James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2015)
156 slides from James Hardie Industries's investor presentation, Sep 10, 2015
Slide 1: James Hardie - USA Investor/Analyst Tour
For personal use only JAMES HARDIE - USA INVESTOR/ANALYST TOUR 10-12 September 2015
Slide 2: Disclaimer: Forward-Looking Statements
DISCLAIMER For personal use only FORWARD-LOOKING STATEMENTS This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange
Slide 3: Disclaimer (continued)
DISCLAIMER (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to id
Slide 4: Financial and Market Dynamics
For personal use only Financial and Market Dynamics September 2015
Slide 5: Disclaimer: Forward-Looking Statements
DISCLAIMER For personal use only FORWARD-LOOKING STATEMENTS This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange
Slide 6: Disclaimer (continued)
DISCLAIMER (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to id
Slide 7: U.S. Marketplace
U.S. MARKETPLACE For personal use only Page 4
Slide 8: Economy Has Stabilized
ECONOMY HAS STABILIZED For personal use only GDP GROWTH INFLATION 8% 6% 5% 6% 4% 3% 4% 2% 2% 1% 0% 0% -1% -2% -2% -3% Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan -4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2000 2001 2002 2003 2004 2005 2006
Slide 9: Key Indicators Point to Some Volatility
KEY INDICATORS POINT TO SOME VOLATILITY For personal use only Oil Prices - Price per Barrel ($USD) S&P 500 Source: World Bank Source: Yahoo! Finance Oil prices and equity markets have displayed volatility Page 6
Slide 10: Employment Supports Homeownership
EMPLOYMENT SUPPORTS HOMEOWNERSHIP For personal use only Unemployment Rate - Seasonally Adjusted Real Average Hourly Earnings 12% $10.80 10% $10.60 $10.40 8% Hourly Earnings $10.20 Inflation 6% $10.00 4% $9.80 Inflation Rates 2% $9.60 0% $9.40 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2000 20
Slide 11: Confidence
CONFIDENCE For personal use only Real Estate Confidence Index Overall Consumer Confidence Current Conditions as of June 2015 (50=“Moderate” Conditions) 80 70 73 60 53 50 48 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 Single-family Townhome Condominium Source: OECD August 2015, Confidence I
Slide 12: Consumer Spend
CONSUMER SPEND CONSUMER SPEND For personal use only 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 2010 2011 2012 2013 Food Shelter Other Housing Transportation Healthcare Insurance/Pensions Entertainment All other Source: U.S. Bureau of Labor Statistics Shelter as a % of spend is s
Slide 13: Eligible Home Buyers Exist
ELIGIBLE HOME BUYERS EXIST For personal use only % of U.S. Population by Age, 2013 Percentage of 18-34 Year-Olds Living with Their Parents 32% 31% 30% 29% 28% 27% 26% 25% 24% 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Slide 14: Demand Outpacing Supply
DEMAND OUTPACING SUPPLY For personal use only Total Number of Households Months of Supply at Current Sales Rate 130,000 4,000 600 12 3,500 120,000 500 10 3,000 110,000 400 8 # Mos. Supply # Households 2,500 (’000s) ∆Households Change Total Total 100,000 2,000 300 6 # Units 1,500 200 4 90,000 1,000 8
Slide 15: Financing
FINANCING For personal use only Borrower FICO Score at Origination 30-year Mortgage Rate 850 8% 90th Percentile 801 7% 800 Median 752 6% 750 741 5% Mean 700 4% 664 650 3% 10th Percentile 600 2% 1% 550 0% 500 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: CoreLogi
Slide 16: Home Ownership Profile
HOME OWNERSHIP PROFILE For personal use only S&P/Case-Shiller Percent of Owner-Occupied Homes 20-City Composite Home Price Index with a Mortgage in Negative Equity (U.S.) 250 35% 30% 200 25% 150 20% 15% 100 10% 50 5% 0 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201
Slide 17: New Construction vs. Existing Home Sales
NEW CONSTRUCTION VS. EXISTING HOME SALES New Construction as a % of Home Sales For personal use only Source: National Association of Realtors and U.S. Census Bureau New construction continues to gain momentum as a percent of total home sales Page 14
Slide 18: Millennials
MILLENNIALS For personal use only Student Loan Debt Households 2013 in millions Share Household (20-39 year olds) Student Loan Debt thousands USD Source: JCHS Tabulation of Federal Reserve Board Source: JCHS Tabulation of U.S. Census Bureau Millennials are a source of pent-up demand in the housing s
Slide 19: Slow and Steady Recovery
SLOW AND STEADY RECOVERY HOUSING PERMITS For personal use only Housing Permits YoY Growth Source: U.S. Census Bureau Starts continue to trend below historic average of 1.5M per year Page 16
Slide 20: Starts Forecast
STARTS FORECAST For personal use only 2016 Forecasted Housing Starts Source: Dodge, Fannie Mae, Freddie Mac and MBA Starts forecasted to be 1.1M in 2015 and 1.3M in calendar year 2016 Page 17
Slide 21: Multi-Family Outpacing Single-Family
MULTI-FAMILY OUTPACING SINGLE-FAMILY For personal use only HOUSING STARTS 000s Homes 180 160 140 120 100 80 Housing Starts - 1 unit 60 40 20 Housing Starts - 5 or more units 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S. Census Bureau Multi-family star
Slide 22: Multi-Family Trend Likely to Continue
MULTI-FAMILY TREND LIKELY TO CONTINUE For personal use only Today’s younger households are increasingly % Homeownership likely to have characteristics associated with 70.0 lower homeownership rates 69.0 68.0 67.0 Change in share of 25-34 year-old households 2003-13 (percentage points) 66.0 % 65.0 10
Slide 23: Repair and Remodel Market
REPAIR AND REMODEL MARKET For personal use only Age of Housing Stock NAHB Remodeling Market Index 70 14.4% 7.8% 60 <10 Years 13.9% 50 11-20 Years 21-30 Years 40 16.0% 31-40 Years 12.2% 30 41-50 Years 51-60 Years 20 19.7% 16.2% >61 Years 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201
Slide 24: Repair and Remodel Market
REPAIR AND REMODEL MARKET For personal use only Home Depot and Lowe’s Hanley Wood R&R Siding Project Growth Same Store Comparable Sales Source: Company Filings Source: Hanley Wood Repair and Remodel market continues to show strength through the recovery Page 21
Slide 25: JH Performance
JH PERFORMANCE For personal use only Page 22
Slide 26: Current Market Share Landscape
CURRENT MARKET SHARE LANDSCAPE For personal use only North America Siding Market Share National Association of Homebuilders (NAHB) serves as our main source for market share measurement as it provides the following: • Siding used in residential dwelling applications • Square feet as unit of measurem
Slide 27: Wood-Look Market Landscape
WOOD-LOOK MARKET LANDSCAPE For personal use only Past Present Future Source: Internal estimates based on NAHB product usage data adjusted for regional market intelligence Continued focus on gaining share in the wood-look market Page 24
Slide 28: Vinyl Share Continues to Decline
VINYL SHARE CONTINUES TO DECLINE For personal use only US Vinyl Market Share Estimate • While vinyl continues to be the volume-leader in siding, market share has continued to steadily decline. • With the wood-look market maintaining 65-70% market share, vinyl’s decline is the result of gains by fibe
Slide 29: Competitive Fiber Cement
COMPETITIVE FIBER CEMENT For personal use only JH A Fiber Cement Category Market Share JH A* JH JH A JH JH* N JH JH JH M JH = James Hardie Plant A = Allura Plant N = Nichiha Plant M = MaxiTile Plant * = Notates Idled Plant Competitive fiber cement plants ran at ~40% capacity in 2014 • Allura / Maxit
Slide 30: James Hardie Group and U.S. & Europe Sales and EBIT Performance
JAMES HARDIE GROUP AND U.S. & EUROPE SALES AND EBIT PERFORMANCE For personal use only Due to strong operational performance, EBIT growth and margin are in line with expectations Page 27
Slide 31: NOPAT and EPS Performance
NOPAT AND EPS PERFORMANCE For personal use only NOPAT and EPS Growth continue to increase Page 28
Slide 32: Operational Cash Flow and CapEx
OPERATIONAL CASH FLOW AND CAPEX For personal use only Millions USD FY11 FY12 FY13 FY14 FY15 Investments in NA and APAC capacity during FY15 largely completed. CapEx to return to primarily maintenance levels for FY16 and near term Page 29
Slide 33: Capacity – Annual Design
CAPACITY – ANNUAL DESIGN For personal use only Historically, our disclosed capacity is Design Capacity based on running a standard 5/16th Plant Location Owned/Leased (mmsf) inch medium standard product: Cleburne, Texas Owned 466 Incremental capacity 200 – No accepted industry standard exists for Per
Slide 34: Capacity – Gross Hours
CAPACITY – GROSS HOURS For personal use only Active Capacity % Utilization Capacity Utilization Determined by Machine Cleburne, Texas Hours of Active Capacity Peru, Illinois Plant City, Florida Pulaski, Virginia 72% Reno, Nevada Actual Total Tacoma, Washington Machine Active Capacity Hours Available
Slide 35: Shareholder Returns
SHAREHOLDER RETURNS For personal use only 31% average annual Total Shareholder Return since FY10 Page 32
Slide 36: Dividends Paid Per Share
DIVIDENDS PAID PER SHARE For personal use only Remain committed to Ordinary Dividend within the Defined Payout Ratio Page 33
Slide 37: Summary
SUMMARY For personal use only • U.S. housing market continues modest recovery, albeit at a historically slower pace • FY2016 continues to be in line with our guidance provided at the August Q1 FY16 result call, including the assumptions and discussion of: • Volume and PDG • Average Selling Price and
Slide 38: Questions
For personal use only QUESTIONS Page 35
Slide 39: Business and Northern Markets
For personal use only BUSINESS AND NORTHERN MARKETS September 2015
Slide 40: Disclaimer: Forward-Looking Statements
DISCLAIMER For personal use only FORWARD-LOOKING STATEMENTS This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange
Slide 41: Disclaimer (continued)
DISCLAIMER (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to id
Slide 42: Strategy
For personal use only STRATEGY
Slide 43: James Hardie US Strategy
JAMES HARDIE US STRATEGY For personal use only • Grow Fiber cement by substituting for both wood and vinyl based sidings and trim all market segments (35) • Maintain our Fiber cement category position by delivering differentiated value to supply chain participants, right through to the home owner (9
Slide 44: Growth
GROWTH - 35 For personal use only • Focus on the wood look opportunity • Grow significantly against vinyl and wood based products • Grow in all segments Present Future PAGE 6
Slide 45: Hardie Value and Segments at Terminal Share
HARDIE VALUE AND SEGMENTS AT TERMINAL SHARE For personal use only Segment Decision Maker Value Creation Share Implications Repair and • Home Owner • Design ++ Remodel • Low Maintenance Single Family New • Builder • Sell house for more, or + Construction sell homes faster Multi Family • Management •
Slide 46: Defend the Category
DEFEND THE CATEGORY - 90 For personal use only • Align with channel partners in a way that allows full market access and leverage their local service capabilities and customer relationships • Ensure that supply chain is built and operates in a manner that enables participants to earn acceptable cate
Slide 47: JH Value Proposition
JH VALUE PROPOSITION For personal use only James Hardie can deliver: • Superior design compared to vinyl with a true wood look • Superior durability and lower maintenance compared to real wood, hardboard/OSB exterior products • Scale, field support and business-building programs to all members in th
Slide 48: Strategic Competitive Advantage
For personal use only STRATEGIC COMPETITIVE ADVANTAGE
Slide 49: R&D Spend
10 YEAR - R&D SPEND For personal use only • R&D spend is divided between research and development projects • Research – Core understanding of the technologies and science behind them • Development – Focus on implementing new technology and new products US R&D Yearly Spend, $Millions US Patents Grant
Slide 50: Research Capabilities
RESEARCH CAPABILITIES For personal use only Thermal Properties Compositional Analysis Mechanical Properties Microscopy PAGE 12
Slide 51: Research Capabilities
RESEARCH CAPABILITIES For personal use only Longer-Term, Real-Life Exposure PAGE 13
Slide 52: Platform Development Focus
PLATFORM DEVELOPMENT FOCUS For personal use only Invest in new manufacturing platforms to enable a step-change in current products or in a new category Platform A Platform B Platform C Platform D (Current) (Current) (New) (New) • Plank / Panel • Thicker products • Aesthetics • Shapes • Flat sheets •
Slide 53: Product Development Focus
PRODUCT DEVELOPMENT FOCUS For personal use only Balanced mix of step change products and product line extensions to drive JH category and market share growth Form Function Features • Aesthetics • Water management • Concealed • Texture • Drainage fastening • Shape • Durability • Nail line • Weight •
Slide 54: HardieZone System – Engineered for Climate
HARDIEZONE® SYSTEM– ENGINEERED FOR CLIMATE ® For personal use only Delivered HardieZone® Engineered for Climate® Products 7th Generation of FC products James Hardie Siding Products PAGE 16
Slide 55: Product Development
PRODUCT DEVELOPMENT For personal use only HardieReveal2.0™Panel HardieTrim® Mouldings System HardiePlank® Lap Siding with Insulation HardieTrim® 5/4” NT3® Artisan® V-Rustic Siding Roughsawn PAGE 17
Slide 56: Product Performance
PRODUCT PERFORMANCE For personal use only HZ5® siding performs 5x better than generic FC in system testing 120 100 DURABILITY INDEX 80 BETTER 60 100 40 60 20 40 20 0 Generic Fiber HZ5 Cement TIME Source: James Hardie Internal Research and Testing PAGE 18
Slide 57: JH vs. Competitors (OSB)
JH vs. COMPETITORS (OSB) For personal use only Like hardboard, OSB siding is a wood based, manufactured product that can experience similar issues when exposed in external applications: • Fire • Splitting • Mold Growth Mold Growth Termite Activity • Termites • Significant Moisture Movement • Swellin
Slide 58: Flexible and Low Cost Manufacturing
FLEXIBLE AND LOW COST MANUFACTURING For personal use only • Low cost manufacturing • Significant R&D investment in plant engineering, construction and design • Significantly lower capital $ per square foot produced than our competitors • Enable James Hardie product leadership and brand promise • Dur
Slide 59: Well Developed Supply Chain
WELL DEVELOPED SUPPLY CHAIN For personal use only Integrated supply chain designed for on-time service at optimized landed costs Regional Sourcing Zones Lowest Cost Sourcing Actual Network Sourcing Customer demand is grouped Manufacturing & freight costs Introducing manufacturing into sourcing zones
Slide 60: Organization Capability
ORGANIZATION CAPABILITY For personal use only • Driving an overall business capability that allows us to profitably participate in all segments • Ability to move a market • Very capable and above the industry norm • Executing at a high level with a single focus • Depth of leadership • Tenure and con
Slide 61: Market Initiatives Driving Non-Product Advantage
For personal use only MARKET INITIATIVES DRIVING NON-PRODUCT ADVANTAGE
Slide 62: Economic Value Analysis
ECONOMIC VALUE ANALYSIS For personal use only Warranty Ease of Install Design Marketing support Value Durability/ low maintenance Install Costs Install Costs Competitive JH full wrap Product PAGE 24
Slide 63: Economic Value Analysis
ECONOMIC VALUE ANALYSIS For personal use only Warranty Ease of Install Design Marketing support Value Durability/ low maintenance Install Costs Install Costs Competitive JH full wrap Product As we get closer to 35 we need to continue to add value PAGE 25
Slide 64: Economic Value Analysis
ECONOMIC VALUE ANALYSIS For personal use only Ease of Install Other non product “Me too’ value adds Positioning Warranty Design Value Marketing support Durability/ low maintenance Install Costs Install Costs Competitive JH full wrap Product PAGE 26
Slide 65: Market Initiatives
MARKET INITIATIVES For personal use only Aimed at facilitating growth • SIDE Master Installation Program • 100% HARDIE in single family new construction • Hardie Ambassadors in repair and Remodel • AskHardie™ Support in smaller markets PAGE 27
Slide 66: SIDE Master Installation Program
SIDE MASTER INSTALLATION PROGRAM For personal use only Process: Output (JH Benefit): 1. Target Builder Conversions Installer 2. New Builder Leads Follow Up 3. Increased Compliance Target SIDE Event Sub-Labor 1. Increased Compliance 2. New Builder Leads Follow Up 3. Capacity Leads PAGE 28
Slide 67: 100% Hardie - Single Family New Construction
100% HARDIE - SINGLE FAMILY NEW CONSTRUCTION For personal use only A program that: …inspires confidence …stands above the rest …delivers results PAGE 29
Slide 68: Hardie Ambassador Program – Single Family Repair and Remodel
HARDIE AMBASSADOR PROGRAM – SINGLE FAMILY REPAIR AND REMODEL For personal use only • Drive awareness and preference for James Hardie products in vinyl battleground neighborhoods • Reaching homeowners through multiple touch points • Enabling contractor growth in these key neighborhoods PAGE 30
Slide 69: AskHardie Support in Smaller Markets
ASKHARDIE™ SUPPORT IN SMALLER MARKETS For personal use only Additional resources for the trade in select Midwest markets providing expedited response times through dedicated single source experts askHardie Support PAGE 31
Slide 70: Questions
For personal use only QUESTIONS PAGE 32
Slide 71: Central Operations
For personal use only CENTRAL OPERATIONS September 2015
Slide 72: Disclaimer: Forward-Looking Statements
DISCLAIMER For personal use only FORWARD-LOOKING STATEMENTS This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange
Slide 73: Disclaimer (continued)
DISCLAIMER (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to id
Slide 74: Agenda
AGENDA For personal use only • Introduction & Org Overview • JH Manufacturing Advantage • Capacity Update • JH Supply Chain Advantage • Freight & Procurement Update PAGE 4
Slide 75: Central Operations Organization
CENTRAL OPERATIONS ORGANIZATION For personal use only Central Operations Supply Chain Centralized Manufacturing Raw Materials to Customer Integration: Key Shared Manufacturing Capabilities: – Procurement – Long-Term Capacity Planning – Production/Capacity Planning – Greenfield Plant Design – Outboun
Slide 76: JH Manufacturing
For personal use only JH MANUFACTURING
Slide 77: JH Manufacturing Overview
JH MANUFACTURING OVERVIEW For personal use only JH manufacturing: Major lever in our competitive advantage Proprietary technology delivers Innovation in process capability unit cost & ROCE advantage enables product leadership Unique throughput advantage in Process capability to deliver our Hatscheck
Slide 78: Manufacturing Processes
MANUFACTURING PROCESSES For personal use only PROCESS TECHNOLOGY SEGMENTS MANUFACTURING APPROACH Pre-Autoclave Post-Autoclave Manufacturing Continuous Process Material handling Process Raw Material Conversion Coatings application Key Process Long Continuous runs Optimize coating yield Objectives Raw
Slide 79: JH Manufacturing Scale Evolution
JH MANUFACTURING SCALE EVOLUTION A culture of engineering step-change has yielded a tremendous For personal use only increase in manufacturing scale Pulaski 5’x9-tub Hatscheck Machine Auto+ Tacoma Dimension Auto 5’x6-tub Plant City Auto Fontana 4’x5-tub Auto Labels 4’x4-tub Auto Tub Config Manual Ma
Slide 80: Scale as a Competitive Advantage
SCALE AS A COMPETITIVE ADVANTAGE For personal use only Manufacturing scale creates a significant competitive advantage Capital $/annual Volume/gross machine hr throughput Fontana Plant City Tacoma Pulaski Fontana Plant City Tacoma Pulaski Capital Efficiency Unmatched Machine Size & Automation by Com
Slide 81: JH Manufacturing Advantage
JH MANUFACTURING ADVANTAGE For personal use only Internally developed process capability enables product differentiation Product thickness HardieTrim® and and density control Artisan product lines Fit-to-purpose HardieZone ® manufacturing processing Engineered for Climate Post-processing HardieShing
Slide 82: Manufacturing Advantage Summary
MANUFACTURING ADVANTAGE SUMMARY For personal use only • Step change engineering focus has delivered a substantial manufacturing scale advantage • Constant investment in manufacturing process capabilities enable our product differentiation • Flexibility in manufacturing & capacity model allow for cos
Slide 83: JH Manufacturing Capacity
For personal use only JH MANUFACTURING CAPACITY
Slide 84: JH Capacity Philosophy
JH CAPACITY PHILOSOPHY For personal use only CORE CONCEPTS OF OUR MANUFACTURING CAPACITY PHILOSOPHY: Enable 35/90 by ensuring market supply ahead of demand Commission new capacity to optimize network costs Invest in capacity that maximizes value creation PAGE 14
Slide 85: Ensuring Market Supply
ENSURING MARKET SUPPLY LONG-TERM CAPACITY PLANNING For personal use only Our trigger to invest in new capacity is designed to buffer demand uncertainty over our design/construction/commission period Decision Point 85% utilization threshold hit Demand Construction Commission PAGE 15
Slide 86: JH Capacity Types
JH CAPACITY TYPES For personal use only As a result, we manage several different types of capacity: Capacity Category Time to Mobilize Network Examples 18-24 month Summerville Idled & New Next Greenfield construction lead-time Not Cleburne SM3 90-day start-up lead-time Commissioned Plant City SM4 Pe
Slide 87: Short-Term Capacity Management Approach
SHORT-TERM CAPACITY MANAGEMENT APPROACH For personal use only IN OUR SHORT-TERM CAPACITY PLANNING, ACTIVE & NOT COMMISSIONED CAPACITY ENABLES A HIGH UTILIZATION TARGET Capacity Category Utilization Triggers Decision Point Idled & New Decision Point Not Commissioned Quick ramp-ups enable a high (95%)
Slide 88: How We Measure Utilization
HOW WE MEASURE UTILIZATION For personal use only OUR UTILIZATION METRIC CONSIDERS THE ACTIVE CAPACITY BUCKET ONLY Capacity Category Idled & New Manufacturing capacity that is not yet capable of Not producing product is NOT included in our network Commissioned utilization calculation Active Available
Slide 89: How We Calculate Utilization
HOW WE CALCULATE UTILIZATION For personal use only OUR UTILIZATION METRIC IS CALCULATED BASED ON GROSS HOURS OF OUR “ACTIVE” CAPACITY Capacity Category JH Utilization Consumed gross hours Current % utilization 100% of available machine hours 100% of available Active machine hours Consumed gross hour
Slide 90: Example Capacity Add Sequence
EXAMPLE CAPACITY ADD SEQUENCE For personal use only Line Commissioned No Yes No No Yes Active Utilization 88% 95%/78% 84% 93% 95%/84% New Capacity Build No Yes – year 3 No Yes – year 5 Yes – year 6 Triggered Year 0 Year 1 Year 2 Year 3 Year 4 PAGE 20
Slide 91: Outlook on New Capacity Timing
OUTLOOK ON NEW CAPACITY TIMING For personal use only Based on the this logic, our current outlook for capacity start-ups is: MANUFACTURING CAPACITY EXPECTED COMMISSIONING PLANT CITY SM4 FY17 – FY18 CLEBURNE SM3 FY18 – FY19 SUMMERVILLE SM1 FY19 – FY21 TACOMA SM2 FY19 – FY22 Actual start-up dates are
Slide 92: Headwinds to Capital Efficiency
HEADWINDS TO CAPITAL EFFICIENCY For personal use only SEVERAL FACTORS ARE DRIVING UP THE COST TO CONSTRUCT NEW CAPACITY Increasing regulatory requirements in air & water Inflationary pressure in install & engineering labor Manufacturing processes to continue differentiation We have recently begun se
Slide 93: Capital Efficiency
CAPITAL EFFICIENCY EXAMPLE: GREENFIELD CAPACITY INITIATIVE For personal use only We have recently resourced a team to off-set these cost headwinds Value Engineering Greenfield Capacity Initiative Product Selection Process Selection PAGE 23
Slide 94: Manufacturing Advantage Summary
MANUFACTURING ADVANTAGE SUMMARY For personal use only • We are committed to ensuring product supply and will continue to invest ahead of demand • Our short-term capacity management program targets high active utilization • We are resourcing programs to maintain our capital efficiency advantage PAGE
Slide 95: JH Supply Chain Advantage
For personal use only JH SUPPLY CHAIN ADVANTAGE
Slide 96: JH Supply Chain Overview
JH SUPPLY CHAIN OVERVIEW A fully integrated value chain that begins with customer value creation… For personal use only Network Production Outbound Channel Customer Procurement Planning Scheduling Freight Management Experience ...and has capabilities that create a substantial competitive advantage:
Slide 97: JH Supply Chain Scale Advantage
JH SUPPLY CHAIN SCALE ADVANTAGE For personal use only JH Network – Today JH Network – 35/90 *Specific locations subject to change PAGE 27
Slide 98: JH Supply Chain Objectives
JH SUPPLY CHAIN OBJECTIVES For personal use only JH SUPPLY CHAIN CREATES CUSTOMER VALUE WHILE OPTIMIZING TOTAL VALUE CHAIN COSTS Custom Production R&R Builder Builder Contractor Enable access to differentiated products across all customer segments Minimize “total supply chain cost” through Aligned C
Slide 99: Supply Chain Advantage: Jobpack Example
SUPPLY CHAIN ADVANTAGE: JOBPACK EXAMPLE For personal use only JOBPACKS: TO-THE-PIECE COLORPLUS® HOUSE PACKS DELIVERED VIA LTL FREIGHT IN 8 DAYS Custom Production R&R Builder Builder Contractor Enable access – The entire ColorPlus® product range at an unmatched lead time Minimize “total supply chain
Slide 100: JH Supply Chain – Capability Advantage
JH SUPPLY CHAIN – CAPABILITY ADVANTAGE For personal use only HIGHLY AUTOMATED, INTEGRATED SYSTEMS Enable Customer Leverage & Exploit Optimize Delivered Cost with Integration Manufacturing Scale Freight/Sourcing (HardieLink ®) (APO) System (JDA) Automated Generates VMI Sequential low Order Taking Rep
Slide 101: Optimizing Supply Chain Costs
For personal use only OPTIMIZING SUPPLY CHAIN COSTS
Slide 102: JH Transportation: Our Approach to Freight
JH TRANSPORTATION: OUR APPROACH TO FREIGHT For personal use only CORE CONCEPTS OF OUR APPROACH TO FREIGHT: We optimize much of our network around freight Freight is a commodity – the spot market is an advantage for us We manage to detailed performance metrics on controllable cost drivers PAGE 32
Slide 103: JH Freight Cost vs the Market
JH FREIGHT COST VS THE MARKET (FY12 – CURRENT) For personal use only $70 $2.80 $68 $2.60 $66 $2.40 JH $/MSF freight cost $64 Spot Market $/mile $2.20 $62 $2.00 $60 $1.80 $58 $/MSF $1.60 $56 $/Mile W/Fuel (spot market) $54 $1.40 FY'12 FY'13 FY'14 FY'15 FY'16 Source: DAT Rateview (Spot market $/Mile W
Slide 104: FY12–FY16 Performance Improvement Levers
FY12 – FY16 PERFORMANCE IMPROVEMENT LEVERS For personal use only Controllable Area Result Achieved How Optimized replenishment to VMI sites Truckload Utilization 5.5% increase Order parameters that maximize value for the entire value chain Leverage JH internal brokerage Carrier Sourcing: >25% saving
Slide 105: Freight Summary and Outlook
FREIGHT SUMMARY AND OUTLOOK For personal use only • JH will continue YOY improvement in controllable areas • In FY16 we are benefitting from a favorable operating environment in both supply/demand and fuel costs • While the current operating environment is soft, our future state thinking on freight
Slide 106: Procurement Approach
PROCUREMENT APPROACH For personal use only WE HAVE TWO PRIMARY OBJECTIVES FOR OUR PROCUREMENT PROCESSES Optimize pricing power on Ensure long-term supply scale & JH value proposition Strategic partnerships in Industry analysis to quantify select commodity categories JH value as a customer Management
Slide 107: Cement: Understanding Our Value as a Customer
CEMENT: UNDERSTANDING OUR VALUE AS A CUSTOMER For personal use only Supply/demand dynamics are driving increased pricing in all regions Quantifying the value of our of our business and leveraging in supply agreements Finishing Efficiency Low Sales SG&A Requirement Leveraging our R&D capability to Co
Slide 108: Pulp: Competitive Pressure & Supply Chain Efficiencies
PULP: COMPETITIVE PRESSURE & SUPPLY CHAIN EFFICIENCIES For personal use only Our long-term pulp supply is secured through contracts with strategic partners. Within those agreements, we are focused on cost optimization Increasing Competition Total Supply Chain Costs Spot Market Development Rail-direc
Slide 109: Supply Chain Summary
SUPPLY CHAIN SUMMARY For personal use only • Supply Chain is a strategic area focused on value creation for our customers • We have substantial operating capabilities that enable optimized delivered cost through the entire value chain • We continue to be focus on elevating our controllable performan
Slide 110: Questions
For personal use only QUESTIONS PAGE 40
Slide 111: Southern Markets Update
For personal use only Southern Markets Update September 2015
Slide 112: Disclaimer: Forward-Looking Statements
DISCLAIMER For personal use only FORWARD-LOOKING STATEMENTS This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange
Slide 113: Disclaimer (continued)
DISCLAIMER (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to id
Slide 114: Agenda
AGENDA For personal use only • South Division Review • Growth / PDG Initiatives • Marketing & Customer Experience • Interiors PAGE 4
Slide 115: South Division at a Glance
SOUTH DIVISION AT A GLANCE For personal use only Quick Facts Manufacturing Employees: ~640 Sales Employees: ~100 FY15 Volume: ~970 mmsf FY15 Revenue: $754M ~60% of North American Volume ~80% Exteriors vs Interiors ~85% Single Family vs Multi Family PAGE 5
Slide 116: South Manufacturing & Reload Network
SOUTH MANUFACTURING & RELOAD NETWORK For personal use only HZ10 Manufacturing Facility ColorPlus ® VMI Distribution Center Products Facility Big Box Distribution Center PAGE 6
Slide 117: South Division Manufacturing
SOUTH DIVISION MANUFACTURING For personal use only PLANT KEY CAPABILITIES KEYS TO OPERATIONAL STRATEGY Sheet Machines: 4’ wide, 5’ wide Low Density Production Fontana, CA Primary products: Panel, Backer • Safety Key Imports: Trim, Heritage® , Artisan® and ColorPlus® Products • Customer service deliv
Slide 118: Growth Against Wood - Trim
GROWTH AGAINST WOOD - TRIM For personal use only TRIM ATTACHMENT TO SIDING CONTINUES TO BE A CORE FOCUS AND GROWTH DRIVER FOR THE SOUTH DIVISION PAGE 8
Slide 119: Growth Against Wood – New Trim Products
GROWTH AGAINST WOOD – NEW TRIM PRODUCTS We have expanded our new trim technologies across numerous For personal use only markets to increase the size of the addressable market for trim. Mouldings 1x2 Foam-Back Trim PAGE 9
Slide 120: Growth Against Wood - Carolinas Trim Transition
GROWTH AGAINST WOOD - CAROLINAS TRIM TRANSITION For personal use only In Q3 FY16 the Carolinas market will transition to a new technology trim finished in our Plant City, FL facility, which enables: - Better Product - No Back-Grooves - Installs Easier - Improved Service Position - Better Capacity Ut
Slide 121: Growth Against Wood – Artisan V Rustic
GROWTH AGAINST WOOD – ARTISAN V RUSTIC For personal use only Artisan V Rustic was launched into the California market in 2014, providing key learning & development in manufacturing and in how to market to fragmented “Top of Market” customers. PAGE 11
Slide 122: Contractor Alliance Program
CONTRACTOR ALLIANCE PROGRAM For personal use only A successful launch of the RR Contractor Alliance Program has resulted in more contractors, more sold jobs, and higher engagement in the program. PAGE 12
Slide 123: Growth Against Vinyl – Ambassador Program
GROWTH AGAINST VINYL – AMBASSADOR PROGRAM For personal use only The Ambassador Program has expanded into new geographies and we have leveraged our leads to acquire new contractor partners. # Participating Contractors Ambassador Generated Leads PAGE 13
Slide 124: Growth Against Fiber Cement and Chip Board
Growth Against Fiber Cement and Chip Board For personal use only Our multi-brand strategy remains key to providing the right products to the right customers. In FY15 we increased investments in promoting our product performance advantages over generic fiber cement and chip board. PAGE 14
Slide 125: Fragmented Customer Marketing
FRAGMENTED CUSTOMER MARKETING For personal use only Investments in inside sales and customer aggregation events (mobile tours) have yielded: - Increased lead generation in fragmented markets - Improved customer experiences - Increased sales / conversions PAGE 15
Slide 126: 100% Hardie
100% HARDIE For personal use only The 100% Hardie Program offers concierge-style marketing services to builders who utilize a full-wrap product solution. Services include: - Welcome kits - Co-branded model home marketing tools - PR Announcements - Advertising – Web / Print / Billboard - Parade of Ho
Slide 127: Customer Experience
CUSTOMER EXPERIENCE For personal use only Our annual survey of customer experience across our distribution channel showed strong progress in almost all areas, especially in areas weighted most important by customers. Distributor Dealer FY14 FY15 YOY FY14 FY15 YOY Product Quality 4.3 4.6 0.3 On Time
Slide 128: Marketing
MARKETING For personal use only Our new website (launched Nov 2014) and more aggressive digital marketing has driven improvement in our digital presence. PAGE 18
Slide 129: Marketing
For personal use only MARKETING PAGE 19
Slide 130: Marketing – Campaign Example
MARKETING – CAMPAIGN EXAMPLE For personal use only To raise awareness of James Hardie’s performance advantage in high-wind markets, a multi-media marketing campaign was launched. Tactics - Direct Sales Education & Promotion - TV – Ads & Consumer Interest Stories - Customer E-Communication - 3rd Part
Slide 131: Interiors
INTERIORS For personal use only • Market Overview • JH Value Proposition and Market Position • Execution and Results PAGE 21
Slide 132: Market Overview
MARKET OVERVIEW For personal use only Total Tile Sales = 2,400 mmsf Total Performance Underlayment Opportunity Opportunity = Tile volume less applications that do not require an underlayment: • Direct to concrete • Greenboard/non-wet area walls • Mortar Addressable Underlayment Market Mortar Greenbo
Slide 133: Market Position
MARKET POSITION For personal use only TILE PERFORMANCE UNDERLAYMENT MARKET Mag Oxide Foam Boards Mats/Membranes • 98% FC Category Share Gypsum Fiber Cement • Glass Mesh opportunity Glass Mesh PAGE 23
Slide 134: Messaging Strategy: The Three Pillars
MESSAGING STRATEGY: THE THREE PILLARS For personal use only PAGE 24
Slide 135: Made Better
Made Better For personal use only Formulation How It’s Made Benefits PAGE 25
Slide 136: Installs Better
INSTALLS BETTER For personal use only Cutting Nails and Screws Floor vs. Wall PAGE 26
Slide 137: Performs Better
PERFORMS BETTER For personal use only Moisture Mold Tile Protects the tile resistance resistance adhesion and the work PAGE 27
Slide 138: Improved Organizational Execution
IMPROVED ORGANIZATIONAL EXECUTION For personal use only R Relationship The organization has been E Education designed and staffed to deliver on our retail selling approach P Position I Inventory C Conversion PAGE 28
Slide 139: Retail Store Segmentation
RETAIL STORE SEGMENTATION • Enhanced segmentation for rep direction “Where to go, What to do” For personal use only • Focus on: – Conversions in “Contractor” stores – Retail fundamentals in “Retail” stores High (200 spd) 1 2 Conctractors Positioning Positioning Conctractors Identify / Convert Gains
Slide 140: Sales Organization
SALES ORGANIZATION For personal use only • Creation of dedicated interiors career path driving tenure • Higher tenured reps delivering more conversions Rep Tenure And Conversions +32% Average Rep Tenure (Years) +28% Conversions (MMSF) FY16TD FY15TD PAGE 30
Slide 141: National Backer Retail POS Results
NATIONAL BACKER RETAIL POS RESULTS use only North Texas District Market Share POS Volume Sold (MMSF) For personal +7% Current Year Previous Year FY 16 FY 15 PAGE 31
Slide 142: Summary
SUMMARY For personal use only • Manufacturing performing well and new capital investments starting to return value • Continue to invest in growth initiatives – Product line extensions to increase available market – Funding PDG projects and programs – Improvements in customer outreach and experience
Slide 143: Questions
For personal use only QUESTIONS PAGE 33
Slide 144: Manufacturing Efficiencies
For personal use only MANUFACTURING EFFICIENCES September 2015
Slide 145: Disclaimer: Forward-Looking Statements
DISCLAIMER For personal use only FORWARD-LOOKING STATEMENTS This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange
Slide 146: Disclaimer (continued)
DISCLAIMER (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to id
Slide 147: Manufacturing Strategy
MANUFACTURING STRATEGY For personal use only • Provides a safe environment and good workplace for all employees, and complies with environmental regulations • Enables JH’s Product Leadership • Ensures capacity is available during periods of peak demand • Allows delivered unit cash costs to remain re
Slide 148: How We Operate
HOW WE OPERATE For personal use only Systematic gate approach Process Safety People Quality Service Optimization Cost PAGE 5
Slide 149: Manufacturing Optimization
MANUFACTURING OPTIMIZATION For personal use only Pre-Autoclave Post-Autoclave Continuous Process Workstations Eliminating stops and unplanned downtime Not to restrict sheet machines at design • Planned stops / planned work • Reliable machines • Correcting issues faster • Re-design of work • Understa
Slide 150: James Hardie's Management System
For personal use only JAMES HARDIE’S MANAGEMENT SYSTEM
Slide 151: Metrics
METRICS For personal use only • A performance band established for all “gates” in the plant • Basic division of day-to-day responsibilities: – General Foremen: Explains any variations outside the band and formulating a plan of attack to prevent recurrence – Managers: Formulate the strategy to shift
Slide 152: Reviewing the Metrics
REVIEWING THE METRICS For personal use only • Management review across all departments: • Daily • Metrics review • Any “out of the band” issues without a clear plan are reviewed later in the day • Weekly • Employee engagement review • Cost review • Band improvement review PAGE 9
Slide 153: Safety
SAFETY For personal use only Process Safety People Quality Service Cost Optimization 2 & 20 Zero Harm Recordable • “Brother’s Keeper” Culture Injuries First Aid • Behavioral focus Injuries • Focus on leading indicators Near Hits Influencers of At-Risk Behaviors PAGE 10
Slide 154: People
PEOPLE For personal use only Process Safety People Quality Service Cost Optimization • Operator proficiency in current role • Operator flexibility to manage seasonal demand • Driving down accountability and decision making • Developing capabilities internally and partnering with local schools PAGE 1
Slide 155: US Plant Performance Drivers
US PLANT PERFORMANCE DRIVERS Process Safety People Quality Service Cost For personal use only Optimization First Pass PCI/PDI 98.0 % 96.0 % 94.0 % 92.0 % 90.0 % 88.0 % 86.0 % 84.0 % 82.0 % 80.0 % FY14 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY15 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY16 Q1 FY14 Q1 FY14 Q2 FY14 Q3 FY14 Q4
Slide 156: Questions
For personal use only QUESTIONS PAGE 13
James Hardie Industries — Investor Presentation (September 2015) on 6ix