James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2003 Earnings Presentation
47 slides from James Hardie Industries's earnings presentation, Nov 14, 2002
Slide 1: 2nd Quarter & Half Year Results
yi James Hardie 2°¢4 Quarter & Half Year Results 14 November 2002
Slide 2: Agenda
James Hardie QES Agenda > Overview — Peter Macdonald, CEO > Financial Review — Phillip Morley, CFO > Operating Review — Peter Macdonald, CEO > Questions and Answers
Slide 3: Very Positive 2nd Quarter and Half Year Performance
James Hardie QES Very Positive 2nd Quarter and Half Year Performance 2nd Quarter and Half Year FY’03 2°03 HY 203 Net Sales* Te 34% up 34% Gross Profit* up 37% up 45% EBIT* up 104% up 148% Operating Profit* up 124% up 230% Net Operating Profit up 137% up 958% * Continuing businesses only All results
Slide 4: Strong Growth Momentum Continued
4) James Hardie LISS) Sa Strong Growth Momentum Continued \ 2nd Quarter > USA Fibre Cement EBIT up 44% > Solid performance in Asia Pacific Fibre Cement - Australia EBIT up 32% - New Zealand EBIT up 20% - Philippines — small loss
Slide 5: Financial Review
bw James Hardie Financial Review Phillip Morley, CFO
Slide 6: Income Statement (Q2)
QUES Income Statement US$ Million Q2 ‘03 Q2'02 % Change Net Sales 207.6 155.5 34 Gross Profit 76.4 55.8 37 SG8&A (40.0) (28.9) 38 EBIT before restructuring and other operating expenses 36.4 26.9 36 Restructuring and other operating expenses - (9.1) (100) EBIT 36.4 17.8 104 Net Interest Expense (2.5)
Slide 7: Income Statement (Half Year)
ex US$ Million Net Sales Gross Profit SG&A EBIT before restructuring and other operating expenses Restructuring and other operating expenses EBIT Net Interest Expense Other Income (Expense), Net Income Tax Expense Operating Profit Continuing businesses only income Statement HY '03 HY ’02 % Change 40
Slide 8: Segment Sales (Q2)
ex US$ Million USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement Total Continuing businesses only Segment Sales Q2’03 Q2’02 % Change 154.7 114.4 36 50.4 40.2 20 25 1.2 108 207.6 155.5 34
Slide 9: Segment Sales (Half Year)
ex US$ Million USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement Total Continuing businesses only Segment Sales HY ’03 HY ’02 % Change 307.2 225.3 36 96.7 76.8 26 3.9 2.0 95 407.8 304.1 34
Slide 10: EBIT (Q2)
QUES EBIT US$ Million Q2’03 Q2’02 % Change USA Fibre Cement 40.7 28.2 44 Asia Pacific Fibre Cement 8.9 6.7 33 Other Fibre Cement (2.1) (1.9) 11 R&D (2.9) (2.0) 45 Total Segment EBIT 44.6 31.0 44 Corporate Costs (8.2) (13.2) (61) Total EBIT 36.4 17.8 104 Continuing businesses only 10
Slide 11: EBIT (Half Year)
ex US$ Million USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R&D Total Segment EBIT Corporate Costs Total EBIT Continuing businesses only EBIT HY'03 HY’02 % Change 79.5 52.4 52 17.2 10.0 72 (4.3) (4.4) 2) (5.4) (4.6) 17 87.0 53.4 63 (14.7) (24.3) Ze) 72.3 29.1 148 "i
Slide 12: Net Interest Expense
SSS AIRS) SEND > Net Interest Expense Ne US$ Million Q2’03 Q2 02 % Change Net Interest Expense 2.5 44 (39) HY ’03 HY ’02 % Change Net Interest Expense 5.4 9.4 (43) Average net borrowings decreased following receipt of proceeds from the sale of Gypsum business in April 2002 Note: Estimated “make-whol
Slide 13: Income Tax Expense
USS Million Income Tax Expense Income Tax Expense Q2 ’02 % Change 3.7 176 HY ’02 % Change 49 318 13
Slide 14: EBITDA (Q2)
SSS AIRS) SeAS> EBITDA Ne US$ Million Q2 ’03 Q2 ‘02 % Change USA Fibre Cement 45.2 31.8 42 Asia Pacific Fibre Cement 10.8 9.4 19 Other Fibre Cement (2.0) (1.9) 5 R&D (2.9) (2.0) 45 Total Segments 51.1 37.0 38 Corporate (8.2) (13.2) (38) Total 42.9 23.8 80 EBITDA = EBIT before depreciation and amorti
Slide 15: EBITDA (Half Year)
SSS AIRS) SeAS> EBITDA Ne US$ Million HY 03 HY ‘02 % Change USA Fibre Cement 88.8 59.3 50 Asia Pacific Fibre Cement 21.3 14.7 45 Other Fibre Cement (4.2) (4.4) its) R&D (5.4) (4.6) 17 Total Segments 100.5 65.0 55 Corporate (14.7) (24.1) (39) Total 85.8 40.9 170 EBITDA = EBIT before depreciation and
Slide 16: Capital Expenditure (Q2)
Capital Expenditure Se \oy) > Capital Expenditure Depreciation US$ Million Q2 03 Q2 ‘02 Q2 03 Q2 02 USA Fibre Cement 12.6 10.8 4.4 3.5 Asia Pacific Fibre Cement 3.2 1.6 1.9 2.4 Other Fibre Cement 0.5 0.4 0.1 - Total Segments 16.3 12.8 6.4 5.9 Continuing businesses only 16
Slide 17: Capital Expenditure (Half Year)
US$ Million USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement Total Segments Continuing businesses only Capital Expenditure Capital Expenditure Depreciation HY ’03 HY 02 HY '03 HY ’02 19.2 32.3 9.2 6.9 42 3.6 4 47 0.7 2.6 0.4 0.1 24.1 38.5 13.4 11.7 17
Slide 18: Key Ratios
SSS AIRS) LEADS Key Ratios Ne HY ’03 FY ‘02 FY '01 FY 00 EPS (Basic) * 10.2c 6.1¢ 7.2¢ 6.0¢ Return on Shareholders Funds 35.1% 9.0% 14.5% 58.0% Return on Capital Employed * 26.3% 8.3% 8.5% 14.0% EBIT/Sales * 17.8% 7.7% 7.6% 11.7% EBIT/Assets * 14.8% 6.7% 6.1% 9.0% Gearing Net cert (241%) 44.7% 56.1%
Slide 19: Economic Profit
C Ss NEN yy Economic Profit N US$ Million HY’03 FY’02* NOPAT 56.1 53.5 Average Capital 622.4 583.7 WACC Rate 9.8% 9.8% Capital Charge 30.5 57.2 Economic Profit 25.6 (3.7) “Restated using updated WACC Rate for FY’03; USGAAP; excluding Gypsum 19
Slide 20: Operating Review
bw James Hardie Operating Review Peter Macdonald, CEO
Slide 21: James Hardie
James Hardie USA Fibre Cement i |
Slide 22: Strong 2nd Quarter Result
SSS —\ SS) ~ ERY Sw) USA Fibre Cement \ Strong 2nd Quarter Result Net Sales up 36% to US$154.7 million Sales Volume up 34% to 337.7 mmsf Average Prices up 1% to US$458 per msf EBIT up 44% to US$40.7 million EBIT Margin up 1.6 pts to 26.3% 22
Slide 23: 2nd Quarter Trading Conditions
SSS | James Hardie —\ SS) ~ ERY Sw) USA Fibre Cement \ 2nd Quarter Trading Conditions > Softer consumer confidence but increased housing construction activity > Strong demand across ali major markets > Low housing inventory levels > Low interest rates 23
Slide 24: Key Points
QES USA Fibre Cement Key Points > Continued growth in primary demand > Strong growth in northern and southern regions > Further penetration of siding, backer and trim segments > Growth in sales of higher-priced differentiated products > Commenced construction of panel line at Waxahachie, Texas plant
Slide 25: Brandon, Pennsylvania Plant Expansion
James Hardie QES USA Fibre Cement Biandon, Pennsylvania Plant Expansion > US$15.3 million upgrade to accommodate growing demand in north-east Capacity being boosted from 120 mmsf to 200 mmsf Removal of 40 mmsf line Cost savings and operating efficiencies Completion expected mid-2003 25
Slide 26: Volume and Net Sales
VOLUME (MMSF) ~ ns 2 oo ra 8 ° 8 8 8 8 8 8 Mar-S0 1 1 1 1 1 4 Sep-90 Mar-91 Sep-91 = Mar-92 5 ) Sep-92 Mar-93 Sep-93 Mar-94 A QD < 5) a c M YMOID BUINJOA Bulddisjsjno yyMoiny snusAey — UJMOJS) BUINJOA pue snusAey Buo0sS penuljuoyg Ff A A F ¢ Sed © _ N w oO i) 2 Q 2 Q im) oS ioe) © im) NET SALES (US$
Slide 27: Average Quarterly Selling Price
SSS a James Hardie \\ASSS ~ QS USA Fibre Cement \ Average Quarterly Selling Price US$/MSF 470 5 460 5 450 5 440 5 430 5 420 410 5 400 5 390 380 Fy99 FY00 Fy01 FY02 Fy03 2r
Slide 28: EBIT and EBIT Margin
James Hardie USA Fibre Cement EBIT and EBIT Margin * 45) r 30 a EBIT EBIT/Sales Fs EBIT US$M EBIT MARGIN % FY99 FY00 FY01 FY02 FY03 *Excluding restructuring and other operating expenses 28
Slide 29: Strategy
SSS James Hardie AIRS) SEND > USA Fibre Cement ee Strategy > Aggressively grow market for fibre cement > Grow our overall market position while defending our share in existing market segments > Offer products with superior value to that of competitors, introducing differentiated products to reduce d
Slide 30: Outlook
eS [ james Hardie LEADS USA Fibre Cement > Continued growth in primary demand > Strong penetration and market share growth - Further penetration of southern and northern regions - Continued growth for differentiated products > Housing activity to continue at high levels - Low interest rates - Low in
Slide 31: James Hardie
James Hardie Asia Pacific Fibre Cement
Slide 32: 2nd Quarter Result
SSS —\ SS) > 95 Asia Pacific Fibre Cement \ 2nd Quarter Result Net Sales up 25% to US$50.4 million Sales Volume up 14% to 95.5 mmsf EBIT up 33% to US$8.9 million EBIT Margin up 1.0 pt to 17.7% 32
Slide 33: Strategy
QES Asia Pacific Fibre Cement Strategy > Grow primary demand for fibre cement > Focus on supply chain efficiencies across tne region > Ongoing manufacturing improvements to further lower cost of production > I[ntroduce new differentiated products to increase share in existing markets > Grow the Asia
Slide 34: Australia - Key Points
SSS James Hardie —\ SS) > 95 Asia Pacific Fibre Cement \ Australia - Key Points > Volume up 21% buoyed by strong building activity > Low interest rates and Government's First Home Owners Scheme helped fuel demand > Gross profit up 24%, EBIT up 32% > EBIT margin improved to 22.6% > Corrugate line rel
Slide 35: Australia - Outlook
SSS | James Hardie \\ASSS ~ QS Asia Pacific Fibre Cement \ Australia - Outlook > Housing market to remain healthy but some softening expected > Continued growth in volumes and category share > New products introduced > Higher prices 35
Slide 36: New Zealand - Key Points
James Hardie QES Asia Pacific Fibre Cement New Zealand - Key Points > > > > Volume up 22%, revenue up 24% in local currency increased residential building activity helped lift demand New products penetrating targeted markets at fast rate Strong panel sales in non-residential sector increased SG&A co
Slide 37: New Zealand - Outlook
| James Hardie QES Asia Pacific Fibre Cement New Zealand - Outlook > Increased residential building activity > Strong demand may slow in short term from adverse spring weather > Growth in sales of higher priced products > improved profitability 37
Slide 38: Philippines - Key Points
QES Asia Pacific Fibre Cement Philippines - Key Points > Volume down 10% due to weaker export sales > Severe typnoon season but domestic sales continued to improve > Further market share taken from plywood > Strong demand for new products such as HardiFlex® lite > Plank product launched — Hardiplank
Slide 39: Philippines - Outlook
SSS AIRS) James Hardie SAS > Asia Pacific Fibre Cement Philippines - Outlook > improved seasonal conditions to lift building and construction activity increased domestic demand for new products Further market penetration against plywood targeted Plant manufacturing performance to lift Soft export sa
Slide 40: Chile Fibre Cement - Key Points
James Hardie QES Other Fibre Cement Chile Fibre Cement — Key Points > Continued to penetrate market at targeted rate > Revenue and volumes up significantly despite softer economic conditions > New exterior and interior products launched > Highly competitive market conditions 40
Slide 41: Chile Fibre Cement - Outlook
SSS James Hardie WH) ~ ERY Sw) Other Fibre Cement \ Chile Fibre Cement — Outlook > Further market penetration and share growth expected from: > Superior products > New products > Growing brand awareness > Distribution relationships > Intense price competition to continue > Higher average price from
Slide 42: FRC Pipes - Key Points
QES Other Fibre Cement FRC Pipes — Key Points > Sales growth and market penetration continued > Revenue doubled and volume almost doubled against Q1 of FY03 > Strong growth in sales of largest diameter pipes (30” — 36”) > Lifted share to 10% of large diameter drainage pipes segment in south-east > i
Slide 43: FRC Pipes - Outlook
QES Other Fibre Cement FRC Pipes — Outlook > Continued market penetration as awareness increases > Further improvements to plant performance > Lower unit cosis > Competitive pressures expected to keep pricing weak 43
Slide 44: Research & Development
James Hardie KAIBA SE Aw) > Research & Development XY a > Key driver of growth > Core projects - engineered raw materials - product formulations - engineering and process technologies - lightweight and durable products for all climates > Sustainable competitive advantage continuing to be built 4g
Slide 45: Outlook
BES Outlook > Relatively healthy trading conditions in our major markets expected to continue in near term > Strong growth momentum in major businesses is continuing > USA — strong penetration and market share growth > Asia Pacific - revenue growth and operating efficiency > Entering slower building
Slide 46: Questions and Answers
Questions and Answers 46
Slide 47: Disclaimer
Disclaimer Notes Unless otherwise stated, results are for continuing operations only and comparisons are of the 2nd quarter of the current fiscal year versus the 2nd quarter of the prior fiscal year. 2. This Management Presentation forms part of a package of information about the company’s results.
James Hardie Industries — Q2 FY2003 Earnings Presentation on 6ix