Boral — Non-Deal Roadshow (February 2014)
45 slides from Boral's roadshow presentation, February 2014
Slide 1: USA Investor Roadshow
USA Investor Roadshow February 2014
Slide 2: Agenda
Agenda • Business overview • Market activity • 1H FY2014 Financial results • Strategic priorities and Outlook 2
Slide 3: Business overview
Business overview • Boral is an international building Revenue by geography – 1H FY2014 and construction materials group with operations in Australia, the USA and Asia • A$4.3b market cap (US$3.9b)1 • S&P/ASX 100 company Revenue by end-market – 1H FY2014 • 568 operating sites across USA non-dwelling
Slide 4: Boral's divisional structure
Boral’s divisional structure Boral Gypsum Asia Boral USA Australia Cladding (Bricks Cultured Stone, Trim) Roof Tiles Boral Construction Fly Ash Materials & Cement Construction Quarries Asphalt Materials (Colorado) Concrete Transport Boral Building Cement Products (Australia) Landfill Concrete Proper
Slide 5: Agenda
Agenda • Business overview • Market activity • 1H FY2014 Financial results • Strategic priorities and Outlook 5
Slide 6: Positive movements across most markets
Positive movements across most markets 1H FY2014 vs 1H FY2013 USA Single-family housing starts Asia7 − Total USA1 10% South Korea − Boral Brick States2 14% Thailand − Boral Tile States2 17% China Non-residential activity3 11% Indonesia Vietnam Malaysia Australia RHS&B4 Non-residential VWD5 5% Detach
Slide 7: Australian residential activity improved
Australian residential activity improved Housing starts estimated to be up 3% with detached starts up 4% A&A activity estimated to be down 5% Total housing starts1 Housing starts – by state1 (‘000) 1H FY2014f v 1H FY2013 Detached Other +3% 171 162 166 169 174 Detached Other Total 163 155 145 55 71 6
Slide 8: Australian non-residential activity strengthened
Australian non-residential activity strengthened Non-residential activity estimated to be up 5% Non-residential1 Non-residential – by State1 (value of work done, $b) 1H FY2014f v 1H FY2013 (value of work done) 36.9 37.2 15% 36.6 34.8 34.8 33.6 10% 32.4 5% +5% 1% -7% FY10 FY11 FY12 FY13 1H FY13 2H FY
Slide 9: US housing activity continues to strengthen
US housing activity continues to strengthen Total housing starts up 12% in 1H FY2014 US total housing starts1 • US housing starts of 942k1 in 1H FY2014, up (‘000) 12% with detached starts up 10%1 913 942 – But total starts remain 37% below long 876 839 term average of 1.5m housing starts 687 594 570
Slide 10: Agenda
Agenda • Business overview • Market activity • 1H FY2014 Financial results • Strategic priorities and Outlook 10
Slide 11: Results for 6 months ended 31 Dec 2013
Results for 6 months ended 31 Dec 2013 A strong improvement in performance Revenue Gearing, Net D/(Net D+E) $2.87billion 4% 29% from 30% EBIT1 EPS1 $168million 49% 11.6cents 71% Profit after tax1 Half year dividend $90million 73% 7.0cents 40% Net profit after tax2 ROFE1,3 ($26)million 5.9% from 4.2%
Slide 12: Earnings increased across all divisions
Earnings increased across all divisions with Building Products delivering the most significant improvement 1. Excluding significant items 12 2. For statutory purposes Boral Gypsum has been reported as a discontinued operation
Slide 13: Construction Materials & Cement
Construction Materials & Cement Improvement in Quarries, Concrete and Cement performance dampened by weaker Asphalt, Placing and Property contribution Revenue EBIT A$m 1H FY2014 1H FY2013 Var, % Revenue 1,696 1,659 2 $1.7b 2% $155m 6% EBITDA1 237 237 - • Quarries, Concrete and Cement EBIT1 155 146 6
Slide 14: Building Products
Building Products Achieved substantial turnaround to profitability A$m 1H FY2014 1H FY2013 Var, % Revenue3 EBIT3 Revenue 248 249 - $248m $5m from ($18m) EBITDA1 17 (1) na • Delivered $23m EBIT turnaround reflecting EBIT1 5 (18) 129 restructuring and better market conditions EBIT ROS, % 2.1 (7.4) • I
Slide 15: Boral Gypsum
Boral Gypsum Solid underlying volume growth delivering positive earnings momentum Revenue EBIT $537m 16% $55m 30% • Strong performance benefited from 10% lift in board volume, and higher non-board revenue • In Australia, EBIT benefited from: – board price increase in March-13 – 4% growth in board vo
Slide 16: Boral USA
Boral USA Progressively reducing losses as US residential market continues to recover A$m 1H FY2014 1H FY2013 Var, % Revenue EBIT Revenue 335 266 26 A$ 335m 26% A$ (30)m 23% EBITDA1 (8) (17) 52 EBIT1 (30) (39) 23 • Improved performance underpinned by EBIT ROS, % (8.9) (14.5) continued growth in US h
Slide 17: Boral USA transformed through acquisitions and restructuring
Boral USA The business has transformed through acquisitions, rationalisation and restructuring following a dramatic cyclical downturn in the US FY2005 FY2009 FY2013 US housing starts (‘000) 2,016 646 877 Revenue US$611m US$406m US$569m EBITDA margin1 22% (11%) (4%) Added since FY04 Added since FY09
Slide 18: Boral USA's focus is to return to profitability as housing recovers
Boral USA’s focus is to return the business to profitability as housing recovers New Products • Product & Market Diversification – Grow and diversify through increased sales in new geography, products, and markets − Geography − Products − Innovation • Price & Share Management – Target Market Segment
Slide 19: Market outlook
Market outlook Residential momentum to continue and non-residential recovering in FY2014 Both markets forecast for significant growth through next 3 to 5 years New residential starts1 Non residential activity4 Actual1 Forecast Actual Forecast Non Residential Construction $s billion Moody’s3 Starts m
Slide 20: Strengthened financial performance
Strengthened financial performance Delivered through stronger market conditions and business improvement initiatives A$m 1H FY2014 1H FY2013 Var % Revenue 2,874 2,774 4 EBITDA1 307 264 16 Depreciation (139) (151) EBIT1 168 112 49 Net interest (47) (50) Income tax expense1 (30) (8) Non-controlling in
Slide 21: Cash generation improved
Cash generation improved Cash flow , A$m 1H FY2014 1H FY2013 • Operating cash flow up $124m to $231m due to: EBITDA1 307 264 − increased earnings Change in working capital 6 (59) − improved working capital Interest & tax (54) (77) management Equity earnings less dividends (4) (1) − lower income tax
Slide 22: Capital expenditure remains constrained
Capital expenditure remains constrained Total capital expenditure • SIB capex at 55% of depreciation A$m • Growth capex constrained to essential Growth projects SIB • Total capex in FY2014 to decrease to Depreciation ~$270m 1H FY2014 capital expenditure % 222 291 111 273 1 245 11 Construction Materi
Slide 23: Balance Sheet
Balance Sheet Benefiting from disciplined cash management • Net debt reduced by $57m since 30 June 2013 to $1,389m • Principal ‘bank gearing’ covenant at 39%; threshold is <60%2 • Weighted average debt maturity ~ 3.3 years • Weighted average cost of debt ~ 6.1% p.a. • Committed undrawn bank debt fac
Slide 24: Debt Profile
Debt Profile Gross debt currency exposure As at 31 Dec-13 @® USD AUD @ Other Total = A$1,652m * CHF150m notes (A$186m) under EMTN program & US$225m fixed rate USPP notes (A$251m) swapped to AUD floating rate via cross currency swaps (Figures may not add due to rounding) 1H FY2014 1H FY2013 Debt faci
Slide 25: Debt Profile continued
Debt Profile continued • Debt reduction and earnings growth have been key areas of focus – circa A$450m of debt is forecast to be repaid from the US$500m JV sales proceeds • US$1b EMTN programme established in November 2012 – To lengthen debt maturity profile and provide further funding diversificat
Slide 26: Credit ratings
Credit ratings • Boral is publicly rated by both S&P and Moody’s • Our target ratings are S&P BBB and Moody’s Baa2 • Our current ratings are S&P BBB (Negative outlook) and Moody’s Baa3 (stable outlook) 26
Slide 27: Agenda
Agenda • Business overview • Market activity • 1H FY2014 Financial results • Strategic priorities and Outlook 27
Slide 28: Boral's Fix, Execute, Transform program
Boral’s Fix, Execute, Transform program Our goal is to transform Boral into a global building and construction materials company that is known for its world-leading safety performance, innovative product platform and superior returns on shareholders’ funds FIX EXECUTE TRANSFORM 2 years FY2013 4 year
Slide 29: Focus is on improving ROFE to 15%
Focus is on improving ROFE to 15% EBIT to average funds employed (ROFE1) % 19.3 17 15.1 12.1 10.1 7.4 6.3 6.2 5.9 4.7 4.7 4.2 2 2 1H FY13 1H FY14 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1. Excludes significant items 29 2. 1H FY2013 and 1H FY2014 on a moving annual total (MAT) basis
Slide 30: Solid progress made in delivering immediate FIX priorities
Solid progress made in delivering immediate FIX priorities PRO OBJECTIVES PROGRESS • In FY2014 reduce costs by: – $105m through prior period headcount Realised $60m in cost reductions from cost Manage down programs in 1H FY2014 reductions & rationalisation initiatives costs down Expect to delive
Slide 31: Transforming Boral through strategic joint venture with USG
TRANSFORMING Boral through strategic joint venture with USG Up to US$575m Boral USG cash payment • Leading manufacturing and • Exclusive access to world- distribution platform across leading technologies in Australia & 8 countries in Asia perpetuity in the Territory3 • #1 or #2 position in markets •
Slide 32: Joint venture has leading positions across Asia, Australasia and Middle East
Joint venture has leading positions across Asia, Australasia and the Middle East SOUTH KOREA Manufacturing footprint 3 (number of operations) CHINA 3 5 18 Boral plasterboard plant 3 SAUDI ARABIA 6 3 OMAN INDIA 2 Boral gypsum mine3 1 1 1 1 2 THAILAND VIETNAM 28 Boral other production2,3 2 1 1 3 1 USG
Slide 33: Asian markets represent strong growth potential for JV
Asian markets represent strong growth potential for JV building products Real GDP growth – Asian countries1 Plasterboard demand/GDP per capita2 • Strong economic growth forecast across most • Historically plasterboard use starts in ceilings then moves Asian markets to walls, and starts in commercial
Slide 34: Joint venture market positions
Joint venture market positions • Asia expected to become world’s largest JV plasterboard market share 20131 plasterboard market by 20151 • Size of plasterboard market in JV region is Revenue contribution from largest to smallest >2,250m m2 58% − Asia market size ~2,100m m2 54% 55% − Excluding China,
Slide 35: Financial impact of USG JV
Financial impact of USG JV Expect much lower second half EBIT contribution from Gypsum as we move to 50% share and due to equity accounting impacts Half year ended 31 Dec-13 – Income Statement Boral gearing impact2 A$m Boral Gypsum EBIT1 55 29% Net interest (2) 22% Income tax expense1 (14) Non-contr
Slide 36: Outlook for FY2014
Outlook for FY2014 Underlying performance of all four divisions expected to improve in 2H FY2014 on 2H FY2013 Market activity - • Overall activity in Australia expected to be steady with higher residential Australia and non-residential activity offset by lower roads and highways activity • Underlyin
Slide 37: Supplementary slides
BORAL} Supplementary slides
Slide 38: Boral USA has an expansive footprint
Boral USA has an expansive footprint #1 in Brick, Clay Tile, Concrete Tile, and Stone Veneer, & #2 in Fly Ash in the USA #3 in Construction Materials in Denver, Colorado CANADA Quebec & Newfoundland British Columbia, Alberta, and 55 3rd Party Distributors Saskatchewan 90 3rd Party Distributors Boral
Slide 39: Boral USA Cladding Footprint
Boral USA Cladding Footprint Comprising 65 facilities, our reach is considered nationwide Bricks: 13 plants with 1.3b SBE1 capacity Stone: 2 plants with 94m sq. ft. capacity Trim: initial plant in North Carolina Distribution: 43 Boral Building Products distribution sites Stucco: 7 tint centers in 6
Slide 40: Boral USA Roofing Footprint
Boral USA Roofing Footprint 11 concrete roof tile plants and 3 clay roof tile plants Boral Plants Concrete Plant North West Clay Plant Key Competitor: WA Tile Share1 (concrete & clay) Colorado Other Key Competitor: CA Entegra NV CO Hanson Boral Eagle South West AZ Concrete: TX FL Clay: Florida Texas
Slide 41: Weather impacts in eastern Australia
Weather impacts in eastern Australia NSW and Queensland experienced particularly dry weather Rainfall in Eastern Australia 1H FY2013 2H FY2013 1H FY2014 Source: Australian Bureau of Meteorology 41
Slide 42: Significant items due to timing impact of Gypsum JV formation
Significant items due to timing impact of Gypsum JV formation Non-trading significant items to be offset on completion of JV A$m 1H FY2014 Revaluation of Gypsum “Held for Sale Net Assets” and costs of disposal (115) Loss on disposal of Windows business (4) EBIT impact (119) Income tax benefit 2 Sign
Slide 43: Segment Revenue and EBIT
Segment Revenue and EBIT External revenue A$m EBIT1 A$m 1H FY2014 1H FY2013 Var, % 1H FY2014 1H FY2013 Var, % BCM & Cement2 1,696 1,659 2 155 146 6 Building Products 248 249 - 5 (18) 129 Boral Gypsum3 537 462 16 55 42 30 Boral USA 335 266 26 (30) (39) 23 Unallocated - - (17) (14) Discontinued Busine
Slide 44: Benefits from announced cost reduction programs
Benefits from announced cost reduction programs 44
Slide 45: Non-IFRS Information
Non-IFRS Information Boral Limited’s statutory results are reported under International Financial Reporting Standards. Earnings before significant items is a non statutory measure reported to provide a greater understanding of the underlying business performance of the Group. Significant items are d