James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2020 Earnings Presentation
48 slides from James Hardie Industries's earnings presentation, Nov 7, 2019
Slide 1: Q2 FY20 Management Presentation
Exhibit 99.4 Q2 FY20 MANAGEMENT PRESENTATION 7 November 2019
Slide 2: Cautionary Note on Forward-Looking Statements
James Hardie Q2 FY20 Results CAUTIONARY NOTE ON FORWARD‐LOOKING STATEMENTS This Management 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 Secur
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
James Hardie Q2 FY20 Results CAUTIONARY NOTE ON FORWARD‐LOOKING STATEMENTS (continued) Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook”
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
James Hardie Q2 FY20 Results USE OF NON‐GAAP FINANCIAL INFORMATION; AUSTRALIAN EQUIVALENT TERMINOLOGY This Management Presentation includes financial measures that are not considered a measure of financial performance under generally accepted accounting principles in the United States (US GAAP). The
Slide 5: Agenda
James Hardie Q2 FY20 Results AGENDA • Group Operating Review Dr Jack Truong, CEO • Financial Review Jason Miele, VP of Investor Relations • Strategy Update Dr Jack Truong, CEO • Questions and Answers Page 5
Slide 6: Group Operating Review – Dr Jack Truong, CEO
• Xxx • Xxx GROUP OPERATING REVIEW – DR JACK TRUONG, CEO
Slide 7: FY20 Group Results Overview
James Hardie Q2 FY20 Results FY20 GROUP RESULTS OVERVIEW • Q2'20 1H'20 Volume growth above market in all three regions 960.2 mmsf 1,917.4 mmsf Sales Volume • Net sales growth (in local currency) in all three 3% 3% regions US$660.1 MMUS$1,316.9 Net Sales 2% 2% • North America: +6% for quarter, +5% fo
Slide 8: FY20 North America Summary
James Hardie Q2 FY20 Results FY20 NORTH AMERICA SUMMARY Q2'20 1H'20 • Exteriors volume growth continued 620.9 mmsf 1,233.6 mmsf • +6% for the quarter Sales Volume 5% 4% • +5% for the first half US$459.6 MMUS$911.9 • Interiors volume ‐ continuous improvement versus Net Sales 6% 5% prior 2 years • Fla
Slide 9: FY20 Europe Summary
James Hardie Q2 FY20 Results FY20 EUROPE SUMMARY Q2'20 1H'20 • Continued Fiber Cement momentum 196.5 mmsf 406.6 mmsf • Net Sales +23% for the quarter in local currency Sales Volume • 1% 1% Net Sales +30% for the first half in local currency • Fiber Gypsum Net Sales growth in local currency €79.0MM €
Slide 10: FY20 APAC Summary
James Hardie Q2 FY20 Results FY20 APAC SUMMARY Q2'20 1H'20 • Strong volume growth above market in Australia and 142.8 mmsf 277.2 mmsf Sales Volume the Philippines FLAT -1% A$164.2MM A$318.6 • Strong EBIT growth for the second quarter Net Sales 2% 1% • EBIT Margin in the top half of our long term tar
Slide 11: FY20 Key Assumptions & Market Outlook
James Hardie Q2 FY20 Results FY20 KEY ASSUMPTIONS & MARKET OUTLOOK North AmericaEurope Asia Pacific Modest growth in the US Housing market down slightly Addressable housing market housing market across addressable market in Australia is contracting US Residential Housing starts Continual introductio
Slide 12: Financial Review – Jason Miele, VP of Investor Relations
FINANCIAL REVIEW – JASON MIELE, VP OF INVESTOR RELATIONS Page 12
Slide 13: Group Results – 2nd Quarter and Half Year FY20
James Hardie Q2 FY20 Results GROUP RESULTS – 2ND QUARTER AND HALF YEAR FY20 Q2'20 1H'20 Volume and Net Sales 960.2 mmsf 1,917.4 mmsf Sales Volume • Growth above market in all three segments 3% 3% • Higher net price in all three segments in local currency US$660.1 MMUS$1,316.9 Net Sales 2% 2% Gross p
Slide 14: North America Fiber Cement Summary
James Hardie Q2 FY20 Results NORTH AMERICA FIBER CEMENT SUMMARY Q2'20 1H'20 Volume 620.9 mmsf 1,233.6 mmsf Sales Volume • PDG on‐track; FY20 target raised to 4‐6% 5% 4% • Exteriors volumes +6% for Q2 and +5% for the first half US$459.6 MMUS$911.9 • Interiors gaining momentum Net Sales 6% 5% • Interi
Slide 15: North America Fiber Cement EBIT Margin
James Hardie Q2 FY20 Results NORTH AMERICA FIBER CEMENT Q2 EBIT Margin of 27.1% YTD EBIT Margin of 26.1% Page 15
Slide 16: North America Input Costs
James Hardie Q2 FY20 Results NORTH AMERICA INPUT COSTS • The price of NBSK pulp down 15% compared to pcp • Freight prices down 16% compared to pcp • Cement prices up 3% compared to pcp • Gas prices flat compared to pcp • Electric prices down 7% compared to pcp The information underlying the table ab
Slide 17: Asia Pacific Fiber Cement Summary
James Hardie Q2 FY20 Results ASIA PACIFIC FIBER CEMENT SUMMARY Q2'20 1H'20 Volume 142.8 mmsf 277.2 mmsf Sales Volume • Strong volume growth above market index in Australia FLAT -1% and Philippines A$164.2MM A$318.6 Net Sales 2% 1% EBIT • Higher average net sales price in Australian dollars A$1,022pe
Slide 18: Europe Building Products Summary
James Hardie Q2 FY20 Results EUROPE BUILDING PRODUCTS SUMMARY Q2'20 1H'20 Net Sales 196.5 mmsf 406.6 mmsf • Sales Volume Net sales in Euros increased 6% for the first half 1% 1% • Fiber cement net sales in Euros increased 30% for the first €79.0MM €164.4 half Net Sales 5% 6% • Fiber gypsum net sales
Slide 19: Segment EBIT
James Hardie Q2 FY20 Results SEGMENT EBIT Other Businesses Research and Development (20) (19.1) (17.6) (20) (15) (15) (14.5) Q2 EBIT (13.1) Q2 EBIT (10) Half Year (10) Half Year (7.1) (6.9) US$ Millions US$ (5) US$ Millions US$ (5) (0.5) (0.1) 0 FY19 FY20 0 FY19 FY20 Exited Windows business Committe
Slide 20: Income Tax
James Hardie Q2 FY20 Results INCOME TAX Three Months and Half Year Ended 30 September 17.9% estimated adjusted effective tax rate US$ Millions Q2'20 Q2'19 1H'20 1H'19 for the year Operating profit before taxes 138.5 87.1 257.1 208.6 • Increase in adjusted income tax expense for the 1 Asbestos adjust
Slide 21: Financial Management Framework
James Hardie Q2 FY20 Results FINANCIAL MANAGEMENT FRAMEWORK Strong Financial Management Disciplined Capital Allocation Liquidity and Funding • Strong margins and operating cash flows • Invest in R&D and capacity expansion to • Conservative leveraging of balance sheet support organic growth at a targ
Slide 22: Cash Flows
James Hardie Q2 FY20 Results CASH FLOWS Change US$ Millions 1H'20 1H'19 (% ) Net income 189.6 160.1 18 Higher operating cash flow Adjustment for non-cash items 92.7 65.1 42 • Increase in income adjusted for non‐cash items 11 41.3 21.4 93 Operating working capital • Net cash inflow due to working cap
Slide 23: Liquidity Profile at September 2019
James Hardie Q2 FY20 Results LIQUIDITY PROFILE AT 30 SEPTEMBER 2019 Strong balance sheet Debt Profile • US$95.6 million cash Millions • US$1,334.3 million net debt 3 • US$284.0 million available on revolving credit facility US$250 1 Corporate debt structure US$500 US$210 • US$400 million 4.75% senio
Slide 24: Capital Expenditures
James Hardie Q2 FY20 Results CAPITAL EXPENDITURES CAPEX spend for the half year of US$123.4 million; decreased US$16.0 million compared to pcp • North America capacity projects • Completed the start‐up of Tacoma greenfield expansion • Continued construction of our Prattville facility • Asia Pacific
Slide 25: FY20 Key Assumptions & Market Outlook
James Hardie Q2 FY20 Results FY20 KEY ASSUMPTIONS & MARKET OUTLOOK North AmericaEurope Asia Pacific Modest growth in the US Housing market down slightly Addressable housing market housing market across addressable market in Australia is contracting US Residential Housing starts Continual introductio
Slide 26: Strategy Update – Dr Jack Truong, CEO
STRATEGY UPDATE – DR JACK TRUONG, CEO Contents are confidential and subject to disclosure and insider trading considerations
Slide 27: Long Term Value Creation
James Hardie Q2 FY20 Results LONG TERM VALUE CREATION North America • 35/90 with strong returns (20‐25% EBIT margin) Europe • €1 billion business with 20+% EBIT margin APAC • Deliver growth above market with strong returns (20‐25% EBIT margin) Page 27
Slide 28: Strategic Priorities: FY20 – FY22
James Hardie Q2 FY20 Results STRATEGIC PRIORITIES : FY20 – FY22 North AmericaEurope Asia Pacific 1 Accelerate Exteriors Growth 1 Gain market traction 1 Continue to drive growth • current fiber cement above market • new, for Europe, fiber cement 2 Drive Lean Transformation 2 Continue to drive fiber 2
Slide 29: NA: Accelerate Exteriors Growth – Update
James Hardie Q2 FY20 Results NA : ACCELERATE EXTERIORS GROWTH ‐ UPDATE From PULL to PUSH-PULL Builders Distributors & JH Dealers • Analytics R&R Contractors • Supply Chain Integration • Ease of Doing Business • Demand Creation • End-user Marketing • Win-Win Approach • Installation Training • Right P
Slide 30: Innovation
James Hardie Q2 FY20 Results INNOVATION • Innovation is one of four pillars supporting our long term growth strategy • Leverage on our global R&D capabilities • Drive customer insights to innovation process to deliver high impact new products • Increased innovation investment Page 30
Slide 31: Culture & Employee Engagement
James Hardie Q2 FY20 Results CULTURE & EMPLOYEE ENGAGEMENT Transforming from big, SMALL company to small, BIG company Page 31
Slide 32: Questions
QUESTIONS Contents are confidential and subject to disclosure and insider trading considerations
Slide 33: Appendix
APPENDIX
Slide 34: FY20 Guidance
James Hardie Q2 FY20 Results FY20 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profitexcluding asbestos for the year ending 31 March 2020 is between US$343 million and US$362 million, with a mean of US$354 million • Management expects full year Adjusted net operatin
Slide 35: North America Fiber Cement Average Net Sales Price
James Hardie Q2 FY20 Results NORTH AMERICA FIBER CEMENT Average Net Sales Price 750 732 718 698 700 669 666 665 US$ per MSF 650 600 FY15 FY16 FY17 FY18 FY19 HY FY20 • FY20 strategic price increase effective April 2019 • Overall, satisfied with price positioning Page 35
Slide 36: Translation Impact on Consolidated Results
James Hardie Q2 FY20 Results TRANSLATION IMPACT ON CONSOLIDATED RESULTS Excluding Translation As Reported 2 Impact 1 Translation Impact % Change Q2'20 1H'20 Q2'20 1H'20 Q2'20 1H'20 Net Sales 2% 2% 4% 3% 2% 1% Gross Profit 16% 11% 17% 12% 1% 1% Adjusted EBIT 26% 21% 26%
Slide 37: Asia Pacific Fiber Cement Results AUD vs USD
James Hardie Q2 FY20 Results ASIA PACIFIC FIBER CEMENT RESULTS AUD vs USD Page 37
Slide 38: Asia Pacific Fiber Cement (Local Currency)
James Hardie Q2 FY20 Results ASIA PACIFIC FIBER CEMENT (LOCAL CURRENCY) Australia • Strong growth above market in a contracting market • Good financial management resulting in EBIT growth in Q2 New Zealand • Slightly lower volumes and higher price • EBIT impacted by unfavorable plant performance Phi
Slide 39: Financial Summary
James Hardie Q2 FY20 Results FINANCIAL SUMMARY Three Months and Half Year Ended 30 September US$ Millions Q2'20 Q2'19 % Change 1H'20 1H'19 % Change Net Sales North America Fiber Cement$ 459.6 $ 435.6 6$ 911.9 $ 869.4 5 Asia Pacific Fiber Cement 112.6 117.3 (4) 220.6 234.4 (6) Europe Building Product
Slide 40: Asbestos Claims Data
James Hardie Q2 FY20 Results ASBESTOS CLAIMS DATA • Net cash outflow in the first half was 5% below actuarial expectations • Gross cash outflow in the first half was 1% above actuarial expectations • Claims received for the first half were 25% above actuarial estimates and 26% higher than pcp • Clai
Slide 41: Depreciation and Amortization
James Hardie Q2 FY20 Results DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Half Year Ended 30 September Q2'20 Q2'19 1H'20 1H'19 Depreciation and amortization North America Fiber Cement$ 22.0 $ 19.5 $ 44.0 $ 37.6 Asia Pacific Fiber Cement 3.2 3.3 6.2 6.4 Europe Building Products 5.7 5.7
Slide 42: Non-US GAAP Financial Measures and Terms
James Hardie Q2 FY20 Results NON‐US GAAP FINANCIAL MEASURES AND TERMS This Management Presentation forms part of a package of information about the company’s results. It should be read in conjunction with the other parts of this package, including the Management’s Analysis of Results, Media Release
Slide 43: Non-US GAAP Financial Measures
James Hardie Q2 FY20 Results NON‐US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non‐US GAAP, but are consistent with those used by Australian companies. Because the company prepares its C
Slide 44: Non-US GAAP Financial Measures – Adjusted EBIT
James Hardie Q2 FY20 Results NON‐US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjuste d EB IT US$ Millions Three Months and Half Year Ended 30 September Q2'20 Q2'19 1H'20 1H'19 EBIT$ 152.6 $ 99.5 $ 285.1 $ 231.4 Asbestos: Asbestos adjustments (18.8) (14.2) (27.3) (39.3) AICF S
Slide 45: Non-US GAAP Financial Measures – Segment Adjusted EBIT
James Hardie Q2 FY20 Results NON‐US GAAP FINANCIAL MEASURES North America Fiber Cement Segment Adjusted EBIT excluding product line discontinuation US$ Millions Three Months and Half Year Ended 30 September Q2'20 Q2'19 1H'20 1H'19 North America Fiber Cement Segment EBIT$ 124.7 $ 94.1 $ 238.2 $ 201.3
Slide 46: Non-US GAAP Financial Measures – Adjusted Diluted EPS
James Hardie Q2 FY20 Results NON‐US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months and Half Year Ended 30 September Q2'20 Q2'19 1H'20 1H'19 Adjusted net operating profit (US$ Millions) $ 98.6 $ 80.9 $ 188.8 $ 160.8 Weighted average common shares outstanding - 444.5 443.1 44
Slide 47: Non-US GAAP Financial Measures – Adjusted EBITDA
James Hardie Q2 FY20 Results NON‐US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos US$ Millions Three Months and Half Year Ended 30 September Q2'20 Q2'19 1H'20 1H'19 EBIT$ 152.6 $ 99.5 $ 285.1 $ 231.4 Depreciation and amortization 32.0 30.8 63.6 58.9 Adjusted EBITDA $ 184.6 $ 130.3 $ 348
Slide 48: Q2 FY20 Management Presentation
Q2 FY20 MANAGEMENT PRESENTATION 7 November 2019
James Hardie Industries — Q2 FY2020 Earnings Presentation on 6ix