James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2010 Earnings Presentation
55 slides from James Hardie Industries's earnings presentation, Nov 25, 2009
Slide 1: Q2 FY10 Management Presentation
Q2 FY10 Management Presentation 23 November 2009
Slide 2: Disclaimer
Disclaimer 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,
Slide 3: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda 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 secti
Slide 4: Overview
Overview Operating results reflect the benefits of lower input and freight costs, improved plant performance and a higher net sales price The net operating result including asbestos, ASIC expenses and tax adjustments was primarily affected by an unfavorable asbestos adjustment of US$62.7m for the qu
Slide 5: Operating Review
Operating Review Louis Gries, CEO
Slide 6: Global Strategy
Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors Introduce differentiated products to deliver a sustainable competitive advantage
Slide 7: 2nd Quarter USA market conditions
Ongoing weakness in the US residential construction and repair and remodel markets September quarter 2009 single unit housing starts were 139,000, 15% below September quarter 2008 Single unit annualised housing starts in the month of September 2009 were 26% of their January 2006 peak of 2.265m Housi
Slide 8: USA and Europe Fibre Cement 2nd Quarter Result
2nd Quarter Result * Net Sales down 13% to US$229.0 million Sales Volume down 17% to 356.9 mmsf Average Price up 5% to US$642 per msf EBIT up 7% to US$65.3 million EBIT Margin up 5.3 pts to 28.6% USA and Europe Fibre Cement *Comparisons are of the 2nd quarter of the current fiscal year versus the 2n
Slide 9: USA and Europe Fibre Cement Half Year Result
Half Year Result * Net Sales down 17% to US$452.2 million Sales Volume down 21% to 714.0 mmsf Average Price up 4% to US$633 per msf EBIT up 6% to US$134.1 million EBIT Margin up 6.5 pts to 29.7% USA and Europe Fibre Cement *Comparisons are of the half year of the current fiscal year versus the half
Slide 10: USA and Europe Fibre Cement 2nd Quarter Key Points
USA and Europe Fibre Cement 2nd Quarter Key Points Sales volumes down due to decline in housing starts and weaker repair and remodel market Net sales down due to weaker demand, partially offset by a higher average net sales price Key raw materials and energy costs lower compared to previous correspo
Slide 11: Total USA Housing Starts - NAHB
Total USA Housing Starts - NAHB NAHB forecast of 2009 Housing Starts has improved since May's release. Starts are currently forecast to be down 37% or 564k (including MF-high) from prior year. Source: NAHB Executive Level Forecasts - Total US Housing Starts (incl. SF, MF-low and MF-high)
Slide 12: Outlook
Outlook The US residential construction market continues to be volatile and it remains too early to ascertain the timing, rate or extent of any recovery Challenges remain including: restricted access to credit for prospective home owners expiration of the first home buyers' credit at the end of Apri
Slide 13: USA Fibre Cement housing starts and volume
USA Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 JH Volume (mmsf), Starts (000s Units) $0 $200 $400 $600 $800 $1,000 $1,200 Revenue (US$M) JH Volume JH R
Slide 14: USA Fibre Cement Primary Growth Performance
USA Fibre Cement Primary Growth Performance 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 • 2008 R&R = avg. published Home Depot & Lowe's same store sales less CPI
Slide 15: Average Net Selling Price
Average Net Selling Price US$ per MSF USA and Europe Fibre Cement 380 420 460 500 540 580 620 660 FY04 FY05 FY06 FY07 FY08 FY09 1H FY10 US$633
Slide 16: EBIT and EBIT Margin
USA and Europe Fibre Cement * Excludes impairment charges of US$45.6 million in Q4 FY08 EBIT and EBIT Margin* 0 20 40 60 80 100 120 140 FY04 FY05 FY06 FY07 FY08 FY09 Q2 FY10 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT Margin
Slide 17: Asia Pacific Fibre Cement 2nd Quarter Result
2nd Quarter Result* Net Sales down 5% to US$75.2 million Sales Volume flat at 102.4 mmsf Average Price up 2% to A$886 per msf EBIT up 15% to US$16.2 million EBIT Margin up 3.6 pts to 21.5% Asia Pacific Fibre Cement *Comparisons are of the 2nd quarter of the current fiscal year versus the 2nd quarter
Slide 18: Asia Pacific Fibre Cement Half Year Result
Half Year Result* Net Sales down 16% to US$136.5 million Sales Volume down 6% to 191.3 mmsf Average Price up 3% to A$896 per msf EBIT down 9% to US$27.1 million EBIT Margin up 1.5 pts to 19.9% Asia Pacific Fibre Cement *Comparisons are of the half year of the current fiscal year versus the half year
Slide 19: Asia Pacific 2nd Quarter Key Points
2nd Quarter Key Points Despite the overall downturn, the Australian business maintained its sales volumes in the quarter In A$, net sales increased 2% due to a 2% increase in the average net sales price Australia and New Zealand residential housing approvals down 11.4% and 35% respectively for the 1
Slide 20: Outlook
Outlook In Australia, while housing starts are unlikely to exceed 2008 numbers, underlying momentum in the residential construction industry appears to be gathering pace In New Zealand, new residential construction is anticipated to remain at current low levels of 1000 units per month with housing a
Slide 21: Financial Review
Financial Review Russell Chenu, CFO
Slide 22: Overview
Overview Results continue to be affected by weak housing construction activity in all markets Net operating profit materially and adversely affected by asbestos Strong cash flow enabled an US$62.1 million reduction in net debt during the second quarter Decreases in SG&A spending compared to FY09 Sig
Slide 23: Consequences of changes - A$ versus US$
Consequences of changes - A$ versus US$ Unfavourable impact from translation of Asia Pacific results - Q2 FY10 vs Q2 FY09 and HY FY10 vs HY FY09 Favourable impact on corporate costs incurred in Australian dollars - Q2 FY10 vs Q2 FY09 and HY FY10 vs HY FY09 Unfavourable impact from translation of asb
Slide 24: Results - Q2
Results - Q2 US$ Millions Q2'10 Q2'09 % Change Net sales 304.2 341.9 (11) Gross profit 117.6 113.2 4 SG&A expenses (49.0) (56.0) 13 Research & development expenses (6.7) (5.8) (16) Asbestos adjustments (62.7) 140.8 - EBIT (0.8) 192.2 - Net interest (expense) income (0.4) 0.3 - Other expense (1.0) -
Slide 25: Results - Q2 (continued)
Results - Q2 (continued) US$ Millions Q2'10 Q2'09 % Change Net operating (loss) profit (19.6) 153.5 - Asbestos: Asbestos adjustments 62.7 (140.8) - AICF SG&A expenses 0.5 0.3 67 AICF interest income (1.0) (2.3) 57 Gain on AICF investments (1.9) - - ASIC expenses 0.4 5.0 (92) Tax adjustments (3.5) 20
Slide 26: Results - Half Year
Results - Half Year US$ Millions HY'10 HY'09 % Change Net sales 588.7 706.9 (17) Gross profit 228.0 237.2 (4) SG&A expenses (90.4) (110.2) 18 Research & development expenses (13.0) (12.2) (7) Asbestos adjustments (182.5) 100.3 - EBIT (57.9) 215.1 - Net interest expense (1.1) (0.8) (38) Other income
Slide 27: Results - Half Year (continued)
Results - Half Year (continued) US$ Millions HY'10 HY'09 % Change Net operating profit (97.5) 154.9 - Asbestos: Asbestos adjustments 182.5 (100.3) - AICF SG&A expenses 1.0 0.9 11 AICF interest income (1.7) (3.2) 47 Gain on AICF investments (2.3) - - ASIC expenses 1.0 6.5 (85) Tax adjustments (3.8) 1
Slide 28: Segment Net Sales - Q2
US$ Millions Q2'10 Q2'09 % Change USA and Europe Fibre Cement 229.0 263.0 (13) Asia Pacific Fibre Cement 75.2 78.9 (5) Total 304.2 341.9 (11) Segment Net Sales - Q2
Slide 29: Segment Net Sales - Half Year
US$ Millions HY'10 HY'09 % Change USA and Europe Fibre Cement 452.2 544.7 (17) Asia Pacific Fibre Cement 136.5 162.2 (16) Total 588.7 706.9 (17) Segment Net Sales - Half Year
Slide 30: Segment EBIT - Q2
US$ Millions Q2'10 Q2'09 % Change USA and Europe Fibre Cement 65.3 61.1 7 Asia Pacific Fibre Cement 16.2 14.1 15 Research & development1 (4.8) (5.0) 4 Total segment EBIT 76.7 70.2 9 General corporate excluding asbestos and ASIC expenses (13.9) (13.5) (3) Total EBIT excluding asbestos and ASIC expens
Slide 31: Segment EBIT - Half Year
US$ Millions HY'10 HY'09 % Change USA and Europe Fibre Cement 134.1 126.7 6 Asia Pacific Fibre Cement 27.1 29.9 (9) Research & development1 (8.8) (10.0) 12 Total segment EBIT 152.4 146.6 4 General corporate excluding asbestos and ASIC expenses (25.8) (24.4) (6) Total EBIT excluding asbestos and ASIC
Slide 32: Net Interest (Expense) Income
US$ Millions Q2'10 Q2'09 HY'10 HY'09 Gross interest expense (0.9) (2.3) (2.0) (4.9) Capitalised interest 0.1 - 0.1 - Interest income 0.1 0.3 0.2 0.9 Net interest expense excluding AICF interest income and interest rate swaps (0.7) (2.0) (1.7) (4.0) AICF interest income 1.0 2.3 1.7 3.2 Realised loss
Slide 33: Income Tax Expense - Q2
Income Tax Expense - Q2 US$ Millions Q2'10 Q2'09 Operating (loss) profit before income taxes (2.2) 192.5 Asbestos: Asbestos adjustments 62.7 (140.8) AICF SG&A expenses 0.5 0.3 AICF interest income (1.0) (2.3) Gain on AICF investments (1.9) - Operating profit before income taxes excluding asbestos 58
Slide 34: Income Tax Expense - Half Year
Income Tax Expense - Half Year US$ Millions HY'10 HY'09 Operating (loss) profit before income taxes (55.2) 214.3 Asbestos: Asbestos adjustments 182.5 (100.3) AICF SG&A expenses 1.0 0.9 AICF interest income (1.7) (3.2) Gain on AICF investments (2.3) - Operating profit before income taxes excluding as
Slide 35: General Corporate Costs - Q2
US$ Millions Q2'10 Q2'09 % Change Stock compensation expense 2.1 1.6 (31) Other costs 9.1 11.8 23 General corporate costs excluding ASIC and domicile change related costs 11.2 13.4 16 ASIC expenses 0.4 5.0 92 Domicile change related costs 2.7 0.1 - Total general corporate costs 14.3 18.5 23 General
Slide 36: General Corporate Costs - Half Year
US$ Millions HY'10 HY'09 % Change Stock compensation expense 4.1 3.6 (14) Other costs 14.5 20.5 29 General corporate costs excluding ASIC and domicile change related costs 18.6 24.1 23 ASIC expenses 1.0 6.5 85 Domicile change related costs 7.2 0.3 - Total general corporate costs 26.8 30.9 13 General
Slide 37: EBITDA - Q2
US$ Millions Q2'10 Q2'09 % Change EBIT USA and Europe Fibre Cement 65.3 61.1 7 Asia Pacific Fibre Cement 16.2 14.1 15 Research & development (4.8) (5.0) 2 General corporate excluding asbestos and ASIC expenses (13.9) (13.5) (3) Depreciation and Amortisation USA and Europe Fibre Cement 12.8 11.7 9 As
Slide 38: EBITDA - Half Year
US$ Millions HY'10 HY'09 % Change EBIT USA and Europe Fibre Cement 134.1 126.7 6 Asia Pacific Fibre Cement 27.1 29.9 (9) Research & development (8.8) (10.0) 11 General corporate excluding asbestos and ASIC expenses (25.8) (24.4) (6) Depreciation and Amortisation USA and Europe Fibre Cement 25.2 23.1
Slide 39: Cash Flow
Cash Flow US$ Millions HY'10 HY'09 % Change EBIT (57.9) 215.1 - Non-cash items - Asbestos adjustments 182.5 (100.3) - - Other non-cash items 58.1 35.5 64 - Change in restricted cash - asbestos 37.0 38.7 (4) Net working capital movements (32.9) (28.3) (16) Cash generated by trading activities 186.8 1
Slide 40: Capital Expenditure
US$ Millions HY'10 HY'09 % Change USA and Europe Fibre Cement 17.5 6.9 (153) Asia Pacific Fibre Cement 3.4 2.5 (36) Total 20.9 9.4 (122) Capital Expenditure
Slide 41: Debt
Debt Net debt decreased US$115.4 million compared to net debt at 31 March 2009 Weighted average remaining term of total facilities was 1.2 years at 30 September 2009 Since 30 September 2009 an US$50.0 million facility has expired and not been renewed James Hardie remains well within its financial de
Slide 42: Key Ratios
Key Ratios Q2' FY10 FY09 FY09 FY08 EPS (Diluted)1 18.2c 18.2c 22.3c 38.1c 38.1c Dividend Paid per share N/A N/A 8.0c 27.0c 27.0c Return on Shareholders' Funds1 16.5% 16.5% 11.2% 17.7% 17.7% Return on Capital Employed2 23.1% 23.1% 16.7% 24.2% 24.2% EBIT/ Sales (EBIT margin)2 21.5% 21.5% 14.2% 19.2% 1
Slide 43: Summary
USA and Europe Fibre Cement EBIT improved 7% driven by lower unit manufacturing costs, lower freight costs, an increase in average net sales price and a slight decrease in SG&A spending Asia Pacific Fibre Cement EBIT, in Australian dollars, increased 21% due to a higher gross margin performance Net
Slide 44: Asbestos Fund Update
AICF holdings at 30 September 2009 A$101.6m - cash and short-term investments (A$110.6m at 30.9.08) Net claims paid HY FY10: A$ Millions AICF HY FY10 KPMG Actuarial Estimate* AICF HY FY09 Claims Paid 51.9 52.6 46.8 Legal Costs 4.2 4.5 4.8 Insurance and cross claim recoveries (6.7) (8.9) (9.1) Total
Slide 45: Legacy Issues Update
Legacy Issues Update Asbestos On 7 November 2009, the Australian and NSW Governments announced a A$320m standby loan facility for Asbestos Injuries Compensation Fund (AICF) James Hardie reiterated its commitment to its obligations as agreed with AICF and the NSW Government in the Amended and Restate
Slide 46: Questions & Answers
Questions & Answers
Slide 47: Endnotes - Definitions
Endnotes 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 Management's Analysis of Results, a Media Release and a Financial Report. Definitions Financial Measures - US GAA
Slide 48: Endnotes - Financial Ratios
Endnotes 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
Slide 49: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos and ASIC expenses - EBIT and EBIT margin excluding asbestos and ASIC expenses 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
Slide 50: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, ASIC expenses and tax adjustments - Net operating profit excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningfu
Slide 51: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments - Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be mo
Slide 52: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos and tax adjustments - Effective tax rate excluding asbestos and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The com
Slide 53: 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 54: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) General corporate costs excluding domicile change related costs - General corporate costs excluding domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than general corpora
Slide 55: Q2 FY10 Management Presentation
Q2 FY10 Management Presentation 23 November 2009
James Hardie Industries — Q2 FY2010 Earnings Presentation on 6ix