Boral — H1 FY2019 Earnings Presentation
62 slides from Boral's earnings presentation, Feb 25, 2019
Slide 1: Results for the half year ended 31 December 2018
RESULTS For the half year ended 31 December 2018 25 February 2019 Earnings growth from Boral North America but softer first half earnings from Boral Australia and USG Boral 1
Slide 2: Agenda
Agenda Results overview Mike Kane Financial results Ros Ng Outlook Mike Kane Strategic & organisational update Mike Kane Sourcing fly ash from a utility in Texas 2
Slide 3: 1H FY2019 results overview
1H FY2019 results overview Excluding the impact of divestments, EBITDA broadly steady 1H 1H % A$m (total operations basis) FY2019 FY2018 1H19 v 1H18 EBITDA1 485 500 (3) Net Profit after tax (NPAT)1 200 214 (6) Statutory NPAT 237 173 37 NPATA1 224 237 (6) EPSA1 (cents) 19.1 20.2 (6) EPS1 (cents) 17.1
Slide 4: Safety performance
Safety performance Company-wide commitment to Zero Harm Today Employee and contractor RIFR1 (per million hours worked) • All divisions recorded improvements in RIFR compared to FY2018 17.4 RIFR MTIFR • RIFR of 6.7, down from 8.3 in 1H FY2018 and 13.6 LTIFR 8.7 in FY2018 12.1 Comparable data - LTIFR
Slide 5: Earnings steady excluding discontinued operations
Earnings steady excluding discontinued operations EBITDA1 variance, A$m 31 7 500 (14) (24) (15) 485 Boral Boral North Discontinued USG Boral2 Unallocated Australia America operations 1H FY2018 1H FY2019 EBITDA1 EBITDA1 1. Excluding significant items 2. Represents Boral’s 50% post-tax equity accounte
Slide 6: Underlying activity in key markets remains solid
Underlying activity in key markets remains solid Boral Australia, % Boral North America, % USG Boral joint venture, % end-market, % Revenue1 by 3 RHS&B2 1 12 Other engineering 14 Single-family 16 Australia Non-residential Multi-family 37 South Korea 10 38 38 Detached housing 12 Repair & remodel 12 T
Slide 7: Adverse weather in key US markets slowed activity
Adverse weather in key US markets slowed activity July to December 2018 July to December 2017 Relative to rainfalls recorded between 1895-2018 Relative to rainfalls recorded between 1895-2017 Record Much Below Near Above Much Record driest below average average average above wettest average average
Slide 8: Boral Australia
Boral Australia 1H 1H • Revenue up slightly with higher contributions from Quarries, A$m Var, % FY2019 FY2018 Cement and Asphalt but lower Concrete & Placing revenue Revenue 1,825 1,804 1 • Lower earnings and margins primarily reflect: EBITDA1 271 294 (8) - lower Concrete volumes and inefficiencies
Slide 9: Boral Australia cost base
Boral Australia Boral Australia ~$1.6b 1H FY2019 cash cost base • Raw materials costs: internationally traded clinker and bitumen prices increased in line with Asian markets and FX • Labour: average wage inflation ~2.5%-3.0% Energy Raw Repairs & & fuel materials • Logistics: continuing to progress o
Slide 10: Boral North America
Boral North America 1H 1H • Revenue increase largely driven by strong growth in Roofing A$m Var, % FY2019 FY2018 • Volumes impacted by extreme rain in key US states Revenue 1,104 994 11 • EBITDA growth and margin expansion due to price increases EBITDA1 196 165 18 and synergies; Fly Ash EBITDA margi
Slide 11: Boral North America – synergies
Boral North America – synergies 1H FY2019 synergies by business1 US$64m Four-year synergy target of US$m US$115m Light Building Cross-Selling US$25m Products & Distribution Expect to Roofing Procurement achieve a further US$11m US$13.7m Operations $1.7m Stone $4.5m $2.2m Fly Ash $3.2m SG&A Block & W
Slide 12: Boral North America – cost base
Boral North America – cost base 1H FY2019 Boral North America • Raw materials costs: increased 4%-6% depending on ~US$700m cost base1 region and material. Cement, vinyl and PVC experienced increases. PVC and vinyl costs are expected to stabilise in Fuel and energy R&M 2H FY2019 5% 2% Raw • Labour: s
Slide 13: USG Boral
USG Boral 1H 1H • Revenue up from volume growth in Australia, Indonesia, Vietnam A$m Var, % and India, higher non-board revenue and FX impacts, offset by FY2019 FY2018 Reported result market-driven decline in South Korea Equity income1,2 25 38 (35) • Australia revenue up 3%, driven by higher board v
Slide 14: Positioned to improve ROFE
Positioned to improve ROFE Aiming for above cost of capital returns through the cycle; current ROFE-equivalent cost of capital ~9.0-9.5% Divisional EBIT return on funds employed Group ROFE1, % (ROFE)1, % Boral Australia1 Boral USG Boral3 North America1,2 15.9 9.0 9.2 15.4 8.2 8.4 8.5 8.1 7.2 11.1 8.
Slide 15: Financial results
Financial results Ros Ng – Group President Ventures and CFO Plant upgrade at Orange Grove Quarry, WA New West Melbourne Concrete Plant, Vic 15
Slide 16: Group financial performance
Group financial performance Total operations basis (A$m) (figures may not add due to rounding) 1H FY2019 1H FY2018 Var % Revenue 2,990 2,937 2 EBITDA1,2 485 500 (3) Depreciation and amortisation2 (156) (150) EBITA1,2 329 350 (6) Amortisation of acquired intangibles (32) (34) EBIT1,2 297 316 (6) Net
Slide 17: Significant items
Significant items A$m (figures may not add due to rounding) 1H FY2019 Notes 1. Costs primarily relating to redundancies, consultant fees supporting the Headwaters integration costs (13) 1 Headwaters integration, integration of IT systems, and closure costs arising from Gain on disposal of Denver Con
Slide 18: Strong operating cash flow
Strong operating cash flow 1H 1H • Operating cash flow up 17% to $253m A$m (figures may not add due to rounding) FY2019 FY2018 EBITDA1 485 500 - Reduction in Headwaters integration costs Change in working capital and other (73) (63) compared to 1H FY2018 Flyash – unbilled receivables and other (28)
Slide 19: Capital expenditure
Capital expenditure Disciplined approach to capital management Total capital expenditure • Total capex up 11% to $183m SIB1 Growth Depreciation and amortisation2 ~60% invested in Boral Australia - Ormeau quarry (Qld) upgrade - Deer Park precast concrete plant (Vic) & replacement 51 concrete plant at
Slide 20: Balance sheet
Balance sheet Maintaining a robust position • Net debt of $2.30b at 31 Dec 2018, down from $2.45b at 30 June 2018, due to sale of US businesses, partially Gearing (net debt / net debt + equity), % offset by a weaker exchange rate 30 30 30 • Principal debt gearing covenant2 of 29%, down from 28 31% a
Slide 21: Outlook
Outlook Orange Grove Quarry, WA Boral supplying Envisia concrete to Crown Sydney Barangaroo, NSW 1 1. Photo supplied by Crown Resorts 21
Slide 22: Outlook for FY2019
Outlook for FY2019 • EBITDA in FY2019 to be broadly similar to prior year (excluding property) Australia • FY2019 Property earnings expected to be around $30m compared with $63m in FY2018 Boral • Expected industry growth in RHS&B (up 4%) and non-residential demand (up around 7%), offsetting moderati
Slide 23: Strategic & organisational update
Strategic & organisational update Mike Kane – CEO & Managing Director USG Boral EasyFinish™ Orange Grove Quarry, WA 23
Slide 24: USG Boral strategic opportunities
USG Boral strategic opportunities Continuing to assess value-creating growth opportunities for USG Boral • Executed non-binding term sheets with Knauf to explore forming a new expanded Asia plasterboard JV • Also considering opportunity to acquire USG Boral’s Australasian1 plasterboard business retu
Slide 25: Senior leadership changes
Senior leadership changes Well positioned around executive capability today and in the future Operations leadership New appointment CEO & Managing Director Mike Kane Group President Ventures and CFO Group President Operations (incl. Chair of USG Boral) Ross Harper Ros Ng President & CEO President &
Slide 26: Questions
Questions Osborne Park Concrete Plant, Perth WA The team at the precast facility, Deer Park Vic 26
Slide 27: Supplementary information
Supplementary information USG Boral Ensemble TM at Chancery House, Perth Boral North America, Saxony Slate Concrete tile and Boral™ Cool Roof System 27
Slide 28: FY2019 financial considerations
FY2019 financial considerations Area FY2019 implications Synergies • Headwaters synergies in year two of US$25m and four year synergy target maintained at US$115m Corporate costs • FY2019 to be broadly in line with FY2018 Depreciation & Amortisation • Group D&A ~A$380-390m in FY2019, including amort
Slide 29: Boral Group: snapshot
Boral Group: snapshot Australian based, ASX listed international building & construction materials group 1H FY2019 revenue by EBITDA5 division4, % A$m market capitalisation1 35 1,056 S&P/ASX 100 company 53 720 Boral Australia 605 645 519 556 500 485 USG Boral 12 Boral North America FY13 FY14 FY15 FY
Slide 30: Our strategic priorities
Our strategic priorities BORAL BORAL BORAL GROUP 1 AUSTRALIA 2 NORTH AMERICA 3 USG BORAL 4 Deliver further gains and Deliver synergy Deliver long term growth Maintain a strong maintain leading benefits, transformation and maximise strategic balance sheet and positions and growth opportunities flexib
Slide 31: Boral Australia
Boral Australia Diversified geographic exposure across construction materials 1H FY19 Revenue1 by region, % 6 402 operating NSW / ACT 24 sites3 VIC / TAS/ SA 45 NT 2 QLD 1 18 1 Quarries 75 WA 66 1 9 1 QLD 25 Concrete 239 WA 12 1 16 2 Asphalt 43 1H FY19 Revenue1 by business2, % SA Cement4 6 10 1 NSW/
Slide 32: Boral Australia vertically integrated positions
Boral Australia Vertically integrated positions in key markets, especially in strong East Coast markets Cement Quarries (all product types) › ~70% manufactured › >30m tonnes p.a. clinker, ~30% imported › Close to 1b tonnes total Bitumen › 1.5m tonne p.a. clinker reserves with ~20-50 BIA JV kiln capa
Slide 33: Boral Australia property life cycle
Boral Australia Property is managed as an integrated and ongoing feature of the business New need defined Site opportunity located Development/disposal Development approval Rehabilitation Integrated Capital approval Property Life New land use approvals Cycle Operations planning End use strategy Oper
Slide 34: Boral Australia property earnings
Boral Australia Boral has a strong track record of maximising returns from property assets Property earnings Property EBIT1, › Earnings secured through A$m multi-year developments and smaller sales of surplus land 11-year average Property earnings: $34m › Portfolio rationalisation, asset relocations
Slide 35: Boral North America
Boral North America Strong national networks in building products and fly ash 1H FY2019 Revenue1 by geography2, % 222 operating 7 Northeast2 sites3 Southeast 9 27 Southwest 8 1 2 Fly ash 122 West 16 Midwest2 Midwest 50 2 Roofing 11 Northeast 22 2 3 19 Stone 9 International West2 20 8 2 Light 8 South
Slide 36: Meridian Brick joint venture update
Meridian Brick Meridian jointjoint Brick venture update venture update Underlying result US$m 1H FY2019 1H FY2018 Ontario Revenue 188 202 3 1 EBITDA1 13 11 1 • Brick volumes lower, reflecting 1 1 smaller distribution network following 1 3 prior period manufacturing and 1 5 2 2 1 3 distribution asset
Slide 37: Headwaters acquisition synergies
Headwaters acquisition synergies Significant synergies as a result of highly complementary businesses Delivered in Cumulative Updated target Synergy drivers by business, US$ FY2018 Delivered within 4 years, 1H FY2019 pa Corporate – incl. executive headcount, public company costs, procurement $9.5m $
Slide 38: Headwaters acquisition synergies
Headwaters acquisition synergies Significant synergies as a result of highly complementary businesses Delivered in Cumulative Updated target Synergy drivers by business, US$ FY2018 Delivered within 4 years, 1H FY2019 pa Roofing Sub-total $7.9m $12.4m >$27m Procurement Cross-selling portfolio – e
Slide 39: USG Boral
USG Boral 50%-owned joint venture in Australasia, Asia & Middle East 1H FY2019 External revenue1, % 3 2 South Korea 16 Operating Footprint China (number of operating sites2) 8 4 37 1 1 3 1 12 Middle East 18 Plasterboard plants 3 Thailand 1 1 628m m capacity 2 3 India Vietnam 5 23 board lines / 6 cei
Slide 40: USG Boral capacity utilisation
USG Boral 5% CAGR in plasterboard volumes and strong capacity utilisation USG Boral plasterboard capacity utilisation and production volume1 Capacity utilisation (RHS) • Average capacity utilisation of 700 Production volume 90% ~80% across network in 1H FY19, Capacity at period end 650 steady on FY1
Slide 41: Market data & forecasts – Australia
Market data & forecasts – Australia Redbank Plains concrete batch plant, Qld ENVISIA® Concrete used at the Punchbowl Mosque in Sydney, NSW 41
Slide 42: Boral Australia's markets
Boral Australia’s markets Revenues are derived from various market segments RHS&B2,3, VWD A$b Detached housing5, # starts 30 120,000 25 20 80,000 15 1H FY2019 External revenue 10 40,000 by end-market1, % 5 - Other - Detached FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19F FY21F FY23F FY01 FY03 FY
Slide 43: Australian RHS&B activity
Australian RHS&B activity RHS&B1 RHS&B1, by state (value of work done, $b) FY2019f v FY2018 (value of work done, $b) +4% +3% 23.2 22.2 18.6 16.6 16.2 +8% 15.4 +3% 9.0 9.3 +6% 4.5 4.6 4.6 4.9 -2% 2.0 2.2 1.3 1.3 FY14 FY15 FY16 FY17 FY18 FY19F FY18FY19F FY18FY19F FY18FY19F FY18FY19F FY18FY19F NSW VIC
Slide 44: Australian residential construction remains strong
Australian residential construction remains strong Housing starts are at historically high levels, though have started to decline Total housing starts1 Housing starts – by state1 (‘000) 1H FY2019f vs 1H FY2018 (‘000) Detached Multi -6% 234 221 229 229 230 219 214 Detached 185 -6% -11% Multi 102 118
Slide 45: Australian non-residential activity continuing growth
Australian non-residential activity continuing growth Further growth expected in most regions Non-residential1 Non-residential – by state1 (value of work done, $b) 1H FY2019f v 1H FY2018 (value of work done, $b) +3% 44.7 43.6 +9% 42.3 41.1 +10% 38.2 38.2 38.3 38.0 -11% 14.0 13.8 -20% 12.9 12.6 8.4 +
Slide 46: Boral's largest projects and potential pipeline
Boral’s largest projects and potential pipeline Project completion Status Projects under tender Status Barangaroo – Crown Casino, NSW Barangaroo – One Sydney Harbour Basement Bringelly Road – Stage 1, NSW Capricorn Highway, Qld Forrestfield Airport Link Part 1, WA Cross River Rail, Qld Geraldton Air
Slide 47: Australian major transport projects pipeline
Australian major transport projects pipeline Value of work done (for years ending June) (A$b) 1. Chart prepared exclusively by Macromonitor based on publicly available data. Boral has not independently verified either the historical data or forecasts. Chart shows financial years and projects with to
Slide 48: Asphalt demand in Australia
Asphalt demand in Australia Industry demand forecast to increase and remain at high levels Macromonitor forecast1 asphalt demand across all Australian construction markets (‘000) tonne3 Forecast volumes 14,000 WA / NT 12,000 › Total asphalt volumes forecast to grow in FY19 and remain at high 10,000
Slide 49: Concrete demand in Australia
Concrete demand in Australia Industry demand forecast to remain at high levels Macromonitor forecast1 pre mix concrete demand across all Australian construction markets (‘000) m3 Forecast volumes 35,000 WA / NT 30,000 › Total concrete volumes forecast to grow in FY2019 before moderating 25,000 back
Slide 50: Market data & forecasts – USA
Market data & forecasts – USA The new Eldorado Stone plant in Greencastle, Pennsylvania Boral North America, Eldorado and Cultured Stone® 50
Slide 51: US housing starts by region
US housing starts by region Southeast, Southwest and Northeast regions continue to grow Southeast – 27% of Boral’s US revenue1,2 Midwest – 16% of Boral’s US revenue1,2 -0% +3% 184 178 Multi Family 172 176 174 177 Housing starts (‘000) Housing starts (‘000) 416 426 417 158 155 397 406 381 Single Fami
Slide 52: Boral North America markets
4. 3. 2. 1. Sq Ft Area (m’s) FY01 1,716 FY01 1,242 1,571 FY02 1,477 FY02 1,313 1,646 329 333 FY03 1,352 FY03 1,393 1,729 336 FY04 1,359 FY04 1,587 1,945 FY05 1,368 FY05 1,663 2,016 FY06 1,534 FY06 1,681 2,036 FY07 358 353 355 FY07 1,486 1,242 1,546 304 FY08 1,473 FY08 807 1,132 326 FY09 1,389 FY09 4
Slide 53: Financial data
Financial data Boral North America, Eldorado Stone® Boral Australia Innovation Factory, Maldon NSW 53
Slide 54: 1H FY2019 segment revenue, EBITDA and EBIT
1H FY2019 segment revenue, EBITDA and EBIT External revenue, A$m EBITDA3, A$m EBIT3, A$m 1H FY2019 1H FY2018 1H FY2019 1H FY2018 1H FY2019 1H FY2018 Boral Australia 1,825 1,804 271 294 168 194 USG Boral1 – – 25 38 25 38 Boral North America 1,104 994 196 165 115 90 Discontinued 62 138 4 19 - 11 Opera
Slide 55: Earnings and dividends per share
Earnings and dividends per share Earnings and dividends per share •EPS1 of 17.1 cents, down 6% A$ cents DPS EPS •EPSA1 of 19.1 cents, down 6% 40.4 › Interim dividend of 13 cents per 33.3 33.7 share (50% franked), for a half year, 29.7 an increase of 4% over the prior period 20.5 18.2 17.1 › Dividend
Slide 56: Debt profile
Debt profile Gross debt currency exposure, % Debt facilities, A$m 1H FY2019 FY2018 As at 31 December 2018 1% US Private Placement Notes 811 772 USD Swiss Franc notes1 217 204 GBP Syndicated bank loan2 - 260 US 144A / Reg S Senior Notes 1,330 1,261 99% Other 24 30 Gross debt 2,382 2,527 •Total = A$2,
Slide 57: US tax loss summary
US tax loss summary Tax losses US$m Gross value Tax effected value Recognised on balance sheet 481 124 Unrecognised 136 35 Total 617 159 57
Slide 58: Boral's energy and fuel costs
Boral’s energy and fuel costs Total energy and fuel costs – 1H FY2019 A$m $29m $198m › FY2019 energy costs impacts: $39m $130m › Expect $10-$15m cost increase Coal $12m impact in energy and fuel prices Gas $14m in Boral Australia in 2H FY2019 Electricity $35m › Expect inflationary increases in Boral
Slide 59: Non-IFRS information
Non-IFRS information Boral Limited’s statutory results are reported under International Financial Reporting Standards. Earnings before significant items is a non-IFRS measure reported to provide a greater understanding of the underlying business performance of the Group. Significant items are detail
Slide 60: Non-IFRS information (continued)
Non-IFRS information (continued) A reconciliation of non-IFRS measures to reported statutory profit is detailed below: Before Significant Reported Continuing Discontinued A$m sig. items items Result operations operations Total Sales revenue 2,990.3 - 2,990.3 2,928.8 61.5 2,990.3 Profit before deprec
Slide 61: Disclaimer
Disclaimer The material contained in this document is a presentation of information about the Group’s activities current at the date of the presentation, 25 February 2019. It is provided in summary form and does not purport to be complete. It should be read in conjunction with the Group’s periodic r
Slide 62: Boral Limited www.boral.com
Boral Limited www.boral.com