James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Goldman Sachs JBWere Australasian Investment Forum 2008
49 slides from James Hardie Industries's conference presentation, Sep 16, 2008
Slide 1: Goldman Sachs JBWere Australasian Investment Forum, London, September 2008
@)sames Hardie Goldman Sachs JBWere ‘ Australasian Investment Forum London, September 2008
Slide 2: A growth focused company
Annual net sales US$1,469m million Total assets US$2,180m Operations in North America, Asia Pacific and Europe 2,700 employees Market cap US$1.8b S&P/ASX 100 company NYSE listing Note: Net sales and total assets are at 31 March 2008 A growth focused company James Hardie
Slide 3: Focused on Fibre Cement
Growth focused Sustainable competitive advantage Unique proprietary technology Strong financial performance, cash flows and balance sheet1 Track record of outperforming US housing market Investment attributes 1 Excluding asbestos related items 1 Excluding asbestos related items Focused on Fibre Ceme
Slide 4: First to develop fibre cement
James Hardie pioneered development of fibre cement technology in the 1980s Superior Durability Fire Resistant Termite Proof Fire Resistant Hail Resistant Moisture Resistant Termite Proof First to develop fibre cement
Slide 5: Strategy: Industry leadership and profitable growth
Aggressively grow primary demand for fibre cement Secure differentiated position Generate strong top line growth Win high shares of large segments Sustain attractive margins Strategy Industry leadership and profitable growth
Slide 6: Business portfolio
At and for the fiscal year ended 31 March 2008 * Total Identifiable Assets - Excludes General Corporate, Research and Development and Asbestos-related items ** EBIT - Excludes Research and Development EBIT and Asbestos-related items Business portfolio USA and Europe Fibre Cement (Established High Gr
Slide 7: Quick history
1990 - 1995 Entered US in 1990 to manufacture and market roofing shakes (one line, one plant) Shifted target market from roofing to siding Moved to high throughput, low unit cost manufacturing strategy Revenue growth led to investment in new capacity 1995 - 2000 Entry of direct fibre cement competit
Slide 8: Quick history continued
2000 - present A number of cladding competitors exit Business continued to grow strongly in buoyant housing market Product leadership strategy helps revenue outstrip volume growth Business model is proven - continues to deliver good returns in housing downturn New competitive capacity is added USA F
Slide 9: Sustainable competitive advantage
Unique plant engineering and proprietary process technology and product formulations - significant investment in R&D Superior capital cost efficiency Low cost manufacturer Only national producer of fibre cement in each key geographic market Excellent plant economies of scale - plants 2-3 times large
Slide 10: Revenue growth streams
Exterior products Siding Soffit Fascia Trim Interior products 1/4 inch backerboard Hardiebacker 500(r) Total net sales compound annual growth rate of 17% (FY02 - FY08) USA Fibre Cement - revenue growth streams
Slide 11: FY09 estimated sales mix
USA Fibre Cement - (FY09 est.) sales mix1 1 FY09 Estimated Volume All market and market share figures are management estimates and cannot be accurately measured
Slide 12: Exterior products - US siding market
Exterior products - US siding market Large growth opportunity 2007* * NAHB Sources: Builder Practices 2007 Report - Siding Usage/Exterior Wall Finish in New Construction (adjusted) Consumer Practices 2007 Report- Siding Usage/Exterior Wall Finish In Repair & Remodel (13% reported growth, factored do
Slide 13: Repair and Remodel siding market
Repair and Remodel siding market - 6.4 billion square feet (2007 est) Where does the product go? Understanding the Repair and Remodel market Replace SF 48% Add & Alts 7% Repairs 27% Replace MF 16% All market and market share figures are management estimates and cannot be accurately measured
Slide 14: Superior product performance
Fibre Cement is more durable than wood and engineered wood Fibre cement superior durability Moisture resistant Fire resistant Weather resistant Termite proof Resists warping Resists cracking Resists rotting Holds paint longer ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? engineered wood USA Fibre Cement Superior
Slide 15: Superior product performance - continued
Fibre Cement looks and performs better than vinyl Vinyl Fire resistant Hail resistant Resists warping Resists buckling Colour lasts longer Dimensional stability Can be repainted ? ? ? ? ? ? ? ? ? ? ? ? ? ? Fibre cement USA Fibre Cement Superior product performance - continued
Slide 16: Interior products
Net sales growing strongly CAGR* 19% (FY02-FY08) Leading position in 1/4" segment technology advantage for floor applications Hardiebacker 500(r) is driving penetration on wall applications High terminal segment share * Compound Annual Growth Rate USA Fibre Cement Hardiebacker FY 1997 657mmsf FY 200
Slide 17: Interior products - continued
Attributes Protection against moisture damage and mould growth (total wet area solution) Strength Highest compressive and flexural strength available Workability Cleaner and less abrasive than glass mesh Low density formulation - lightest cement board on the market USA Fibre Cement Interior products
Slide 18: Largest fibre cement producer in North America
Flat Sheet Plants Capacity (mmsf) Fontana, California 180 Plant City, Florida 300 Cleburne, Texas 500 Tacoma, Washington 200 Peru, Illinois 560 Waxahachie, Texas 360 Blandon, Pennsylvania1 200 Summerville, South Carolina 190 Reno, Nevada 300 Pulaski, Virginia 600 Flat Sheet Total 3,390 1 Production
Slide 19: Low cost fibre cement producer
USA Fibre Cement CAPITAL COST PER UNIT OF CAPACITY (US$/SF) 0.1 0.15 0.2 0.25 0.3 0.35 0.4 FY91 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY05 FY06 FY07 $US / SF PRODUCTION CAPACITY PER LINE 60 100 150 200 3001 0.1 50.1 100.1 150.1 200.1 250.1 300.1 350.1 1990 1994 1998 2001 2006 MMSF Low cost fibre c
Slide 20: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement Five manufacturing plants in Asia Pacific FY08 net sales US$298m FY08 EBIT US$50m Higher value differentiated products Lower delivered cost Shift to growth model Philippines focus on profitability
Slide 21: Product leadership
Product leadership Continued investment in new product development and commercialisation Value-added, differentiated products Benefits: Grow the fibre cement category Grow revenue Sustain good margins Defend and strengthen our competitive position Organisational focus
Slide 22: Product leadership - ColorPlus Collection
Product leadership - examples in USA Fibre Cement: ColorPlus(r) Collection (pre-painted siding and trim): Driving growth against vinyl in Northern Division Launched in Western and Southern Divisions FY07 Organisational focus
Slide 23: ColorPlus Model
Higher quality products with higher revenue stream Strategy designed to reduce 'on the wall' cost and close gap with vinyl siding Supply of pre-painted exterior products Reduce supply chain costs Installer education Channel increases revenue base and gains incremental volume End-user gets higher qua
Slide 24: ColorPlus Model - continued
Mechanics of model in place Colour plant network 20 colours and 20 products by market Channel is reset and developing Base level logistics capability Value priced ColorPlus(r) since July 2006 USA Fibre Cement ColorPlus(r) Model - continued
Slide 25: Product leadership - Artisan Lap and HardieWrap
Product leadership - examples USA Fibre Cement: ArtisanTM Lap (thicker siding, provides distinctive shadow lines) premium product launched in Atlanta wider launch during 2008 HardieWrapTM Organisational focus
Slide 26: Product leadership - Asia Pacific Scyon range
Product leadership - examples Asia Pacific Fibre Cement ScyonTM range of value-added, differentiated products launched 2007 ScyonTM wet area flooring ScyonTM Trim and ScyonTM LineaTM weatherboards ScyonTM Matrix cladding Organisational focus
Slide 27: Changing US product mix
Today Tomorrow HardiePlank ColorPlus Cemplank Next Generation Fighting Brand Cemplank Hardieplank/ ColorPlus Changing US product mix Product mix will evolve significantly in the medium term to continue to drive revenue and leverage market position Organisational focus
Slide 28: NAHB housing starts forecast
NAHB's Housing Starts forecast has been steadily eroding with each release NAHB's current 2009 forecast is -11.3% below 2008 (Source - August 13th Executive Level Forecast) Business currently set for approx. 700k addressable US starts estimate (excl. MF-high) plus Canada Housing starts
Slide 29: Response to US housing downturn
Focus on primary demand growth and cost management Business re-sets in late 2006/early 2007 and again in April 2008: production re-scheduled to balance supply and demand corporate-wide review of activities, projects and cost-saving opportunities changes made to SG&A cost base considering impact on a
Slide 30: Top line growth
Top line growth 0 400 800 1,200 1,600 2,000 2,400 2,800 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 $0 $200 $400 $600 $800 $1,000 $1,200 Revenue (US$M) JH Volume JH Revenue Housing Starts Q1 09 JH Volume (mmsf), Starts (000s Units) Rolling 12 month average of seasonally adjusted estimat
Slide 31: Primary growth performance
Primary growth performance USA Fibre Cement Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $ expenditures less CPI Note: • US Census discontinued their R&R $ expenditures report in 2007 • Q108 R&R = avg. published Home Depot & Lowe's same store sales less CPI - -30% - -20% - -10%
Slide 32: Average Net Selling Price
Average Net Selling Price US$ per MSF 360 400 440 480 520 560 600 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Q1 FY09 USA Fibre Cement
Slide 33: EBIT and EBIT Margin
*Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02 and impairment charges of US$45.6 million in Q4 FY08 EBIT and EBIT Margin* 0 20 40 60 80 100 120 140 FY02 FY03 FY04 Q1 FY05 Q1 FY06 Q1 FY07 Q1 FY08 Q1 FY09 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales
Slide 34: Growth in revenue per employee
Growth in revenue per employee US$ Thousands USA Fibre Cement
Slide 35: Long term financial targets
Targeting high growth and attractive returns Target1 Actual FY08 Actual FY07 Actual FY06 Actual FY05 Actual FY04 Revenue Growth > 15% pa (5)% 4% 23% 23% 25% EBIT Margin* > 15% pa 19% 22% 21% 19% 18% Return on Capital Employed* > 15% pa 24% 28% 32% 27% 23% 1 Long term targets exclude Asbestos-related
Slide 36: Q1 FY09 - results overview
US$ Millions Q1 Q1 % FY 2009 FY 2008 Change Net operating profit 1.4 39.1 (96) Net operating profit excluding asbestos 41.6 68.6 (39) Diluted earnings per share excluding asbestos (US cents) 9.6 14.6 (34) Results affected by on-going weakness in all markets, particularly the US Businesses continued
Slide 37: Q1 FY09 - results overview: key ratios
Key ratios Q1' FY09 FY08 FY07 EPS (Diluted)1 9.6c 36.9c 49.3c Dividend Paid per share - 27.0c 9.0c Return on Shareholders' Funds1 19.9% 17.7% 24.0% Return on Capital Employed2 21.9% 24.2% 27.7% EBIT/ Sales (EBIT Margin)2 17.5% 19.2% 21.6% Gearing Ratio1 15.4% 21.5% 12.5% Net Interest Expense Cover1
Slide 38: Corporate issues and challenges
Company faces challenges that stem from legacy issues, including: Managing obligations under Amended Final Funding Agreement (approved by shareholders in February 2007): Asbestos compensation funding; Financial results affected by movements in exchange rate between A$ and US$ because asbestos liabil
Slide 39: Corporate issues and challenges - continued
ASIC: ASIC proceedings associated with establishment of Medical Research and Compensation Foundation in 2001, and subsequent events; substantive court proceedings to start 29 September 2008 On 4 September 2008, ASIC dropped its claim for A$1.9b indemnity from JHI NV in favour of ABN 60 Domicile: US
Slide 40: Summary
We have a strong, well established, growth focused and high return business We have a sustainable competitive advantage Our model for strong growth is based on: Large market opportunity Superior value proposition Proprietary and/or protected technology Upsides due to current R&D investments Signific
Slide 41: Forward-looking statements
This Management Presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering
Slide 42: Definitions
Definitions Financial Measures - US GAAP equivalents EBIT and EBIT Margin - EBIT, as used in this document, is equivalent to the US GAAP measure of operating income. EBIT margin is defined as EBIT as a percentage of net sales. We believe EBIT and EBIT margin to be relevant and useful information as
Slide 43: Financial Ratios
Financial Ratios Gearing Ratio - Net debt (cash) divided by net debt (cash) plus shareholders' equity. Net interest expense cover - EBIT divided by net interest expense. Net interest paid cover - EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payback -
Slide 44: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos - EBIT and EBIT margin excluding asbestos are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has included these financial measures to
Slide 45: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos - Net operating profit excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than net income. The company has included this financial measure to
Slide 46: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos - Diluted earnings per share excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than diluted earnings per share. The company has include
Slide 47: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos - Effective tax rate excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The company has included this financial measure
Slide 48: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) EBITDA - is not a measure of financial performance under US GAAP and should not be considered 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 profitability or liquidity. N
Slide 49: Endnotes
In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures included in the Definitions section of this document starting on page 42. The company presents financial measures that it believes are customarily us
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