James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Non-Deal Roadshow (September 2019)
84 slides from James Hardie Industries's roadshow presentation, Sep 16, 2019
Slide 1: Sustainable and Profitable Growth Above Market
For personal use only Sustainable and Profitable Growth Above Market Jack Truong, CEO 1
Slide 2: Cautionary Note on Forward-Looking Statements
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 For personal use only forward-looking statements in its periodic reports filed with or furnished to the Securities an
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and sim
Slide 4: We Are an Organic Growth Company with Global Reach
We Are an Organic Growth Company with Global Reach… For personal use only EUROPE Net Sales $368MM EBIT $10MM EBIT % 2.7% # Employees 1,000 EBIT included Integration costs ASIA PACIFIC NORTH AMERICA Net Sales $447MM Net Sales $1,677MM EBIT $100MM EBIT $388MM EBIT % 22.3% EBIT % 23.1% # Employees 1,10
Slide 5: …with a Broad Portfolio of Products & Brands
…with a Broad Portfolio of Products & Brands For personal use only PRODUCT PLATFORMS Trim / Tile Commercial Flooring Siding Soffit Interior Walls Fiber Gypsum Fascia Backerboard Exteriors PORTFOLIO OF BRANDS 5
Slide 6: Our Products Offer Design Flexibility
Our Products Offer Design Flexibility… …from traditional to luxury homes to commercial buildings For personal use only …from the desert to coastal areas in varying climates MID-CENTURY MODERN MULTI-FAMILY CONTEMPORARY LUXURY RURAL COASTAL MOUNTAINS COMMERCIAL 6
Slide 7: Our Global Manufacturing Footprint is Strategically Located
Our Global Manufacturing Footprint is Strategically Located For personal use only 7
Slide 8: We Deliver Strong Value Propositions to Our Customers
We Deliver Strong Value Propositions to Our Customers For personal use only 8
Slide 9: We Have Clear Objectives for Long Term Value Creation
We Have Clear Objectives for Long Term Value Creation Growth Above Market with Strong Returns For personal use only EUROPE €1 BILLION REVENUE with 20% EBIT MARGIN NORTH AMERICA 35/90 with 20-25% EBIT MARGIN ASIA PACIFIC DELIVER GROWTH with 20-25% EBIT MARGIN 9 ABOVE MARKET
Slide 10: We Are Transforming to Continue Our Profitable Growth Journey
We Are Transforming to Continue Our Profitable Growth Journey For personal use only FROM: TO: Big, SMALL Company Small, BIG Company • Leverage for scale • Standardize processes for global best practice replication • Continuous improvement mindset 10
Slide 11: North America Commercial: From Pull to Push-Pull
North America Commercial: FROM Pull TO Push-Pull For personal use only Builders Distributors JH & Dealers R&R Contractors • Analytics • Supply Chain Integration • Ease of Doing Business • Win-Win Approach • Demand Creation • Installation Training • End-user Marketing • Right Products for Right Segme
Slide 12: Operations: From World's Best Fiber Cement Producer to World Class Manufacturer via LEAN
Operations: FROM World’s Best Fiber Cement Producer… …TO World Class Manufacturer via LEAN For personal use only It is all about fostering employees engagement while making our operations more predictable and with less variation 3-Year Cumulative Lean Cost Reduction North America $100 MM Asia Pacifi
Slide 13: North America Interior Business: Focus on Executing Fundamentals
North America Interior Business: Focus on Executing Fundamentals For personal use only Placement Clear Packaging In Building Materials Section New Products Organization Waterproof Focus on Account Management Backer Board New Sales Leadership 13
Slide 14: Innovation: Leverage Our Global Research & Development Capabilities
Innovation: Leverage Our Global Research & Development Capabilities For personal use only 10% employees 40% employees 50% employees Over 130 Global R&D Employees with World Class Expertise in: • High performance fiber cement and fiber gypsum formulations • Durable surface coatings & textured surface
Slide 15: James Hardie Fiber Cement Substrate Generations
James Hardie Fiber Cement Substrate Generations For personal use only 1st James Hardie Invents Fiber Cement 2nd Primer Added 3rd Substrate Composition Other Fiber Cement Manufacturers Only Meet Our 3rd Generation 4th Surface Adhesion Technology 5th ColorPlus® Technology 6th Modified Thickness Techno
Slide 16: Customer Insights to Innovation Process to Deliver High Impact New Products
Customer Insights to Innovation Process to Deliver… …High Impact New Products For personal use only Mega Customer Winning Trends Insights Product Concepts Stage Gates CONCEPT PRODUCT DISCOVERY SCALE UP LAUNCH FEASIBILITY DEVELOPMENT Urbanization Prioritization Product Commercialization Development 1
Slide 17: FY20 Global New Products
FY20 Global New Products For personal use only 17
Slide 18: Europe: €1B Revenue at 20% EBIT Margin by FY2029
EUROPE: €1B Revenue at 20% EBIT Margin by FY2029 Growth Pathway For personal use only €1B European Manufacturing Footprint New Fiber Cement Existing Fiber Cement €320MM Fiber Gypsum Unlocking Plant Capacity to Improve Margin + ~200-300 bps margin improvement + ~200 bps margin improvement 18
Slide 19: APAC: 3-5% Growth Above Market at 20-25% EBIT Margin
APAC: 3-5% Growth Above Market at 20-25% EBIT Margin For personal use only FROM: Consumer Survey: Cladding Preference TO: (June 2018, n = 6,500, JH Insights) 19
Slide 20: Transforming How We Execute to Deliver Sustainable, Profitable Growth
Transforming HOW We Execute to Deliver Sustainable, Profitable Growth For personal use only FROM TO • Leading with Clarity of Direction Managing Top Down • Empowerment & Accountability Working Cross Functionally With Working in Silos Clear Alignment Regionally Focused Global Business with Best Pract
Slide 21: James Hardie Sustainability Highlights
James Hardie Sustainability Highlights For personal use only Zero to Landfill Zero Harm Culture Manufacturing process produces zero landfill waste Commitment to providing a safe and healthy in Fiber Gypsum Plants working environment for every individual (employee, vendor, and visitor) 100% Recycled
Slide 22: Exteriors
For personal use only EXTERIORS Sean Gadd, Chief Commercial Officer 1 Johnny Cope, NA Head of Sales
Slide 23: Agenda
Agenda For personal use only • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 2
Slide 24: Agenda
Agenda For personal use only • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 3
Slide 25: Exteriors Strategic Objective
Exteriors Strategic Objective New Construction For personal use only 35% Market Share 90% Category Share Multifamily Repair & Remodel 4
Slide 26: Changing Market Landscape
Changing Market Landscape For personal use only • Dealers continue to consolidate greater scale and reach • Competitive landscape • Fragmented builders and contractors Builders Distributors JH & Dealers R&R Contractors Customers 5
Slide 27: A Change in Approach – Pull to Push/Pull
A Change in Approach – Pull to Push/Pull For personal use only Customers Heavy Pull Focus Push / Pull Organization Separate Commercial Sales, Marketing Team, under one & Segments leader Product Full Exterior Siding Focus Solutions 6
Slide 28: Agenda
Agenda For personal use only • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 7
Slide 29: How James Hardie Creates Customer Value
How James Hardie Creates Customer Value For personal use only Working Ease of Product Growth Doing Capital Leadership Business • Demand • Supply chain • Full product • Improved Creation integration portfolio partnership • All segments • Product mix • New products • Win-win approach approach • All ho
Slide 30: Single Family New Construction - Push-Pull (Part 1)
Single Family New Construction - Push-Pull (Part 1) For personal use only • Hardie gets established in top price bands via market development pull approach Hardie getting established Still following the old standard PULL: Win With Color (Hardie Focus) • Segment Target Position • Overcome switching b
Slide 31: Single Family New Construction - Push-Pull (Part 2)
Single Family New Construction - Push-Pull (Part 2) For personal use only • Partnering with channel customers enables and accelerates “closing out” price bands Hardie and customer partners setting the new standard Still following the old standard PUSH: Win With Color (Customer Partnering) • Products
Slide 32: Repair & Remodel: Low-S - Push-Pull (Part 1)
Repair & Remodel: Low-S - Push-Pull (Part 1) For personal use only • Hardie sets up aligned market-mover contractors (Boats) in key target neighborhoods (Vinyl Battlegrounds) • Vinyl Battlegrounds generally are adjacent to “lockdown” neighborhoods PULL: Win With Color (Hardie Focus) • Right Neighbor
Slide 33: Repair & Remodel: Low-S - Push-Pull (Part 2)
Repair & Remodel: Low-S - Push-Pull (Part 2) For personal use only • Integration with our channel partners ensure the wake comes faster and goes to James Hardie PUSH: Win With Color (Customer Partnering) • Data Sharing & Analytics • Right Products Available in Market • Joint Contractor Targeting & G
Slide 34: High-S: Account Management
High-S: Account Management For personal use only • In High-S we are the market Wood-Look Cladding Split standard In Selected High-S Regions • Account management is critical for both new construction and R&R − Grow by partnering with our customers to take share from like alternatives − Grow by partne
Slide 35: Agenda
Agenda For personal use only • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 14
Slide 36: Organization: Commercial Structure
Organization: Commercial Structure Market Development For personal use only Dedicated Hunters • Setting up Commercial team for clarity of direction and alignment from strategy to field execution • Double down on exteriors market development (demand creation/pull), funded by interiors alternative app
Slide 37: Agenda
Agenda For personal use only • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 16
Slide 38: The Right Product Portfolio
The Right Product Portfolio For personal use only High Paint Cost Markets Low Paint Cost Markets Luxury 2nd Move-Up Starter Homes 17
Slide 39: Broad Product Portfolio: Complete Exterior
Broad Product Portfolio: Complete Exterior For personal use only 18
Slide 40: Win With Color: Enabling Further Penetration
Win With Color: Enabling Further Penetration For personal use only • Leverage scale and manufacturing technology to deliver lower total installed cost to drive accelerated penetration, whilst offering greater choice for consumers who are willing to pay JH Manufacturing Channel Customers Install Part
Slide 41: Agenda
Agenda For personal use only • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 20
Slide 42: Boston, MA - New Construction Market Development
Boston, MA - New Construction Market Development For personal use only Win With Color • New Construction conversion from vinyl • Delivered by reducing on-the-wall costs 21
Slide 43: Boston, MA - R&R Market Development
Boston, MA - R&R Market Development For personal use only Win With Color • Target neighborhood • Converted vinyl via aligned contractor • Followed up with “2-10” activity 22
Slide 44: Boise, ID - Win Against Engineered Wood
Boise, ID - Win Against Engineered Wood For personal use only Account Management • Partnering with our customer to convert a large builder from engineered wood • Securing multiple stocking positions • Leading to more builder conversions 23
Slide 45: Dallas, TX—James Hardie Full Wrap Initiative
Dallas, TX—James Hardie Full Wrap Initiative For personal use only Account Management • Partnering with our customer to convert a builder to use our trim and soffit in addition to our plank 24
Slide 46: Summary: Executing The Strategy, Gaining Momentum
Summary: Executing The Strategy, Gaining Momentum For personal use only Customers • Partnering with our channel customers Heavy Pull Focus Push / Pull to capture share in the tail • Doubling down on pull-through market development Organization • Aligned sales, product & segment Separate Commercial s
Slide 47: Zero Harm & Lean Transformation
For personal use only Zero Harm & Lean Transformation Ryan 1 Kilcullen, EVP - Operations
Slide 48: Agenda
AGENDA For personal use only Zero Harm Foundation Lean Transformation Alabama Construction Update 2
Slide 49: Agenda
AGENDA For personal use only Zero Harm Foundation Lean Transformation Alabama Construction Update 3
Slide 50: Our Zero Harm Strategy
OUR ZERO HARM STRATEGY For personal use only Zero Harm is the foundation of everything we do… • Safe People − Empowered & Engaged − Living Zero Harm 24/7 • Safe Places − World Class Work Environment − Standardized & Organized • Safe Systems − Processes Enabling Safe Work − Forward-Looking Risk Reduc
Slide 51: Global Standardization
GLOBAL STANDARDIZATION For personal use only Global approach to our Zero Harm culture • Global standards • Global organization With processes to replicate regional best practices • Local innovation shared & replicated • Replication celebrated as an equal to invention 5
Slide 52: Safe People – Leadership Commitment
SAFE PEOPLE – LEADERSHIP COMMITMENT For personal use only Oversight at ELT level • Prattville construction pause Significant investment • 20+ incremental global safety professionals since FY17 • Investment in safety data management system, training, facilities upgrades, etc. 6
Slide 53: Safe People – Global Mindset
SAFE PEOPLE – GLOBAL MINDSET For personal use only Improve, Standardize, Replicate – on a global scale – PPE example Before After (Europe) (Europe) 7
Slide 54: Safe Places – Global Mindset
SAFE PLACES – GLOBAL MINDSET For personal use only • One JH standard in our plants accelerates best practice replication • Global best practices, benchmarked to world class levels, with strong local ownership − 5S replication – standardization − Pedestrian/Forklift standardization leads global impro
Slide 55: Global Performance & Summary
GLOBAL PERFORMANCE & SUMMARY For personal use only Incident Frequency • Lagging indicators are 1.6 tracking in-line with our 1.4 strategic roadmap 1.2 1.0 0.8 0.6 • Our focus remains on creating 0.4 0.2 a culture of empowerment at 0.0 FY17 FY18 FY19 the floor level DART 0.8 • We are making progress,
Slide 56: Zero Harm Summary
ZERO HARM SUMMARY For personal use only • Zero Harm is the foundation of everything we do • Strong leadership commitment • Operators are empowered & engaged to live Zero Harm 24/7 • We are making good progress, but will never be satisfied until true Zero Harm is achieved • Zero Harm fundamentals are
Slide 57: Agenda
AGENDA For personal use only Zero Harm Foundation Lean Transformation Alabama Construction Update 11
Slide 58: Lean Manufacturing Transformation
LEAN MANUFACTURING TRANSFORMATION For personal use only Transforming FROM the world’s best fiber cement producer TO a world class manufacturer From To Local site autonomy A highly integrated network, operating as one Silos of Fiber Cement knowledge & A connected organization, leveraging scale & hero
Slide 59: HMOS
HMOS From the world’s best producer of Fiber Cement to a world class For personal use only manufacturer L2: Process, Reliability, & Six Sigma L3: Plant Management & Steering team Manufacturing Operating System -Leadership drive & engagement -Change management capabilities -Lean tools L1: Operators &
Slide 60: HMOS
HMOS For personal use only • HMOS enables flawless, daily HMOS Framework execution to the company strategy, with feedback up & down the site Strategy Deployment • Consistent execution reduces variation • Predictability & connectivity - enable time to add value & increase engagement of operators • En
Slide 61: Connecting the Network – L4
CONNECTING THE NETWORK – L4 For personal use only • We are creating a force multiplier by connecting all of our sites into a highly integrated network • Best practice sharing is accelerating our pace of improvement • Clear targets, measured & reviewed frequently • Intra-site sharing & communication
Slide 62: HMOS Global Timeline
HMOS GLOBAL TIMELINE Lean Cost For personal use only Out Targets Region FY20‐FY22 (in millions) North America US$100 Europe US$20 APAC US$19 APAC Rosehill, AUS Carole Park, AUD Penrose, NZ Peru, USA Summerville, USA Cleburne, USA Reno, USA Orejo, ES Cabuyao, PHL Cooroy, AUS Waxahachie, USA Pulaski,
Slide 63: Getting Started – The Power of Gemba
GETTING STARTED – THE POWER OF GEMBA For personal use only • Leverage learnings from APAC and generate excitement in NA − 40+ NA employees GEMBA to APAC (Feb & May 2019) • Lay the groundwork for future deployment in Europe − 15 EU manufacturing employees GEMBA to NA (Jul 2019) • Replicate & Improve
Slide 64: Organizational Capability
ORGANIZATIONAL CAPABILITY For personal use only Significant investments in organizational capability to enable the transformation… • NA Lean VP with a team of 10 Lean professionals • Lean roles created at all of our manufacturing facilities • All 2,000+ NA manufacturing employees will be trained in
Slide 65: Employee Empowerment
EMPLOYEE EMPOWERMENT For personal use only • Operators transforming from Doers → Thinkers → Problem Solvers • Management GEMBAs significantly increase leadership presence on the floor & help solve problems faster – at the source • Recognition of employee contributions is happening on a daily basis.
Slide 66: Performance Drivers Impact the P&L
PERFORMANCE DRIVERS IMPACT THE P&L For personal use only Roll Throughput Yield How Lean Manufacturing Net available hours is impacting our P&L Lower cost per square foot Net Available Hours (NA network) 20
Slide 67: Delivering Value
DELIVERING VALUE For personal use only • We are targeting $100M cost out in NA • We are on-track and committed to full delivery • Additional upside realized by deferred capital investment FY20 – FY22 Region Lean Cost Out Targets APAC $19MM USD • Global cost-out targets established Europe $20MM USD 2
Slide 68: Lean Summary – The Journey Never Ends
LEAN SUMMARY – THE JOURNEY NEVER ENDS For personal use only • We are on-track to implement HMOS in all 9 NA plants by the end of Q3 FY20 • Employee engagement is improving • We are on-track to deliver our $100MM cost-out target in NA • We are forward-looking in our approach & see significant opportu
Slide 69: Agenda
AGENDA For personal use only Zero Harm Foundation Lean Transformation Alabama Construction Update 23
Slide 70: Prattville Construction Update
PRATTVILLE CONSTRUCTION UPDATE For personal use only Prattville, Alabama greenfield expansion project is on-budget and on-track to be completed by end of calendar year 2019 • 1H FY21 Commissioning Best Practice Sharing and Replication from Global engineering teams 24
Slide 71: Summary
SUMMARY For personal use only • Zero Harm is the foundation of everything we do • HMOS is a cultural transformation in how we operate. It connects our sites & our network as one JH operating system • Employee engagement is improving • Lean savings commitment is on-track • Alabama construction is on-
Slide 72: Interiors
For personal use only INTERIORS Sean Gadd, Chief Commercial Officer 1
Slide 73: Agenda
Agenda For personal use only • Underlayment Overview • A Change in Approach • Execution Fundamentals • Interiors Trajectory 2
Slide 74: Tile Underlayment Overview
Tile Underlayment Overview For personal use only U.S. Underlayment Products Foam Boards Fiber Gypsum Glass Mat Gypsum Fiber Cement Mats & Membranes Glass Mesh Source: Ciprus 3
Slide 75: A Change in Approach
A Change in Approach For personal use only Retail Hardie Reps calling Strategic Key on retail stores account management Contractor Small Box Focused on larger store contractors contractors Products Product portfolio 2 Products based on insights 4
Slide 76: Retail Approach: Home Depot and Lowe's
Retail Approach: Home Depot and Lowe’s For personal use only • Customer centric approach • Account Management approach • Retail fundamentals − Product • HardieBacker 500, HardieBacker ¼” − Promotion − Positioning • New Leadership 5
Slide 77: Execution Fundamentals
Execution Fundamentals For personal use only Building Materials Flooring • Customer insights • Better positioning • Improved packaging • Better placement in the stores 6
Slide 78: Global Mindset, Best Practice Sharing, Replication
Global Mindset, Best Practice Sharing, Replication For personal use only Interior Solutions based on Fermacell Fiber Gypsum at a leading DIY retailer in Germany 7
Slide 79: Pro Channel Approach
Pro Channel Approach For personal use only Key Pro Channel Partners • Partner for performance with key accounts • Strong customer acquisition team driving large conversions • Support through inside sales • Right Product − 4x8 HardieBacker® 500 8
Slide 80: Interiors Trajectory
Interiors Trajectory For personal use only • Short-term: execute fundamentals to take share and grow • Long-term: commercialize customer driven innovations to accelerate growth Product Portfolio Expansion Gain share in Retail and Pro with HardieBacker FY20 FY21 FY22+ 9
Slide 81: HydroDefense Launch
HydroDefenseTM Launch For personal use only • Product Description ‒ The first waterproof1 cement backer board ‒ Installed cost advantage vs. current waterproofing practices ‒ Maintains market leading performance of existing HardieBacker • Why Waterproof Backer Board? Tile Installer Test Results ‒ Wa
Slide 82: Summary: Resetting For Growth
Summary: Resetting For Growth Retail For personal use only • Sales org restructure to match strategy Hardie Reps calling Strategic Key • Built up retail bench strength on retail stores account management • Enhancing customer partnerships Contractor Small Box Focused on • Focusing on larger contracto
Slide 83: Sustainable and Profitable Growth Above Market
For personal use only Sustainable and Profitable Growth Above Market Jack Truong, CEO 1
Slide 84: Summary
SUMMARY For personal use only 1. We are transforming commercially to push-pull approach and becoming a world class manufacturer to reignite our track record of growth above market with strong returns 2. We are investing in customer driven innovation to deliver aggressive long- term growth goals in e
James Hardie Industries — Non-Deal Roadshow (September 2019) on 6ix