James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q1 FY2004 Earnings Presentation
52 slides from James Hardie Industries's earnings presentation, Aug 21, 2003
Slide 1: Results Recap and Strategic Overview
@® James Hardie ) James Hardie Results Recap and Strategic Overview
Slide 2: Q1'04 vs Q1'03 income summary
US$ Million Q1'04. Q1'03 % Change Net Sales 241.5 194.6 24 Gross Profit 89.3 68.5 30 SG&A (36.2) (30.1) 20 Research & Development (4.8) (3.3) 45 EBIT 48.3 35.1 38 Net Interest Expense (2.3) (2.9) (21) Other Income, Net - 0.3 - Income Tax Expense (13.1) (10.1) 30 Operating Profit® 32.9 22.4 47 Contin
Slide 3: USA Fibre Cement highlights
Net Sales Sales Volume Average Price EBIT EBIT Margin up up up up up @®) James Hardie 22% to US$186.8 million 14% to 387.5 mmsf 7% to US$482 per msf 39% to US$54.1 million 3.6 pts to 29.0%
Slide 4: Asia Pacific Fibre Cement highlights
sia Net Sales Sales Volume EBIT EBIT Margin up up up down 23% to US$50.1 million 12% to 98.2 mmsf 15% to US$8.6 million 1.2 pts to 17.2%
Slide 5: Other Fibre Cement
‘i G@) James Hardie — Fibre Cemer CLO Chile — breakeven, growing share Pipes — volumes trebled, prices low Europe — positive start Roofing — trials commenced
Slide 6: EBIT and EBITDA by segment
@®) James Hardie Q1'04 Q1'03 % Change EBIT? USA Fibre Cement 54.1 38.8 39 Asia Pacific Fibre Cement 8.6 75 15 Other Fibre Cement (3.7) (2.7) (37) R&D (3.3) (2.5) (32) Corporate (7.4) (6.0) (23) Depreciation and Amortization USA Fibre Cement 4.9 48 2 Asia Pacific Fibre Cement 2.3 2.1 10 Other Fibre C
Slide 7: Net interest and income tax expense
ay nterest and|Tax Ex Net Interest Expense US$ Million Q104.- Q1'03.-—_ % Change Net Interest Expense (2.3) (2.9) (21) Income Tax Expense US$ Million Q1'04 Q103 % Change Income Tax Expense (13.1) (10.1) 30 Rate 28.5% 31.1% -
Slide 8: Capital expenditure and depreciation
@ James Hardie tal Expend Ali Capital Expenditure Depreciation US$ Million Q1'04 Q1 03 Q1 04 Q1°03 USA Fibre Cement 18.5 6.6 4.9 4.8 Asia Pacific Fibre 12 0.9 23 24 Cement Other Fibre Cement 1.1 0.2 0.1 - Total Segments 20.8 7.7 7.3 6.9 Continuing businesses only
Slide 9: Key financial ratios
. — a : ae Q1'04 FY “03 FY’02 FY 01 EPS (Basic)* 7.2¢ 18.7¢ 6.4c 7.3¢ Return on Shareholders 29.6% 42.3% 8.9% 14.7% Funds? Return on Capital Employed12 29.7% 21.2% 8.6% 8.6% EBIT/Sales' 20.0% 16.4% 8.0% 7.6% . Net debt Gearing Net debt & Equity 18.2% 21.4% 44.7% 56.1% Net Interest Cover* 21.0x 6.6x
Slide 10: Dividends and capital returns
ae 2 aes yy ees Be ee y o J Le 7 Since December 2001* Dividends US 10¢ Capital Returns” US 40c Total US 50c Cash Yield 1% *paid or announced 10
Slide 11: Fibre cement outlook
Fibre ment! Continued strong demand for fibre cement Housing construction to remain buoyant over short to medium term « Low interest rates, house prices strong, new economic stimulus bill, improved consumer confidence « Approvals up, low inventories, large order backlogs Further market share gains i
Slide 12: Outlook
@®) James Hardie Le a Li LL a i (NU " Strong results in Q1 continuing into Q2 « Prospects for good growth over the full year are encouraging 12
Slide 13: Strategic Overview
@® James Hardie ) James Hardie Strategic Overview
Slide 14: High growth, proprietary technology
« High growth « Unique proprietary technology " Sustainable competitive advantage " Strong cashflows and balance sheet " Low cyclical risk « Relentless will to win 14
Slide 15: World's best manufacturers
. » World’s best manufacturers " Bigger, faster, lowest cost « Profitable Growth « Market penetration « Geographic expansion " Product innovation « Winning Culture « Disruptive winose approach 15
Slide 16: Industry Leadership and Profitable Growth
Lo @® James Hardie Industry Leadership and Profitable Growth « Aggressively grow the market « Secure differentiated position « Generate strong top line growth « Win high shares of large segments « Sustain attractive margins 16
Slide 17: A high performance meritocracy
y OO ay = Gp) James Hardie Co ae i6S: = « A high performance meritocracy " High performance hurdles « Continuous step changes required " Our people need to « Relish competition and love winning " Be willing to learn and innovate " Challenge themselves and each other « Rewards are material if value i
Slide 18: Balanced business portfolio
La) ey : J y : Pe q 7 7 : 7 | ] y ae a | @ sames Hardie a « Business portfolio balanced to achieve short and long term growth « USA expected to double between 2002 - 2007 « Growth and attractive returns from ANZ " Numerous opportunities for growth > 5 years « Pipes ® Roofing « Europe ® Chile « Asset
Slide 19: Sales and EBIT mix by region
ye : Ve yy J Se Lo oe 7 ; 2 Cl se Bs Pe dames Hardie _ | ae a > oe o _ CCl Ce CE Sales EBIT USA — Established high growth/high 10% 15% 89% return Asia Pacific — Established high return 21% 24% 17% Other — Emerging opportunities 5 49 , (Pipes, Roofing, Europe, Chile) 9% % (6%) Total 100% 100% 100% 19
Slide 20: Sustainable Competitive Advantage
Sustainable Competitive Advantage « Unique plant engineering and proprietary process technology and product formulations " Superior capital cost efficiency — plant capital cost < 1% that of competitors « Largest, lowest cost manufacturer — pliant operating cost 20-30% lower than competitors « Superi
Slide 21: Largest lowest cost producer of fibre cement
- James Hardie is the largest lowest cost producer of the USA In fibre cement Plant Capac! Flat Sheet Capaci mmsf) ( ions var} 6 oO °° a 4 c Ss Qu. 180 3 ia ida , Californi: Fontana Plant Ci 0 10 10 01 ity, Flori i 50 20 560" 360 200 190 ington Texas Blandon, Pennsylvania Tacoma, Washi Peru, fllinoi
Slide 22: New Flat Sheet Plant - Sacramento, California
Gp) James Hardie t New Flat Sheet Plant - Sacramento, California I demand ing ty to meet rapidly growi ign capaci 300 mmsf des US$47.5 million cost 50% more capacity One third lower capital cost/uni Me Plank, panel and backer products m7 ion — mid 2004 Expected complet m7 22
Slide 23: @® dames Hardie
@® dames Hardie — : ee | es y EUs i Oe iE ee eee a LL i : 7 oe. ne , es mmsf Lo 23
Slide 24: @®) James Hardie
@®) James Hardie 1990 1995 1997 1998 2000 2003 24
Slide 25: New Trim Line - Peru, Illinois
oy Q L Fi -ement - Cai New Trim Line — Peru, Illinois * 160 mmsf design capacity « Required to meet demand in mid-west and northeast « US$49.9 million cost " Next generation of low density technology « Expected completion — mid 2004 25
Slide 26: Fibre cement more durable than wood
a ay Le : ae : Be a Le o Z a Ly : ye ee — Gp) James Hardie Fibre Cement is more durable than wood and engineered wood Superior Durability a on Moisture Resistant a Fire Resistant Weather Resistant Termite Proof Won't Warp Won't Crack ! a cs Won't Rot Holds Paint Longer Won't Delaminate 26
Slide 27: ce a ee / TR Ua een is
ce a ee / TR Ua een is ee a ee z ) ae ee a foe Fire Resistant ov Hail Resistant ? v Wind Resistant ? v Won't Warp ? iv Won't Buckle 9 ~ ColourLastsLonger @ v Strong and Rigid ? s” — Expands/Contracts ? » — Withstands Impact ? Dimensional Stability 4 ca Won't Blister 2 a Won't Crack ? i: 27
Slide 28: 13% of siding market vs long term target
a a ey Q SO - Gp James Hardie SS oS oe 7 ue ee oe A oy oe y : 13% of siding market vs long term target of 35-40% Fibre Cement 13% Aluminum 1% ae Cini Lo Le aaa 28
Slide 29: US New Construction Siding Market
Lo y ee LF Ly a ae |. oD oe US New Construction Siding Market Syn Stuc 2% James Hardie 20% Stucco 15% Masonry 20% New Construction — ff Southern Division ne Za Other FC 1% LT | a Le Lo a 2 OSB 2% Hardboard 4% James Hardie : _ 28% oT fe y ee ee Hardboard Other FC Wood OsB 4% 2% 4% 4% 29
Slide 30: ColorPlus pre-painted siding
_ a : idin | Chestnut ‘ Brown - Z a URI Me 7 ColorPlus™ pre-painted siding " Helps take share from vinyl a " Lifts selling prices Staal " Lifts margins
Slide 31: a Le
- a Le Le a Do i, UMNO ie y —- ee oe Le 2 31
Slide 32: ee ee a ] oy a o oe
- Lo . : : ee ee a ] oy a o oe ee Le : oe _ a : oe g Ce i : CU o ay ue DC |) ~~ Certainteed 1% 7 a Uo _ Dens-Shield 8% c x By in a yD Util-A-Crete 7% Na iii. LY ul i yy AN 32
Slide 33: 1/4" Backer Market
eer aE BU. i y a a are - Ba ! uo Li ” Lo a oe >, PermaBase G-2 Hardibacker Util-A-Crete Wonderboard ; Gp) James Hardie Very strong in %” segment 1/4" Backer Market Durock PermaBase 4% Util-A-Crete Dens-Shield 0% Wonderboard 12% HardiBacker 73% 33
Slide 34: Soffit and Hardibacker growth
Gp James Hardie Ue Soffit Growth | 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 1/4” Hardibacker Growth 4” Hardibacker Growth Fyoo FYet Fyo2 FYO3 FY97 FY98 FYSa FYOO0 FYo1 FYO2 FYO03 Fyo7 FY98 FY99 ~FYOO FYO1 FY02 FYO3 34
Slide 35: Revenue growth continuing to outstrip volume growth
VOLUME (MMSF) ae Lae 1200 4 1000 4 800 4 600 4 y ye veges, Volume Lo Co Co ; James Hardie a Loe ae: a Soe . Sy Ce ye Lic aii Revenue Growth Continuing to outstrip Volume Growth 600 500 400 300 REVENUE (USDM) comme Revenue 200 . 2 : a — @ Ce (es es q Le oo . a ~~ —rt—“aOO—OOCOrV CO Be: Ce os a ie oe
Slide 36: Average price US$/msf
@®) James Hardie bot ee 1 / ; O§<__€_€wwOiiiKeniiaii USS/MSF 490 > 470 — 450 5 430 > 410 - 390 FY99 FY00 FYO1 FY02 FY03 Q1 FY04 36
Slide 37: EBIT and EBIT margin
es & Le eas ue 8 i . a - aa F | J f : ona z : EBIT US$M EBIT MARGIN % yey —— 4 ie & a ke ee ee Ose Koos Were i 2 ied Ve | : y ay / 7 ee oe ee ge i @ 1 ee A Y Va Vey my Was ee cA da a ee cl FY99 FYOO FY01 FyYo2 FYO3 Q1 FY04 *Excludes restructuring and other operating expenses See Note 5 37
Slide 38: Volume, revenue and housing starts
ee @® James Hardie a $700 $600 ¢? ; $500 > iJ 38 : $400 2 38 sé 800 4 once Volume sane . sao = = = Starts ommmmass Revenue “ 400 200 . $0 2 S tee a = Mar 91 Mar 92 Mar 93 Mar 94 Mar 95 Mar 96 Mar 97 Mar 98 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 38
Slide 39: USA Fibre Cement Targets
A 3 a = cu Q & s & USA Fibre Cement Targets 20% Revenue Growth Ae 20% EBIT/Revenue Ratio Ae 39
Slide 40: USA Exterior Products Market
| Gp) James Hardie 2 i 8 l ee Le ee a Exterio ucts § Double 2 2002 2007 James Hardie Share James Hardie Share USA Exterior Products Market USA Exterior Products Market 10.2 bsf 11.0 bsf — oe us i Fe ini Baa y — 40
Slide 41: USA Interior Cement Board Market
ee ey oe es a @® dames Hardie ae La a ean Oo -ould Grow | y PE ae ee oe USA Interior Cement Board Market 1.1bsf _ Mardi yy i ae Le a ye a “41
Slide 42: Grow the market
2 Go Se / Grow the market » Increase category share « Higher value differentiated products « Flatten the structure » Simplify the business » Lower delivered cost « Lower SG&A Emphasise step change * High performance culture m Increase revenue and margins TI 42
Slide 43: Philippines and Asia
andAsia __ Manufacturing plant commissioned 1999 « FYQ3 sales US$18 million, EBIT slightly positive « Fibre cement as substitute for plywood m 25% market share domestically « Established low cost regional manufacturing hub " Low GDP per capita is an obstacle for developing a differentiated JH busine
Slide 44: South Africa
BP @)) James Hardie oe 5 ee oS ye ae ; / oo Li oo 2 d South A ica Manufacturing plant commissioned 2001 « Low cost manufacturing, rapid market penetration " 23% share of flat sheet market already achieved 7. « Currently operating at EBIT breakeven Plant has been certified to import US products :
Slide 45: Fibre cement pipes
es ae Lane = — ee a a USA manufacturing plant commissioned 2001 « Product has advantages over reinforced steel concrete pipes « Lower cost to make and install « Long term targets « national business w 4-5 manufacturing plants " large share of US$2 billion market
Slide 46: Roofing: USA market entry
USA market entry Development of fibre cement roofing technology US roofing market 13 bsf (US siding market 10.2 bsf) Initial target market 2.1 bsf " to compete with wood shake " superior durability and fire performance US$12m pilot plant being commissioned 46
Slide 47: Europe: low cost, low risk strategy
< —— a « jnitially pursuing a low cost, low risk strategy « Differentiated products imported from US « G2 Backer « XLD Trim « ColorPlus Siding " Focussed market development UK and France « JH business model differentiated from current industry approach 47
Slide 48: High Growth and Attractive Returns Targeted
RE fe a oe Pine zi Se, oe CC — ie OER ‘ 5 ee eee De High Growth and Attractive Returns Targeted Target Actual FY03 Revenue growth > 15% p.a. 32 EBIT Margins > 15% 16 ROA > 15% 21 a Hue ee ee es
Slide 49: Forward-looking statements
Gp James Hardie This presentation contains forward-looking statements. Words such as "believe," “anticipate,” “plan,” "expect," intend,” “target,” "estimate," "project," “predict,” "forecast," "guideline," "should," "aim" and similar expressions are intended to identify forward-looking statements bu
Slide 50: Notes and definitions
se @®) James Hardie Unless otherwise stated, results are for continuing operations only and comparisons are of the 1st quarter of the current fiscal year versus the 1% quarter of the prior fiscal year. The ‘Results Recap’ section of this Management Presentation forms part of a package of information
Slide 51: EBITDA and EBIT notes
on 6. @®) James Hardie cP mM mm ie EBITDA is not a measure of financial performance under US GAAP and should not be considered as 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 our profitability or liquidity. AH c
Slide 52: James Hardie
dames Hardie ) James Hardie
James Hardie Industries — Q1 FY2004 Earnings Presentation on 6ix