James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q1 FY18 Earnings Presentation
35 slides from James Hardie Industries's earnings presentation, Aug 8, 2017
Slide 1: Q1 FY18 Management Presentation
Q1 FY18 MANAGEMENT PRESENTATION 08 August 2017 Exhibit 99.7
Slide 2: Cautionary Note on Forward-Looking Statements
PAGE 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 Securities and Exchange Commis
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
PAGE 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” and similar expressions
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
PAGE 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). These financial measures ar
Slide 5: Agenda
PAGE AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers 5
Slide 6: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 7: Group Overview
PAGE GROUP OVERVIEW 7 • North America Fiber Cement top line growth below our market index due to capacity constraints • North America Fiber Cement margins compressed by manufacturing inefficiencies and higher production costs • International Fiber Cement net sales increased 8% and EBIT increased 10%
Slide 8: North America Fiber Cement Summary
PAGE NORTH AMERICA FIBER CEMENT SUMMARY Volume • Growth below our market index due to capacity constraints Price • Favorably impacted by our annual changes in strategic pricing effective April 2017 Manufacturing Capacity and Production Costs • Compared to prior corresponding period: • Higher labor,
Slide 9: North America Fiber Cement EBIT and Margin
PAGE NORTH AMERICA FIBER CEMENT 9 Q1 FY18 EBIT Margin % down 520 bps to 20.3% compared to pcp, but remains within target range 1 Excludes asset impairment charges of US$5.8 million in Q3 FY13 and US$11.1 million in Q4 FY13 0 5 10 15 20 25 30 0 10 20 30 40 50 60 70 80 90 100 FY13 FY14 FY15 FY16 FY17
Slide 10: North America Fiber Cement
PAGE NORTH AMERICA FIBER CEMENT 10 • Strategic price increase effective April 2017 • Satisfied with tactical pricing and price positioning • Q1 FY18 revenue up 6% on 2% volume growth • US housing starts outpace our volume growth $0 $400 $800 $1,200 $1,600 0 500 1,000 1,500 2,000 2,500 3,000 '1 2 '1
Slide 11: International Fiber Cement Summary
PAGE Volume • Growth in Australian, New Zealand and Philippines • Partially offset by volume declined in Europe Higher average selling price compared to pcp • Favorable product and geographic mix • Favorably impacted by annual changes in strategic pricing EBIT • Higher EBIT in Australia and New Zeal
Slide 12: International Fiber Cement (USD)
PAGE INTERNATIONAL FIBER CEMENT (USD) 12 Australia • Flat market growth compared to pcp • Growth above market index + PDG • EBIT favorably impacted by price and product mix New Zealand • Higher average net sales price and volume Philippines • Net sales and EBIT unfavorably impacted by lower averag
Slide 13: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 14: Results – 1st Quarter FY18
PAGE Net sales increased 6% • Higher average net sales price and volume in North America Fiber Cement and International Fiber Cement segments Gross profit decreased 4%, gross margin % down 370 bps SG&A expenses increased 2% • Continuing to invest in future growth Adjusted net operating profit decrea
Slide 15: Changes in AUD vs. USD
PAGE 0.60 0.70 0.80 30 Jun 15 30 Sep 15 31 Dec 15 31 Mar 16 30 Jun 16 30 Sep 16 31 Dec 16 31 Mar 17 30 Jun 17 A U D /USD E x c h a n g e Ra te 1 As Reported Q1 FY18 figures converted using Q1 FY17 weighted average exchange rates 2 Reflects the difference between Q1 FY18 As Reported and Q1 FY18 using
Slide 16: North America Input Costs
PAGE NORTH AMERICA INPUT COSTS • The price of NBSK pulp increased 12% compared to pcp • Cement prices continue to rise, up 6% compared to pcp • Freight market prices increased 10% compared to pcp • Gas prices are up 54% compared to pcp • Electricity prices are flat compared to pcp 16 The information
Slide 17: Segment EBIT – 1st Quarter FY18
PAGE North America Fiber Cement EBIT summary • EBIT decreased 16% compared to pcp • Primarily driven by higher production costs and increased SG&A expenses • Partially offset by higher average net sales price SEGMENT EBIT – 1st QUARTER FY18 17 International Fiber Cement EBIT summary • EBIT increased
Slide 18: Segment EBIT – 1st Quarter FY18 (Other, R&D, Corporate)
PAGE Other Businesses • Continue to incur losses from continued investment in business development opportunities R&D • On strategy to invest 2-3% of net sales • Fluctuations reflect normal variation and timing in the number of R&D projects in process General Corporate Costs • Decrease driven by the
Slide 19: Income Tax
PAGE 1 Includes Asbestos adjustments, AICF SG&A expenses and net AICF interest (income) expense 2 Excludes tax effects of Asbestos and other tax adjustments 24.1% estimated adjusted effective tax rate for the year • Adjusted income tax expense for the quarter decreased due to changes in geographical
Slide 20: Cashflow
PAGE 1 CASHFLOW 20 Decrease in net operating cash flow • Decrease in net income, primarily due to underlying business unit performance • Rebuilding inventory levels, and normal quarterly variation in accounts payable and receivables Higher investing activities • Increase in capacity expansion relate
Slide 21: Capital Expenditures
PAGE CAPITAL EXPENDITURES • Q1 FY18 CAPEX spend of US$48.1 million increased US$30.3 million compared to pcp • North America capacity projects: Recommissioned a 4th sheet machine at our Plant City facility which continues to start-up as planned Commissioned our Summerville facility which continu
Slide 22: Financial Management Supporting Growth
PAGE FINANCIAL MANAGEMENT SUPPORTING GROWTH 22 Strong Financial Management Disciplined Capital Allocation Liquidity and Funding • Strong margins and operating cash flows • Strong governance and transparency • Investment-grade financial management • Invest in R&D and capacity expansion to support org
Slide 23: Liquidity Profile
PAGE LIQUIDITY PROFILE 23 Strong balance sheet US$112.3 million cash US$427.8 million net debt3 at 30 June 2017 70% liquidity on bank debt at 30 June 2017 Corporate debt structure US$500 million unsecured revolving credit facility, with a December 2020 maturity US$400 million senior unsecu
Slide 24: FY2018 Guidance
PAGE FY2018 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2018 is between US$248 million and US$297 million • Management expects full year Adjusted net operating profit to be between US$240 million and US$280 mil
Slide 25: Questions
(@) sames Hardie QUESTIONS
Slide 26: Appendix
(@) sames Hardie APPENDIX
Slide 27: Financial Summary
PAGE FINANCIAL SUMMARY 1 Excludes Asbestos related expenses and adjustments 2 Excludes AICF interest income/expense 27 US$ Millions Q1'18 Q1'17 % Change Net Sales North America Fiber Cement 393.1$ 370.3$ 6 International Fiber Cement 110.8 102.9 8 Other Businesses 3.8 4.5 (16) Total Net Sales 507.7$
Slide 28: Asbestos Claims Data
PAGE ASBESTOS CLAIMS DATA 28 • Claims received were 1% above actuarial estimates and 5% lower than pcp • Claims reporting for mesothelioma: • 8% higher than actuarial estimates • 1% higher than pcp • Average claim settlement was 19% below actuarial estimates and 2% higher than pcp: Lower average c
Slide 29: Depreciation and Amortization
PAGE DEPRECIATION AND AMORTIZATION 29 US$ Millions Q1'18 Q1'17 Depreciation and amortization North America Fiber Cement 17.1$ 15.0$ International Fiber Cement 3.1 2.9 Other Businesses 0.5 0.5 Research and Development 0.4 0.4 General Corporate 0.7 0.7 Total depreciation and amortization 21.8$ 19.5$ T
Slide 30: Non-US GAAP Financial Measures and Terms
PAGE 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 and Condensed Consolidat
Slide 31: Non-US GAAP Financial Measures
PAGE 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 Condensed Consolidated Fi
Slide 32: Non-US GAAP Financial Measures – Adjusted EBIT and Net Operating Profit
PAGE Financial Measures – US GAAP equivalents NON-US GAAP FINANCIAL MEASURES 32 Adjusted EBIT US$ Millions FY18 FY17 EBIT 84.0$ 117.8$ Asbestos: Asbestos adjustments 3.9 (20.6) AICF SG&A expenses 0.4 0.4 Adjusted EBIT 88.3$ 97.6$ Net sales 507.7$ 477.7$ Adjusted EBIT margin 17.4% 20.4% Three Months
Slide 33: Non-US GAAP Financial Measures – Adjusted Diluted EPS and Tax Rate
PAGE 33 NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share FY18 FY17 Adjusted net operating profit (US$ Millions) 61.7$ 66.7$ Weighted average common shares outstanding - Diluted (millions) 441.6 447.3 Adjusted diluted earnings per share (US cents) 14 15 Three Months Ended 30 June Ad
Slide 34: Non-US GAAP Financial Measures – Adjusted EBITDA and SG&A
PAGE NON-US GAAP FINANCIAL MEASURES 34 Adjusted EBITDA excluding Asbestos US$ Millions FY18 FY17 EBIT 84.0$ 117.8$ Depreciation and amortization 21.8 19.5 Adjusted EBITDA 105.8$ 137.3$ Asbestos: Asbestos adjustments 3.9 (20.6) AICF SG&A expenses 0.4 0.4 Adjusted EBITDA excluding Asbestos 110.1$ 117.
Slide 35: Q1 FY18 Management Presentation
Q1 FY18 MANAGEMENT PRESENTATION 08 August 2017
James Hardie Industries — Q1 FY18 Earnings Presentation on 6ix