Division - MF & Non-MF Volume Split • Single Family new construction and • Single Family repair and remodel • Multifamily share and volume remains consistent over time Multi-Family Non-Multi-Family
Slide 115: Market Development
For personal use only MARKET DEVELOPMENT 1. Price premium 2. High switching barriers (requires change in behavior) 3. Need to demonstrate value (Fiber Cement not yet accepted as market standard) Grow (market share) Defend (category share) Vinyl substitution Market Development Wood trim replacement W
Slide 116: Fiber Cement Value Proposition
For personal use only FIBER CEMENT VALUE PROPOSITION Targets • Durability • A substrate that is engineered for specific climates • Will not rot, warp, crack, swell Wood siding, trim and shingle • Low Maintenance • All parts of the home • Made with the same materials • Performing the same over time •
Slide 117: Segments
For personal use only SEGMENTS • Single Family New Construction • Segment, Target, Position • Builders and Developers • Prime and Color Full-wrap • Superior Design • Single Family Repair and Remodel • Lockdowns / Battlegrounds • Sold through the Contractor • Color Full-wrap • Durability, Low Mainten
Slide 118: Segments
For personal use only SEGMENTS • Multifamily New Construction • Early Stage Execution Need photo of Multifamily job • Architects and Developers • Color Full-wrap • Lowest Life Cycle Cost 22
Slide 119: Segments
use only SEGMENTS For personal Value proposition is strongest Value proposition is diluted Owner / Developer Value to the homeowner Scale impacts decision realize value engineered Price scale impacts decision Replacement Remodel Small Large Early Stage Late Stage builder builder Single Family Multif
Slide 120: Pricing Drivers
For personal use only PRICING DRIVERS • Selling all markets (Metro and Non-Metro) • Selling full product range • Selling to all segments • Single Family right target, right product • Repair and Remodel right contractor, right geography • Multifamily early stage to drive specs • Interiors Box
Slide 121: Product Mix - Exteriors
For personal use only PRODUCT MIX - EXTERIORS • Midwest, Northeast and Canada • Colorplus® versus Primed product • Trim and Shingle • Northwest • Cemplank® versus James Hardie brand • Trim and Shingle ColorPlus® Brand versus Cemplank® ColorPlus ® ColorPlus® versus Primed 25
Slide 122: Job-Packs
For personal use only JOB-PACKS • Launch completed July 2012 • Opened us up to new customers • % of Job-Packs in the North is lower than originally expected • Large one-steppers relying on their stocking inventory as their advantage over lumber yards • VMIs cover the majority of product volume while
Slide 123: Target Market Share – End State
For personal use only TARGET MARKET SHARE – END STATE Share of market • Expect to grow against other wood-look siding JH alternatives Competitive Fiber Cement Vinyl Wood • Category share to remain Stucco strong Brick and Stone Current State End State 27
Slide 124: Product Mix – End State
For personal use only PRODUCT MIX – END STATE • Artisan® to take the “top of the market” as the market recovers, builders look to differentiate • ColorPlus® product continues to Artisan® drive the growth in vinyl-biased ColorPlus® markets JH Primed Cemplank® /Prevail® • Prime in wood-biased markets
Slide 125: Organization
For personal use only ORGANIZATION Delivering on 35/90 requires: • Tenure and continuity • Depth and leadership • Execution at a very high level 29
Slide 126: Organization - Retention
For personal use only ORGANIZATION - RETENTION 30
Slide 127: Organization - Execution
For personal use only ORGANIZATION - EXECUTION Efficiency: maximizing existing sales force • Eliminating variance • Focus on leasing indicators • Scheduled calls • Funnel movement • Driving out waste • Time management and sequencing Effectiveness: Improving the quality of the calls • Segmenting, tar
Slide 128: Manufacturing
For personal use only Manufacturing 32
Slide 129: Distribution Network
For personal use only DISTRIBUTION NETWORK HZ5® Manufacturing VMI Distribution Center JHBP Reload Center Facility ColorPlus ® Product Big Box Distribution Center Facility 33
Slide 130: Plant / Market Coverage
For personal use only PLANT / MARKET COVERAGE 34
Slide 131: Plant / Market Coverage
For personal use only PLANT / MARKET COVERAGE • High throughput sheet machines • All 5’ widths • Tacoma and Peru (6 tubs) • Reno and Pulaski (9 tubs) • All have the capability to manufacture HZ5 plank • Complex post-production • ColorPlus® Technology in Peru, Pulaski and Reno • Trim in Reno and Peru
Slide 132: Capacity Additions
For personal use only CAPACITY ADDITIONS • NT3 Trim, single sourced – additional capacity in FY15 • Pulaski capacity is freed up by additional capacity in South • Sheet machine and ColorPlus® capacity planned for FY17 in Tacoma Tacoma capacity Add NT3® Trim Capacity Add 36
Slide 133: Manufacturing Philosophy
For personal use only MANUFACTURING PHILOSOPHY • Enhance our manufacturing and material flow capabilities to deliver the requirements of a 35:90 business • Post autoclave • Value-add processes • Finishing • Color • Packaging • Specialized lines • Trim and • Heritage 37
Slide 134: Fulfilling Customer Orders
For personal use only FULFILLING CUSTOMER ORDERS We run two different manufacturing models to fulfill customer orders Business Trim and Heritage ColorPlus® Product Network Manufacturing Model Make-to-Inventory Make-to-order How Orders are Fulfilled From inventory produced prior to accepting the Pain
Slide 135: Post Autoclave
For personal use only POST AUTOCLAVE North Manufacturing Inputs • Order entry • Machine scheduling S U • Maintain the pulse of the line P Machine • Sustainable performance P Performance • Maximize utilization of assets L • Eliminate bottlenecks and constraints • Maximize throughput Y C • Schedule ad
Slide 136: Europe Overview & Asia Pacific Q&A
For personal use only EUROPE OVERVIEW & ASIA PACIFIC Q&A Mark Fisher USA Investor/Analyst Tour – Thursday 19th September 2013
Slide 137: Agenda
For personal use only AGENDA • Evolution of the company • Market overview • Strategy • Current position • New products runway • Summary 2
Slide 138: Evolution of European Business
For personal use only EVOLUTION OF EUROPEAN BUSINESS Phase SUBH I: E Establish A D I N G a Beachhead- 2003 • Build base capability (Sales, Channel) • This will be the body copy Phase II: Build a EU Business using U.S. Products • Improve capabilities • Increase volume • Achieve profitability Phase II
Slide 139: How We Operate
For personal use only HOW WE OPERATE • European head office in Amsterdam • Core markets UK and France • Developing in Germany • High population & GDPs in all core markets • France 63M • UK 63M • DE 82M • Steadily growing share of timber frame 4
Slide 140: Housing Starts (SF & MF)
For personal use only HOUSING STARTS (SF & MF) Forecasts 450 400 350 300 UK SF 250 UK MF GE SF 200 GE MF 150 FR SF FR MF 100 50 0 FR GE UK FR GE UK FR GE UK FR GE UK FR GE UK FR GE UK FR GE UK 2009 2010 2011 2012 2013 2014 2015 55
Slide 141: Market Overview
For personal use only MARKET OVERVIEW • UK & France markets returning • Government-led initiatives • Building systems and designs are changing • Architectural style / materials Shift • Brick share UK* • 2008 95% • 2013 88% *JH internal estimate 6
Slide 142: Strategy
For personal use only STRATEGY To aggressively drive sales growth through a unique product portfolio and establish a long- term differentiated position via JH USA current products and EU specific products Market development New products Market penetration 7
Slide 143: Goals
For personal use only GOALS • Fiber cement market leader in core geographies • High share of sales in new products 8
Slide 144: Current Position
For personal use only CURRENT POSITION • Developed capability to import products • Freight model not excessively punitive: • Roughly equal costs of full truck US to UK versus overland Europe • Long term goal is local value-add manufacturing • Now customizing products: • Enhances differentiation 9
Slide 145: Changing European Environment
For personal use only CHANGING EUROPEAN ENVIRONMENT • Architectural styles changing • Mixed facades • Availability of skilled labor • Brick-masons becoming scarce • Energy efficiency requirements • France - RT 2012 • 150 kwh/M² to 50 kwh/M² • Trend towards lightweight • Faster • More energy efficien
Slide 146: Hardie Growth
For personal use only HARDIE GROWTH • Well positioned: • Channel • Builders (90% of UK Top 20) • Low geographic penetration 11
Slide 147: New Products Runway
For personal use only NEW PRODUCTS RUNWAY • Interior products: • HardieFloor • Structural flooring product for SF • HardieFloor QT • Structural sound flooring for MF / SF • Exterior products: • HardieStria • New cladding for MF/SF 12
Slide 148: Energy Efficiency
For personal use only ENERGY EFFICIENCY • To meet RT2012, France MF Social needs to be “re-skinned” • Complicated system • High labor costs • Long time frames • Needs re-thinking • We have an answer 12 13
Slide 149: Summary
For personal use only SUMMARY • Focused approach on core markets • Changes in • Construction • Architectural style • Energy efficiency • James Hardie is well positioned to exploit this growth 14
Slide 150: Questions?
For personal use only Questions? 15
James Hardie Industries — Investor Presentation (September 2013) on 6ix