James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2017 Earnings Presentation
38 slides from James Hardie Industries's earnings presentation, Nov 18, 2016
Slide 1: Q2 FY17 Management Presentation
Q2 FY17 MANAGEMENT PRESENTATION 17 November 2016 Exhibit 99.4
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 forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange Commission,
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
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 are i
Slide 4: Note to the Reader
NOTE TO THE READER 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 June 2016, the Company b
Slide 5: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
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 are des
Slide 6: Agenda
AGENDA Overview and Operating Review – Louis Gries, CEO Financial Review – Matt Marsh, EVP and CFO Questions and Answers
Slide 7: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 8: Group Overview
GROUP OVERVIEW Higher volume in North America Fiber Cement and strong net sales growth in all operating segments3 HY FY17 North America Fiber Cement EBIT margin of 25.5% Net operating cash flow increased US$45.4 million compared to pcp Announced plans to restart Summerville manufacturing facility De
Slide 9: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY Volume Steady growth in R&R and new construction markets Market penetration momentum continues to improve PDG improving and trending closer to target Volume growth by period versus pcp: Q1 FY1716% Q2 FY1712% HY FY1714% EBIT EBIT growth lagging net sales growth due
Slide 10: North America Fiber Cement EBIT Margin
1 Excludes asset impairment charges of US$14.3 million in Q4 FY12, US$5.8 million in Q3 FY13 and US$11.1 million in Q4 FY13 NORTH AMERICA FIBER CEMENT Half Year EBIT Margin % remains above target range, but down 170 bps to 25.5% compared to pcp
Slide 11: North America Fiber Cement Pricing and Volume
NORTH AMERICA FIBER CEMENT Pricing down ~1% driven by regional and product mix and ongoing execution of tactical pricing strategies Overall, satisfied with tactical pricing and price positioning 2Q17 revenue up 10% on 12% volume growth 1H17 revenue up 12% on 14% volume growth Continuing to outpace U
Slide 12: International Fiber Cement Summary
Volume Half year volume increased 2%, excluding the Australian Pipes business Volume growth in Australian, Europe and New Zealand businesses Volume declined in the Philippines Price Q2 FY17 and HY FY17 favorably impacted by annual price increase in the Australian business Q2 FY17 favorably impacted
Slide 13: International Fiber Cement (USD)
INTERNATIONAL FIBER CEMENT (USD) 1 Excludes Australian Pipes business which was sold in Q1 FY16 Australia Higher volumes and strategic pricing Non-recurring startup costs at Carole Park in Q2 FY16 New Zealand Higher volumes and strategic pricing Philippines Volume and net sales lower due to strong c
Slide 14: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 15: Results – 2nd Quarter FY17
Net sales increased 10% Higher volume driven by North America segment Higher average net sales price in International Fiber Cement segment Gross profit increased 10%, in line with net sales SG&A expenses increased 10% Continued higher investment in sales and marketing activities supporting growth in
Slide 16: Results – Half Year FY17
RESULTS – HALF YEAR FY17 Net sales increased 11% Higher volume in all operating segments3 Higher average net sales price in International Fiber Cement segment Gross profit increased 11% … gross margin %, up slightly by 20 bps SG&A expenses increased 14% Continued higher investment in sales and marke
Slide 17: Changes in AUD vs. USD
CHANGES IN AUD vs. USD I} eM node USS Millions 4H47 4H4N6 ‘% Change 4H'7 ‘% Change ‘$(Unfav)/Fav_ Net sales $s 973.5 8785 ~ 11% $ 973.1 *= 11% Gross profit 368.9 3226 * 11% 3688 * 11% Adjusted EBIT 203.7 1849 ~ 10% 2036 ~ 10% Adjusted net operating profit 1414 1287 ~ 10% $ 1413 * 10% " As Reported 1
Slide 18: North America Input Costs
NORTH AMERICA INPUT COSTS The price of NBSK pulp increased 4% compared to prior corresponding quarter Cement prices continue to rise, up 5% compared to prior corresponding quarter Gas prices are down 20% compared to prior corresponding quarter Freight market prices are down 8% compared to prior corr
Slide 19: Segment EBIT – 2nd Quarter and Half Year FY17
North America Fiber Cement EBIT summary 2Q and 1H EBIT increased by 7% and 5%, respectively, when compared to pcp Driven by favorable volume, partially offset by higher production costs and continued investment in SG&A expense SEGMENT EBIT – 2nd QUARTER and HALF YEAR FY17 International Fiber Cement
Slide 20: Segment EBIT – 2nd Quarter and Half Year FY17 (Other)
Other Businesses 2Q and 1H EBIT loss improved by 43% and 37%, respectively, when compared to pcp Driven by improving performance of Windows business 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 in any given peri
Slide 21: Income Tax
1 Includes Asbestos adjustments, AICF SG&A expenses and net AICF interest expense (income) 2 Excludes tax effects of Asbestos and other tax adjustments 26.0% estimated adjusted effective tax rate for the year Adjusted income tax expense for the quarter and half year increased due to higher adjusted
Slide 22: Cashflow
1 CASHFLOW Increase in net operating cash flow Favorable change in working capital Increase in net income adjusted for non-cash items Partially offset by increase in the annual AICF contribution Lower capital expenditures Higher financing activities Increase in net repayments of debt Increase in sha
Slide 23: Capital Expenditure
CAPITAL EXPENDITURE Half year CAPEX of US$35.6 million down by 16% compared to pcp North America capacity projects: Restarting Summerville facility with an estimated cost of US$17.9 million; planned for early FY18 Expecting to commission Cleburne facility sheet machine in Q3 FY17 Continue to expand
Slide 24: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH 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 organic growth Main
Slide 25: Liquidity Profile
LIQUIDITY PROFILE Corporate debt structure US$500 million unsecured revolving credit facility, with a December 2020 maturity US$400 million senior unsecured notes2 maturing February 2023 Strong balance sheet US$84.7 million cash US$528.8 million net debt3 at Q2 FY17 55% liquidity on bank debt at Q2
Slide 26: FY2017 Guidance
FY2017 GUIDANCE Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2017 is between US$256 million and US$285 million Management expects full year Adjusted net operating profit to be between US$250 million and US$270 million assu
Slide 27: Questions
@)vames Hardie QUESTIONS
Slide 28: Appendix
@)vames Hardie APPENDIX
Slide 29: Financial Summary
FINANCIAL SUMMARY 1 Excludes Asbestos related expenses and adjustments
Slide 30: Asbestos Claims Data
ASBESTOS CLAIMS DATA Quarter and 1H claims received decreased by 17% and 4%, respectively, compared to pcp Quarter and 1H claims received were 17% and 9%, below actuarial estimates, respectively Claims reporting during the half year for mesothelioma: 12% lower than pcp 8% lower than actuarial estima
Slide 31: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION
Slide 32: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS This Management Presentation forms part of a package of information about the company’s results. It should be read in conjunction with the other parts of this package, including the Management’s Analysis of Results, Media Release and Condensed Consolidated Financial State
Slide 33: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non-US GAAP, but are consistent with those used by Australian companies. Because the company prepares its Condensed Consolidated Financi
Slide 34: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES EBIT – Earnings before interest and taxes EBIT margin – EBIT margin is defined as EBIT as a percentage of net sales Sales Volumes mmsf – million square feet, where a square foot is defined as a standard square foot of 5/16” thickness msf – thousand square feet, where a
Slide 35: Non-US GAAP Financial Measures – Adjusted EBIT
Financial Measures – US GAAP equivalents NON-US GAAP FINANCIAL MEASURES Adjusted EBIT US$ Millions Q2'17 Q2'16 1H'17 1H'16 EBIT 88.5 $ 161.1 $ 206.3 $ 245.6 $ Asbestos: Asbestos adjustments 17.2 (66.0) (3.4) (61.5) AICF SG&A expenses 0.4 0.3 0.8 0.8 Adjusted EBIT 106.1 95.4 203.7 184.9 Net sales 495
Slide 36: Non-US GAAP Financial Measures – Adjusted Effective Tax Rate
NON-US GAAP FINANCIAL MEASURES Adjusted effective tax rate US$ Millions Q2'17 Q2'16 1H'17 1H'16 Operating profit before income taxes 82.0 153.9 193.0 235.2 Asbestos: Asbestos adjustments 17.2 (66.0) (3.4) (61.5) AICF SG&A expenses 0.4 0.3 0.8 0.8 AICF interest (income) expense, net (0.1) 0.1 0.6 - A
Slide 37: Non-US GAAP Financial Measures – Adjusted EBITDA
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA US$ Millions Q2'17 Q2'16 1H'17 1H'16 EBIT 88.5 $ 161.1 $ 206.3 $ 245.6 $ Depreciation and amortization 20.4 17.6 39.9 35.8 Adjusted EBITDA 108.9 $ 178.7 $ 246.2 $ 281.4 $ Three Months and Half Year ended 30 September Adjusted selling, general and admini
Slide 38: Q2 FY17 Management Presentation
Q2 FY17 MANAGEMENT PRESENTATION 17 November 2016
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