James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2016)
130 slides from James Hardie Industries's investor presentation, Sep 15, 2016
Slide 1: James Hardie - USA Investor/Analyst Tour
For personal use only James Hardie - USA Investor/Analyst Tour 15-17 September 2016
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS For personal use only 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 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: Note to the Reader
NOTE TO THE READER For personal use only As of 30 June 2016, the Company changed its reportable operating segments. Previously, the Company reported on three operating segments: (i) North America and Europe Fiber Cement, (ii) Asia Pacific Fiber Cement, and (iii) Research and Development. As of 30 Ju
Slide 5: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
USE OF NON-GAAP FINANCIAL INFORMATION; AUSTRALIAN EQUIVALENT TERMINOLOGY For personal use only 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 fina
Slide 6: North America Overview: Strategic Pillars
For personal use only NORTH AMERICA OVERVIEW STRATEGIC PILLARS LOUIS GRIES SEPTEMBER 2016
Slide 7: Agenda
AGENDA For personal use only • STRATEGIC PILLARS • PEOPLE • BRAND PROMISE • MARKET POSITION • NON-FIBER CEMENT PAGE 2
Slide 8: Strategic Pillars
STRATEGIC PILLARS For personal use only PEOPLE Continue to invest in the safety, development and promotion of our people DRIVING PROFITABLE GROWTH BRAND PROMISE DELIVERING MARKET POSITION Build on industry leadership SUPERIOR Grow fiber cement market through unrivalled commitment to manufacturing, R
Slide 9: People – Increasing Organizational Capability
PEOPLE – INCREASING ORGANIZATIONAL CAPABILITY For personal use only We will refocus on optimizing our organizational capability by: • Ensuring a safe work environment • Developing and promoting our employees PEOPLE • Attracting top external talent Continue to invest in the development and • Creating
Slide 10: People – Global Management Team
PEOPLE – GLOBAL MANAGEMENT TEAM For personal use only Global Management Team CEO Gries Sales Operations Products & International Technology Chief HR CFO Segments & Non-Fiber Officer Cement Gries (interim) Kilcullen Gadd Fisher (interim) Marsh (interim) Marsh Fisher • Focus on expanding the breadth a
Slide 11: People – FY17 Organizational Priorities and Metrics
PEOPLE – FY17 ORGANIZATIONAL PRIORITIES AND METRICS For personal use only Attrition Rate • Seamless transition to global 20% organization structure 19% 17% 17% 15% • Move to longer time in role for critical 13% jobs to build talent depth • Target reduction in overall turnover with emphasis on volunt
Slide 12: People – Blue Line Development Program
PEOPLE – “BLUE LINE” DEVELOPMENT PROGRAM For personal use only Formal Individual Peer Mentoring Training Development Networking OBJECTIVES METRIC Build pipeline of talent for critical roles by increasing Promotions/Transfers at above average rate awareness of talent across the organization Accelerat
Slide 13: People – FY17 Safety Priorities and Metrics
PEOPLE – FY17 SAFETY PRIORITIES AND METRICS For personal use only JH US Manufacturing • Step change approach regarding Historical Safety Performance Company’s approach to safety • HardieSafe vision initiated with goal of achieving sustainable world-class safety performance globally across every area
Slide 14: Brand Promise – Differentiated by Design
BRAND PROMISE – DIFFERENTIATED BY DESIGN For personal use only We aim to deliver differentiated products and services by: • An unrivalled commitment to research and development • Maintaining our manufacturing cost advantage • Delivering industry leading quality and service levels BRAND PROMISE • Inv
Slide 15: Brand Promise – FY17 Priorities and Metrics
BRAND PROMISE – FY17 PRIORITIES AND METRICS For personal use only Adjusted Diluted Earnings Per Share • FY17 guidance for full year for Adjusted Net Operating Profit to be between US$260 million and US$290 million 60 54 50 50 • FY17 EBIT margins to be at the higher end of 44 20% to 25% targeted rang
Slide 16: Market Position – Positioned for Growth
MARKET POSITION – POSITIONED FOR GROWTH For personal use only We aim to grow our businesses by: • Growing fiber cement by substituting for wood and vinyl siding and trim in the new construction, repair and remodel and multifamily segments (35%) • Maintaining our fiber cement category position by del
Slide 17: Market Position – FY17 Priorities and Metrics
MARKET POSITION – FY17 PRIORITIES AND METRICS For personal use only North America Siding Market Share • Lift rolling four-quarter primary demand growth (“PDG”) to 8% • Continue to invest in sales programs that drive increased market demand • Recruit new Executive Vice President of Sales • Realize re
Slide 18: Non-Fiber Cement – Developing New Streams of Growth
NON-FIBER CEMENT – DEVELOPING NEW STREAMS OF GROWTH For personal use only We will continue to explore opportunities for growth beyond our existing fiber cement business by: • Continuing to invest in fiberglass protrusion technology and our existing fiberglass window frame business • Identifying othe
Slide 19: Questions
For personal use only QUESTIONS
Slide 20: Market and Capacity Update
For personal use only MARKET AND CAPACITY UPDATE Matthew Marsh September 2016
Slide 21: Economy and Housing Sector Stabilizing
ECONOMY AND HOUSING SECTOR STABILIZING For personal use only GDP Growth Residential Fixed Investment as a % of GDP 8% 7% 6% 6% 5% 4% 4% 2% 3% 0% 2% 1% -2% 0% -4% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1980 198
Slide 22: Energy Commodity Pricing and Market Volatility
Oil and Coal Prices ($ USD) 20 40 60 80 0 100 120 For personal use only Feb 2014 Apr 2014 Jun 2014 Source: World Bank Aug 2014 Oct 2014 Dec 2014 Feb 2015 Apr 2015 Jun 2015 Aug 2015 Oct 2015 Crude Oil Dec 2015 Feb 2016 Apr 2016 Energy Commodity Pricing ($USD) Jun 2016 Natural Gas Aug 2016 0 1 2 3 4 5
Slide 23: Housing Confidence Remains Strong
HOUSING CONFIDENCE REMAINS STRONG For personal use only Overall Consumer Confidence Real Estate Confidence Index Current Conditions as of June 2016 (50=“Moderate” Conditions) 102 101 100 99 98 97 96 95 94 Dec-10 Sep-12 Jul-11 Mar-16 Mar-09 Jun-14 Aug-15 Aug-08 Apr-13 Feb-12 Nov-13 Jan-15 Jan-08 Oct-
Slide 24: The Eligible Homebuyer Exists
THE ELIGIBLE HOMEBUYER EXISTS For personal use only % of U.S. Population by Age, 2015 Percentage of 18-34 Year-Olds Living with Their Parents 15% 13.7% 13.4% 32% 12.6% 31% 30% 10% 8.6% 29% 7.1% 6.8% 28% 5.9% 6.3% 27% 5% 26% 25% 24% 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 201
Slide 25: Homebuyer Challenges
HOMEBUYER CHALLENGES Households with Little or No Wealth Student Loan Debt For personal use only 50% Student Loan Debt thousands USD 40% % of Households 30% 20% 10% 0% 1992 1995 1998 2001 2004 2007 2010 2013 $0 or Negative $25,000 - $0 Source: JCHS Tabulation of US Federal Reserve Board of Governors
Slide 26: Housing Recovery Slow but Steady
HOUSING RECOVERY SLOW BUT STEADY For personal use only Housing Starts 2017 Forecasted Housing Starts 1,500 2,500 80% 1,400 Housing Starts YoY Growth 60% 1,300 2,000 40% 1,200 1,500 20% YoY Growth 0% 1,100 1,000 -20% 1,000 500 -40% 900 0 -60% 800 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979
Slide 27: New Construction Dynamics
NEW CONSTRUCTION DYNAMICS For personal use only Housing Starts Average Annual Growth – Rent vs. Own 000s Homes (Millions of Households) 200 2.0 150 1.5 100 Starts - 1 unit 1.0 50 0.5 Starts – 5+ units 0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -0.5 200
Slide 28: Repair and Remodel Dynamics
REPAIR AND REMODEL DYNAMICS For personal use only Age of Housing Stock Hanley Wood R&R Siding Project Growth 15% 14.7% 7.7% 13.6% <10 years 10% 11-20 years 16.0% 21-30 years 5% 12.1% 31-40 years 0% 41-50 years 51-60 years -5% 19.6% 16.2% >61 years -10% Average Age = 41 Years Source: U.S. Census Bure
Slide 29: Market Share Landscape
MARKET SHARE LANDSCAPE For personal use only North America Siding Market Share National Association of Homebuilders (NAHB) serves as our main source for market share measurement as it provides the following: • Siding used in residential dwelling applications • Square feet as unit of measurement • Ge
Slide 30: Wood-Look Share Outlook
WOOD-LOOK SHARE OUTLOOK For personal use only Present Future Focus remains on gaining share in the wood-look market PAGE 11
Slide 31: Wood-Look Share
WOOD-LOOK SHARE For personal use only US Vinyl Market Share Estimate Fiber Cement Category Market Share FY16 FY17 Estimate JH Allura Nichiha Source: Internal estimates based on NAHB product usage data adjusted for regional market intelligence • While vinyl continues to be the volume-leader in siding
Slide 32: Capacity
For personal use only CAPACITY
Slide 33: Capacity – Annual Design
CAPACITY – ANNUAL DESIGN For personal use only Design Capacity Plant Location Owned/Leased (mmsf) Cleburne, Texas Owned 466 Incremental Capacity 200 Peru, Illinois Owned 560 Plant City, Florida Owned 300 Incremental Capacity 400 Pulaski, Virginia Owned 600 Reno, Nevada Owned 300 Tacoma, Washington O
Slide 34: Capacity – Gross Hours
CAPACITY – GROSS HOURS For personal use only Active Capacity % Utilization Cleburne, Texas Peru, Illinois Plant City, Florida Pulaski, Virginia 91% Reno, Nevada Tacoma, Washington Waxahachie, Texas Fontana, California Idle Capacity Cleburne, Texas New Plant City, Florida New Summerville, SC Idle 74%
Slide 35: Capacity Core Concepts
CAPACITY CORE CONCEPTS For personal use only CORE CONCEPTS OF MANUFACTURING CAPACITY Enable 35/90 by ensuring market supply ahead of demand Commission new capacity to optimize network costs Invest in capacity that maximizes value creation Use triggers to serve as leading indicators for capacity expa
Slide 36: Short-Term Capacity Management
SHORT-TERM CAPACITY MANAGEMENT For personal use only Utilization Trigger Concept Capacity Category Begin Commissioning Running New Line Idled & New Decision Point Decision Point ~85% ~90% Not Commissioned Demand Active Capacity Active Time Complexity of capacity add will influence actual trigger poi
Slide 37: Current Capacity Projects
CURRENT CAPACITY PROJECTS For personal use only Plant City Sheet Machine #4 Anticipated Design Capacity • Performance ramp up on target Commission in mmsf • Excellent material yield result to date Plant City #4 2Q FY17 300 • Minimal impact to existing plant operations Cleburne #3 3Q FY17 200 Plant C
Slide 38: Greenfield Capacity Concepts
GREENFIELD CAPACITY CONCEPTS For personal use only • Greenfield construction anticipated in 2-3 years • Potential locations -Pacific Northwest -Midsouth -Northeast -West • Decision drivers -Demand -Proximity to raw materials -Total cost to operate PAGE 19
Slide 39: Greenfield Capacity Concepts
GREENFIELD CAPACITY CONCEPTS For personal use only Design new capacity that optimizes returns of the entire network – Line location and size determination – Product & process capability selection – Value engineering and line optimization Current cost estimates for next greenfield site range between
Slide 40: Summary
SUMMARY For personal use only • US housing market continues down path of recovery, though at a slower than historical rate. • James Hardie remains focused on market position, including share growth in the wood-look category. • Capacity core concepts remain guiding principles of investment decision-m
Slide 41: Manufacturing and Operations
For personal use only MANUFACTURING AND OPERATIONS Ryan Kilcullen September 2016
Slide 42: Agenda
AGENDA For personal use only • MANUFACTURING AND OPERATIONS OVERVIEW • JAMES HARDIE MANUFACTURING ADVANTAGE • JAMES HARDIE MANUFACTURING APPROACH • APPROACH TO NEW LINE COMMISSIONING PAGE 2
Slide 43: Operations Strategy
OPERATIONS STRATEGY For personal use only • Provides a safe environment and good workplace for all employees, and complies with environmental regulations • Enables JH’s Product Leadership of making highest quality fiber cement • Ensures capacity is available during periods of peak demand • Allows de
Slide 44: Manufacturing Processes
MANUFACTURING PROCESSES For personal use only Process technology segments manufacturing approach Pre-Autoclave Post-Autoclave Manufacturing Continuous Process Material handling Process Raw Material Conversion Coatings application Key Process Long Continuous runs Optimize coating yield Objectives Raw
Slide 45: North America Footprint & Performance
NORTH AMERICA FOOTPRINT & PERFORMANCE For personal use only 200 MMstdft • Largest fiber cement producer in North America Naperville, IL • 1,505 manufacturing 300 MMstdft R&D Facility 560 MMstdft Fontana, CA employees R&D Facility 600 MMstdft 250 MMstdft • 9 manufacturing locations* 190 MMstdft 360 M
Slide 46: What Is Operations Organization?
WHAT IS OPERATIONS ORGANIZATION ? For personal use only Finance & Human Manufacturing Supply Chain Engineering Resources Safety in every part of our Total value chain (raw Maximizing capacity, Helping to maximize process. Delivering on our materials to customer) innovating new products resources and
Slide 47: James Hardie's Manufacturing Advantage
For personal use only JAMES HARDIE’S MANUFACTURING ADVANTAGE
Slide 48: Manufacturing Advantage
MANUFACTURING ADVANTAGE For personal use only PAGE 8
Slide 49: Scale as a Competitive Advantage
SCALE AS A COMPETITIVE ADVANTAGE use only Manufacturing scale creates a significant competitive advantage machine hour Capital $/Annual Volume/gross For personal Throughput Fontana Plant City Tacoma Pulaski Fontana Plant City Tacoma Pulaski Capital Efficiency Unmatched Machine Size & Automation by C
Slide 50: Manufacturing Scale Evolution
MANUFACTURING SCALE EVOLUTION For personal use only Key: Tub Config Finishing Interlever PAGE 10
Slide 51: Process & Product Capability Advantage
PROCESS & PRODUCT CAPABILITY ADVANTAGE For personal use only Internally developed process capability enables product differentiation Product thickness & density HardieTrim® & Artisan control product lines Fit-to-purpose manufacturing HardieZone ® Engineered for processing Climate Post-processing Har
Slide 52: Manufacturing Advantage Summary
MANUFACTURING ADVANTAGE SUMMARY For personal use only • Step change engineering focus has delivered a substantial manufacturing scale advantage • Constant investment in manufacturing process capabilities enable our product differentiation • Flexibility in manufacturing and capacity model allow for c
Slide 53: James Hardie's Manufacturing Management System
For personal use only JAMES HARDIE’S MANUFACTURING MANAGEMENT SYSTEM
Slide 54: Manufacturing Gates 2017
MANUFACTURING GATES 2017 For personal use only First Gate Second Gate Third Gate Fourth Gate Quality & Machine Cost Safety Service Performance Optimization • Gate requirements still in place from FY16 • Path to achieve a journey … tasking sites to learn to run as holistic business • Goal achievement
Slide 55: First Gate: Safety
FIRST GATE: SAFETY For personal use only Work Environment First Gate Optimized Training & Feedback Development Safety Loops World Class Safety Culture Engineering & Organizationa Goal: Zero Harm Process l Culture Capability Safety remains the #1 priority • Organization Culture • Training and Develop
Slide 56: Second Gate: Quality & Service
SECOND GATE: QUALITY & SERVICE For personal use only Second Gate Quality & Service Goal: Deliver on the Brand Promise Quality in execution • 100% 1st Pass & 97% Service • Reduce process variation • Improve schedule adherence • Increase process sustainability PAGE 16
Slide 57: Third Gate: Machine Performance
THIRD GATE: MACHINE PERFORMANCE For personal use only Efficiency Third Gate Machine Performance Performance Material Utilization Yield Goal: 100% PcI-PdI Design with 10% Total Delay Optimize utilization … avoid unnecessary machine start-up • Focus on total delay to increase net hours, machine throug
Slide 58: Fourth Gate: Cost Optimization
FOURTH GATE: COST OPTIMIZATION For personal use only Fourth Gate Raw material Cost Optimization + Total Cost Conversion Management + Fixed Cost Goal: Tight cost control as we add capacity to deliver within Guidance of 20-25% EBIT Drive total cost efficiencies … understand financial tradeoffs • Impro
Slide 59: Start-Up Performance
For personal use only START-UP PERFORMANCE
Slide 60: Key Concepts for Our Start-Ups
KEY CONCEPTS FOR OUR START-UPS For personal use only Break-Even Performance Performance Learning Curve Machine Time Historical Start-Up Approach Historical Start-Up Approach Focus on time to break-even Low material yield results in performance high cost learning curve Machine speed used as Start-up
Slide 61: Plant City Start-Up Approach
PLANT CITY START-UP APPROACH For personal use only Operational Concepts Organizational Concepts • Maximize learning per dollar spent on the • Firewall the start-up organization start-up • Separate the “start-up” team into a • Minimize volume produced at a premium planning team and an execution team
Slide 62: Plant City vs. Recent NA Start-Ups
PLANT CITY VS. RECENT NA START-UPS For personal use only Lowering Cost per Learning to Achieve Similar Efficiency Machine Hours Yield Plant City 4 is delivering significantly higher yield and similar machine performance with half the gross hours run – significantly lowering our “cost of learning” PA
Slide 63: Summary
SUMMARY For personal use only JH manufacturing capabilities continue to provide a significant source of competitive advantage Our gate philosophy in our approach to plant operations provides clarity for organization to deliver continuous improvement Significant progress has been made in our approach
Slide 64: Market Position
For personal use only MARKET POSITION Sean Gadd September 2016
Slide 65: Agenda
AGENDA For personal use only • 35/90 AND WHERE IT COMES FROM • SINGLE FAMILY NEW CONSTRUCTION AGAINST VINYL • SINGLE FAMILY REPAIR AND REMODEL AGAINST VINYL • WINNING AGAINST OSB SIDING • TOP OF MARKET STRATEGY PAGE 2
Slide 66: James Hardie US Strategy
JAMES HARDIE US STRATEGY For personal use only • To grow organically through a differentiated position in the building products industry. • Grow Fiber Cement by substituting for both wood and vinyl based sidings and trim in the new construction, repair & remodel market and multifamily segments (35)
Slide 67: James Hardie vs Competitive Wood-Look Cladding
JAMES HARDIE VS COMPETITIVE WOOD-LOOK CLADDING For personal use only Defend vs Competitive Objective Growth vs Wood Growth vs Vinyl Fiber Cement Value Sell Superior Durability Design – Authentic Look Channel Alignment and Proposition and Low Maintenance of Wood Company PAGE 4
Slide 68: Growth – Terminal Segment Composition
GROWTH – TERMINAL SEGMENT COMPOSITION For personal use only Multifamily Repair and Remodel Single Family Market opportunity & growth will come from both metro and non-metro markets PAGE 5
Slide 69: Single Family New Construction - Vinyl
For personal use only SINGLE FAMILY NEW CONSTRUCTION - VINYL
Slide 70: Primary Competitor by Region
PRIMARY COMPETITOR BY REGION For personal use only Market Development vs Vinyl Sales approach vs OSB Sales approach vs wood PAGE 7
Slide 71: Market Development Against Vinyl
MARKET DEVELOPMENT AGAINST VINYL For personal use only 1. Significant price increase 2. Requires articulation of the value Market Development Approach 3. Switching costs or barriers High • Large number of fragmented Builders • Builders needs differing Fragmentation Local Builders Builder Custom / Se
Slide 72: Market Development – Targeted Approach
MARKET DEVELOPMENT – TARGETED APPROACH For personal use only Market Development Approach Targeting the quality builder, in the right geography at the right price point that is looking to build a quality home with authentic design and the look of real wood Segment Target Position Support and project
Slide 73: Accelerating the Approach
ACCELERATING THE APPROACH For personal use only Increasing James Operating in Leveraging the Shift price point Hardie resources multiple wins and making Left – creating and developing geographies and it “loud” by competitive their capability price points marketing with pressure for key builders buil
Slide 74: Vinyl Standard Market – Product Mix
VINYL STANDARD MARKET – PRODUCT MIX For personal use only Custom Low Low Top of Market Product Solution Price Sensitivity A ColorPlus® Technology Builder Type Paint Cost finish can also be the Semi-Custom lowest cost depending on market paint costs Vinyl Production High High PAGE 11
Slide 75: Single Family Repair and Remodel
For personal use only SINGLE FAMILY REPAIR AND REMODEL
Slide 76: Single Family Repair and Remodel
SINGLE FAMILY REPAIR AND REMODEL For personal use only Key Decision Maker Homeowner • Return On Investment • A Trusting Contractor Decision Maker Key Considerations • Renewing Homeowner’s Dream Home • Durability, Low Maintenance, Design and Time Proven Product • Raise Awareness with The Homeowner •
Slide 77: Vinyl Standard, Metro Markets
VINYL STANDARD, METRO MARKETS For personal use only • Drive awareness and preference for James Hardie products in vinyl battleground neighborhoods via the Contractor • Convert battlegrounds into lockdowns • Reach Homeowners through multiple touch points • Enabling Contractor growth in these key neig
Slide 78: 2 to 10 Activity and Lead Nurturing
“2 TO 10” ACTIVITY AND LEAD NURTURING For personal use only Sold Job Request for quote Request for quote High-S Low-S CONTRACTORS QTY OF NEW CY14 CY15 CY16 PROJECTED. PAGE 15
Slide 79: Non-Metro Markets
NON-METRO MARKETS For personal use only • Invest in non-metro markets – 50%+ of the opportunity • Invest in the “boat” to help create the “wake” • Generalist sales model • Optimize rep selling time in field by doing more work centrally Metro Market Non-Metro Market PAGE 16
Slide 80: Centralized Approach to Deliver Results
CENTRALIZED APPROACH TO DELIVER RESULTS For personal use only Inside Sales Prospecting Centrally Executed Result Activities Qualified Consumer More Opportunities to Reps Leads Accelerate Contractor Conversion Neighborhood Development (2 to 10) Automated Jobsite Marketing Influence “Jack of all Trade
Slide 81: Winning Against OSB Siding
For personal use only WINNING AGAINST OSB SIDING
Slide 82: Winning Against OSB Siding
WINNING AGAINST OSB SIDING For personal use only WIN IN KEY REGIONS 19 PAGE
Slide 83: Winning Against OSB Siding – Non-Product Value
WINNING AGAINST OSB SIDING For personal use only Company versus company (non-product value) Economic Value Analysis $’s Non – Product Marketing Tools Ease of Install, Value Warranty “Me too” positioning Value Design Low Maintenance Durability OSB Siding 20 PAGE
Slide 84: Winning Against OSB Siding in Zone
WINNING AGAINST OSB SIDING IN ZONE 1 For personal use only To win against OSB siding products, James Hardie game plan was developed around key pillars: • Resourcing • Product portfolio changes • Non-Product value programs • Value chain engagement PAGE 21
Slide 85: Resourcing Investments
RESOURCING INVESTMENTS For personal use only • Increased market presence in additional metros and non-metros • Resourced market programs for success • Increased management effectiveness PAGE 22
Slide 86: Product Portfolio – Custom Color
PRODUCT PORTFOLIO – CUSTOM COLOR For personal use only Since the launch of Custom Color sales volume has grown consistently as James Hardie capabilities continue to improve PAGE 23
Slide 87: Product Portfolio – Roughsawn Trim
PRODUCT PORTFOLIO – ROUGHSAWN TRIM For personal use only HardieTrim is now attached to more Hardie homes following the launch of Roughsawn trim PAGE 24
Slide 88: Non-Product Value – 100% Hardie
NON PRODUCT VALUE – 100% HARDIE • Single family new construction program For personal use only • 100% Hardie program continues to enhance the James Hardie value proposition • Designed to inspire confidence that is marketable at the builder level Builder Conversions Minneapolis Pilot Expansion to add
Slide 89: Non-Product Value – Ambassador Program
NON-PRODUCT VALUE - AMBASSADOR PROGRAM For personal use only • Repair and Remodel program • Expanded the Ambassador Program to additional markets PAGE 26
Slide 90: Value Chain Engagement – SideMaster
VALUE CHAIN ENGAGEMENT – SIDEMASTER For personal use only • SIDE Master is an Installer affiliation program • Enhances James Hardie partnership with installers through education, tools and services. • Continue to work on creating value for the installer PAGE 27
Slide 91: Value Chain Engagement – askHardie
VALUE CHAIN ENGAGEMENT – ASKHARDIE™ For personal use only Additional resources for dealers in select non-metro markets providing expedited response times through dedicated single source experts JH Rep Coverage askHardie™ Coverage PAGE 28
Slide 92: Winning Against OSB Siding in Zone 2
WINNING AGAINST OSB SIDING IN ZONE 2 For personal use only To win against OSB siding in Zone 2, James Hardie game plan was developed around key pillars: • Winning large builders • Building stronger relationships with our channel partners • Winning trim LP conversions - Zone 2 FY14 FY15 FY16 FY17 (TT
Slide 93: Top of Market
For personal use only TOP OF MARKET
Slide 94: Top of Market
TOP OF MARKET For personal use only • The goal in Top of Market is to establish a design leadership position for James Hardie on luxury and custom homes. • Product development investments will deliver a suite of products designed to appeal to traditional, contemporary, or modern design preferences.
Slide 95: Top of Market – James Hardie
TOP OF MARKET – JAMES HARDIE For personal use only James Hardie is uniquely advantaged to win in the Top of Market… • Trusted and respected brand with proven durability • Product Leadership: Technologies to deliver improved product development capabilities • Leverage process advantages • Work though
Slide 96: Top of Market – Competitor
TOP OF MARKET - COMPETITOR For personal use only • The wood and panel look portion of the Top of Market has traditionally been split between cedar, wood and some high-end imports • Several exterior cladding manufacturers have recently introduced products Total Top of Market Wood-look Market Share, T
Slide 97: Top of Market – Customer
TOM OF MARKET - CUSTOMER For personal use only The Top of Market is influenced heavily by the small, custom home builder and the architect they partner with Custom Builder Segmentation Architect Needs from Manufacturer Source: Venveo Source: Hanley Wood PAGE 34
Slide 98: Top of Market – Opportunity
TOP OF MARKET - OPPORTUNITY For personal use only • Approx. 35% of wood look material has already been displaced by HardiePlank Top of Market • Over time Top of Market products should extend downward and address homes in lower tiers • Including all homes above $300K would add another 19% of US cladd
Slide 99: Top of Market – Value Proposition
TOP OF MARKET – VALUE PROPOSITION For personal use only • Brand you can trust High Focus Target Product on Aesthetics Line Cedar • Low maintenance • Lower Maintenance • Deep Shadow lines • For Architects: • Flat wall look • Mitered corners Aesthetics Looking good • Design, specifically hidden nails
Slide 100: Top of Market – Product Development
TOP OF MARKET - PRODUCT DEVELOPMENT For personal use only Our product development programs leverage advances and investments in: • Thick Products • Low Density • Machining • Pressing • Sanding • Embossing PAGE 37
Slide 101: Top of Market – Sales and Marketing
TOP OF MARKET – SALES AND MARKETING For personal use only • High fragmentation of Top of Market customers drives the marketing mix to win the segment more heavily weighted to centralized investments vs field resources. • Will supplement with field resources to partner with key builders, architects a
Slide 102: Questions
For personal use only QUESTIONS
Slide 103: Interiors Overview
For personal use only INTERIORS OVERVIEW Bill Hogan September 2016
Slide 104: Agenda
AGENDA For personal use only • INTERIORS OVERVIEW • PATH TO 50% SHARE • ACHIEVING “++” STRATEGY • QUESTIONS PAGE PAGE 2
Slide 105: Tile Underlayment Overview
TILE UNDERLAYMENT OVERVIEW For personal use only Floors • Tile underlayment, most commonly referred to as backerboard, is installed under tile in wet areas • Backerboard provides a solid foundation to install the tile and protects the subfloor from moisture and mold • Backerboard is most commonly in
Slide 106: Tile Market Growth
TILE MARKET GROWTH For personal use only U.S. ceramic tile volume (MMSF) • U.S. ceramic tile volume has 3,000 increased by ~7.2% p.a. to reach ~2.7 billion square feet in 2015 2,500 • Ceramic tile has increased its share of 2,000 the total floor coverings market from 1,500 ~11% in 2010 to ~13% in 20
Slide 107: Construction Drivers
CONSTRUCTION DRIVERS For personal use only Increased construction activity has driven higher demand for ceramic tile … Single family housing starts (000s) Residential R&R spending ($B) 800 $400 600 $300 Higher usage of 400 $200 backerboard in SFNC and R&R segments 200 $100 0 $- 2010 2015 2010 2015 M
Slide 108: Tile vs. Backerboard Usage
TILE VS. BACKERBOARD USAGE For personal use only Tile and Backerboard Volume SFNC and R&R 100% • Backerboard is prominent solution over wood subfloors 80% • Not used over slab on grade 60% Commercial and multifamily 40% • Lower usage as backerboard is not used 20% over concrete floors • Backerboard
Slide 109: Types of Tile Underlayment
TYPES OF TILE UNDERLAYMENT For personal use only Description JH value proposition Example brands • HardieBacker® has a differentiated fiber cement • Cement board with 90% formulation and has been voted the most Fiber cement Portland cement and preferred backerboard by NTCA professional sand contract
Slide 110: HardieBacker Positioning
HARDIEBACKER POSITIONING For personal use only • HardieBacker® is the market leader in rigid backerboard • Voted most preferred backerboard by NTCA professional contractors in study conducted by Clear Seas Research • Only backerboard stocked nationally at both Home Depot and Lowe’s • Customers see v
Slide 111: Channel Presence
CHANNEL PRESENCE For personal use only Largest JH backerboard segment Example companies presence Primary customer Segment advantage • Convenience (locations / hours) DIY, remodeling • One-stop-shop for a broad range of JH over- Big Box contractors, “jack of items that remodelers buy (fixtures, index
Slide 112: Historical Interiors Performance
HISTORICAL INTERIORS PERFORMANCE For personal use only Interiors rolling 12-month PDG growth FY16: Met goal FY15: Underperformed FY14: Underperformed FY14 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY15 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY16 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY17 Q1 The Interiors team has consistently accelerate
Slide 113: Agenda
AGENDA For personal use only • INTERIORS OVERVIEW • PATH TO 50% SHARE • ACHIEVING “++” STRATEGY • QUESTIONS PAGE PAGE 11
Slide 114: 50% Share Ambition
50% SHARE AMBITION For personal use only HardieBacker® current market share • Our goal is to drive HardieBacker® share to 50% of the backerboard market • Current share is estimated to be ~35-40%, with a stronger position in retail than in the pro channel • Achieving 50% market share Retail Pro Total
Slide 115: Key Initiatives
KEY INITIATIVES For personal use only 1 • Educating contractors on the value Driving Brand proposition and points of differentiation Preference • Driving end user conversion to HardieBacker® from other technologies 2 • Maintain high level of engagement in retail Channel channel Alignment • Expand po
Slide 116: Path to 50% Share
PATH TO 50% SHARE For personal use only Relative share growth opportunity High Medium Low PAGE PAGE 14
Slide 117: Agenda
AGENDA For personal use only • INTERIORS OVERVIEW • PATH TO 50% SHARE • ACHIEVING “++” STRATEGY • QUESTIONS PAGE PAGE 15
Slide 118: Vision for Interiors
VISION FOR INTERIORS For personal use only % share of rigid • Drive share of backerboard to 50% backer ̶ Growth required across channels, with most coming from pro Win • Enter non-FC underlayment categories underlayments to achieve 50% share of total underlayments Add • Develop JH into one of the to
Slide 119: Example Categories and Products
EXAMPLE CATEGORIES AND PRODUCTS For personal use only Prep / underlayment Backerboard Mats Membranes Self-leveling Setting / grout Accessories Mortar Grout Tapes Fasteners Sealants Shower systems Kits Pans / bases Benches Shelves PAGE PAGE 17
Slide 120: Agenda
AGENDA For personal use only • INTERIORS OVERVIEW • PATH TO 50% SHARE • ACHIEVING “++” STRATEGY • QUESTIONS PAGE PAGE 18
Slide 121: Technology Update
For personal use only TECHNOLOGY UPDATE Mark Fisher September 2016
Slide 122: Fiber Cement Technology Strategy
FIBER CEMENT TECHNOLOGY STRATEGY For personal use only Enable James Hardie Product Leadership Strategy Provide a continuous pipeline of innovative new products and technologies that deliver sustainable advantages to achieve our category and market share goals PAGE 2
Slide 123: R&D Locations
R&D LOCATIONS For personal use only Three research centers – US and Australia • Fontana, CA • Naperville, IL • Sydney, AUS Naperville, IL CA Fontana, CA Sydney, AUS. PAGE 3
Slide 124: Creating a Sustainable and Differentiated Advantage
CREATING A SUSTAINABLE AND DIFFERENTIATED ADVANTAGE For personal use only Research and Development: Significant and consistent investment • US$29.5m spent on Research & Development in FY16 History of Fiber Cement Substrate Development PAGE 4
Slide 125: Research Capabilities
RESEARCH CAPABILITIES For personal use only Longer-Term, Real-Life Exposure PAGE 5
Slide 126: Product Performance
PRODUCT PERFORMANCE For personal use only HZ5® siding performs 5X better than generic FC in system testing 120 100 DURABILITY INDEX 80 BETTER 60 100 40 60 20 40 20 0 Generic Fiber HZ5 Cement TIME Source: James Hardie Internal Research and Testing PAGE 6
Slide 127: Product Development
PRODUCT DEVELOPMENT For personal use only Artisan® V-Rustic Siding HardieTrim™ Mouldings HardieReveal2.0™ Panel System Artisan® Cove and HardieTrim™ NT3® Beveled Channel Siding Roughsawn PAGE 7
Slide 128: Non-FC Technology Strategy
NON – FC TECHNOLOGY STRATEGY For personal use only Evaluate and develop alternate material technologies and Non – FC product opportunities for fit with current and future JH Business • New technology exploration – materials, process and applications • Utilize existing markets or new opportunities to
Slide 129: Non-FC Technology Capability
NON – FC TECHNOLOGY CAPABILITY For personal use only Established Non – FC research and development capabilities in Naperville center over the last 2-3 years Product Windows Coatings Non FC Performance (Design and Development Materials and Support Performance) Current Areas of Capability PAGE 9
Slide 130: Questions
For personal use only QUESTIONS
James Hardie Industries — Investor Presentation (September 2016) on 6ix