James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Q2 FY2009 Earnings Presentation
53 slides from James Hardie Industries's earnings presentation, Nov 19, 2008
Slide 1: Q2 FY09 Results Management Presentation
In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non- US GAAP financial measures included in the Definitions section of this document starting on page 46. The company presents financial measures that it believes are customarily u
Slide 2: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda
Slide 3: Overview
Operating results were significantly affected by further declines in the US housing market and overall market downturn Net operating profit for the quarter and half year affected by material favourable asbestos adjustments, unfavourable ASIC expenses and unfavourable tax adjustments US$ Millions Q2
Slide 4: Operating Review
Operating Review Louis Gries, CEO
Slide 5: Global Strategy
Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors Introduce differentiated products to reduce direct price competition Global Strat
Slide 6: USA Fibre Cement: 2nd Quarter Result
2nd Quarter Result Net Sales down 16% to US$257.4 million Sales Volume down 17% to 424.6 mmsf Average Price up 1% to US$606 per msf EBIT down 27% to US$61.4 million EBIT Margin down 3.5 pts to 23.9% USA Fibre Cement
Slide 7: USA Fibre Cement: Half Year Result
Half Year Result Net Sales down 18% to US$533.7 million Sales Volume down 18% to 887.2 mmsf Average Price down less than 1% to US$602 per msf EBIT down 36% to US$127.3 million EBIT Margin down 6.5 pts to 23.9% USA Fibre Cement
Slide 8: 2nd Quarter Market Conditions
2nd Quarter Market Conditions Further deterioration in new housing construction activity Starts down 35% for the quarter, compared to last year Market demand affected by weaker economic conditions, tighter lending standards and falling house prices Inventory level of new homes remains high More exis
Slide 9: 2nd Quarter Key Points
2nd Quarter Key Points Sales down due to declining market Sales volumes were lower across all divisions and in each key region, other than Canada While sales of most exterior products declined, the differentiated ColorPlus(r) collection of products increased market penetration in the quarter Weaknes
Slide 10: Plant Suspensions at Fontana and Summerville
Announced on 4 November 2008, in response to the continued deterioration in the US housing market: Suspension of operations at Fontana, California plant Fontana, a 175 mmsf per annum plant, has been running at reduced operating levels since the market downturn Reduction in demand in the core area it
Slide 11: Outlook
Outlook On-going downward pressure on house prices and weaker demand Repair & Remodelling activity expected to continue to be soft Maintain or grow market share of fibre cement against alternative materials Maintain share of fibre cement category USA Fibre Cement
Slide 12: Top Line Growth: Volume, Revenue and Housing Starts
Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau Top Line Growth 0 400 800 1,200 1,600 2,000 2,400 2,800 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 JH Volume (mmsf), Starts (000s Units) $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000
Slide 13: Primary Growth Performance
Primary Growth Performance Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $ expenditures less CPI Note: • US Census discontinued their R&R $ expenditures report in 2007 • 2008 R&R = avg. published Home Depot & Lowe's same store sales less CPI USA Fibre Cement
Slide 14: Average Net Selling Price
Average Net Selling Price US$ per MSF 360 400 440 480 520 560 600 640 FY03 FY04 FY05 FY06 FY07 FY08 HY09 USA Fibre Cement
Slide 15: EBIT and EBIT Margin
*Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02 and impairment charges of US$45.6 million in Q4 FY08 EBIT and EBIT Margin* 0 20 40 60 80 100 120 140 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Q2 FY09 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales USA Fibre C
Slide 16: Asia Pacific Fibre Cement: 2nd Quarter Result
2nd Quarter Result Net Sales up 4% to US$78.9 million Sales Volume down 2% to 102.0 mmsf Average Price up 1% to A$869 per msf EBIT up 14% to US$14.1 million EBIT Margin up 1.6 pts to 17.9% Asia Pacific Fibre Cement
Slide 17: Asia Pacific Fibre Cement: Half Year Result
Half Year Result Net Sales up 10% to US$162.2 million Sales Volume up 1% to 203.9 mmsf Average Price up less than 1% to A$868 per msf EBIT up 21% to US$29.9 million EBIT Margin up 1.6 pts to 18.4% Asia Pacific Fibre Cement
Slide 18: Key Points
Key Points Residential construction declined in both Australia and New Zealand Strong result in Q2 against the overall market downturn driven by a primary demand focus for sales growth to the small builder and renovation segments US$ financial results assisted by appreciation of Asia Pacific currenc
Slide 19: Outlook
Outlook Building approvals expected to continue to fall in Australia and in New Zealand Housing affordability to remain under pressure with high interest rates and fuel costs Continued growth in sales of differentiated products Non-differentiated products in Australia are expected to remain subject
Slide 20: Financial Review
Financial Review Russell Chenu, CFO
Slide 21: Overview
Result affected by further decline in US housing construction activity Reduced cash flow as a result of reduced contribution from US business Decrease in capital expenditure Net operating profit affected by asbestos, ASIC expenses and tax adjustments: Asbestos adjustments: US$140.8m in Q2 and US$100
Slide 22: Interim Dividend
The company today announced it will omit the interim dividend for the current fiscal year Contributing factors: The significant change in the macro environment since the last revision of the company's dividend policy in May 2007 Market uncertainty US housing market Global economic environment Pruden
Slide 23: Results - Q2
US$ Millions Q2'09 Q2'08 % Change Net sales 341.9 390.1 (12) Gross profit 113.2 138.8 (18) SG&A expenses (54.7) (58.1) 6 Research & development expenses (7.1) (7.1) - Asbestos adjustments 140.8 (28.9) - EBIT 192.2 44.7 - Net interest income 0.3 2.0 (85) Income tax expense (39.0) (27.6) (41) Net oper
Slide 24: Results - Q2
US$ Millions Q2'09 Q2'08 % Change Net operating profit 153.5 19.1 - Asbestos: Asbestos adjustments (140.8) 28.9 - AICF SG&A expenses 0.3 1.1 (73) AICF interest income (2.3) (2.6) 12 ASIC expenses 5.0 1.9 - Tax adjustments 20.5 0.8 - Net operating profit excluding asbestos, ASIC expenses and tax adju
Slide 25: Results - Half Year
US$ Millions HY'09 HY'08 % Change Net sales 706.9 814.5 (13) Gross profit 237.2 305.7 (22) SG&A expenses (108.0) (113.6) 5 Research & development expenses (14.4) (13.4) (7) Asbestos adjustments 100.3 (59.0) - EBIT 215.1 119.7 80 Net interest (expense) income (0.8) 2.5 - Income tax expense (59.4) (64
Slide 26: Results - Half Year
US$ Millions HY'09 HY'08 % Change Net operating profit 154.9 58.2 - Asbestos: Asbestos adjustments (100.3) 59.0 - Tax expense related to asbestos adjustments - 0.4 - AICF SG&A expenses 0.9 1.7 (47) AICF interest income (3.2) (4.2) 24 ASIC expenses 6.5 3.1 - Tax adjustments 17.4 1.6 - Net operating p
Slide 27: Segment Net Sales - Q2
US$ Millions Q2'09 Q2'08 % Change USA and Europe Fibre Cement 263.0 314.0 (16) Asia Pacific Fibre Cement 78.9 76.1 4 Total 341.9 390.1 (12) Segment Net Sales - Q2
Slide 28: Segment Net Sales - Half Year
US$ Millions HY'09 HY'08 % Change USA and Europe Fibre Cement 544.7 667.2 (18) Asia Pacific Fibre Cement 162.2 147.3 10 Total 706.9 814.5 (13) Segment Net Sales - Half Year
Slide 29: Segment EBIT - Q2
US$ Millions Q2'09 Q2'08 % Change USA and Europe Fibre Cement 61.1 82.4 (26) Asia Pacific Fibre Cement 14.1 12.4 14 Research & development1 (5.0) (4.8) (4) Total segment EBIT 70.2 90.0 (22) General Corporate excluding ASIC expenses (13.5) (13.4) (1) Total EBIT excluding asbestos and ASIC expenses 56
Slide 30: Segment EBIT - Half Year
US$ Millions HY'09 HY'08 % Change USA and Europe Fibre Cement 126.7 195.5 (35) Asia Pacific Fibre Cement 29.9 24.8 21 Research & development1 (10.0) (8.9) (12) Total segment EBIT 146.6 211.4 (31) General Corporate excluding ASIC expenses (24.4) (27.9) 13 Total EBIT excluding asbestos and ASIC expens
Slide 31: Corporate Costs - Q2
US$ Millions Q2'09 Q2'08 % Change Stock compensation expense 1.6 1.6 - Earnings-related bonus 0.4 2.0 80 ASIC expenses 5.0 1.9 - Other costs 11.5 9.8 (17) Total 18.5 15.3 (21) Other costs have increased due to: Non ASIC legacy issues Unfavourable impact of movements in foreign exchange rates for cor
Slide 32: Corporate Costs - Half Year
US$ Millions HY'09 HY'08 % Change Stock compensation expense 3.6 3.1 (16) Earnings-related bonus 1.0 2.9 66 Non-US warranty provision - 4.0 - ASIC expenses 6.5 3.1 - Other costs 19.8 17.9 (11) Total 30.9 31.0 - Other costs have increased due to: Non ASIC legacy issues Unfavourable impact of movement
Slide 33: Net Interest (Expense) Income
US$ Millions Q2'09 Q2'08 HY '09 HY '08 Gross interest expense (2.3) (2.6) (4.9) (4.4) Capitalised interest - 0.2 - 0.6 Interest income 0.3 1.8 0.9 2.1 Net interest expense excluding AICF net interest income (2.0) (0.6) (4.0) (1.7) AICF net interest income 2.3 2.6 3.2 4.2 Net interest income (expense
Slide 34: Income Tax Expense - Q2
US$ Millions US$ Millions Q2'09 Q2'08 Operating profit before income taxes Operating profit before income taxes 192.5 46.7 Asbestos: Asbestos: Asbestos adjustments Asbestos adjustments (140.8) 28.9 AICF SG&A expenses AICF SG&A expenses 0.3 1.1 AICF interest income AICF interest income (2.3) (2.6) Op
Slide 35: Income Tax Expense - Half Year
US$ Millions HY'09 HY'08 Operating profit before income taxes 214.3 122.2 Asbestos: Asbestos adjustments (100.3) 59.0 AICF SG&A expenses 0.9 1.7 AICF interest income (3.2) (4.2) Operating profit before income taxes excluding asbestos 111.7 178.7 Income tax expense (59.4) (64.0) Asbestos: Tax expense
Slide 36: EBITDA - Q2
US$ Millions Q2'09 Q2'08 % Change EBIT USA and Europe Fibre Cement 61.1 82.4 (26) Asia Pacific Fibre Cement 14.1 12.4 14 Research & development (5.0) (4.8) (4) General Corporate excluding ASIC expenses (13.5) (13.4) (1) Depreciation and Amortisation USA and Europe Fibre Cement 11.7 11.6 1 Asia Pacif
Slide 37: EBITDA - Half Year
US$ Millions HY'09 HY'08 % Change EBIT USA and Europe Fibre Cement 126.7 195.5 (35) Asia Pacific Fibre Cement 29.9 24.8 21 Research & development (10.0) (8.9) (12) General Corporate excluding ASIC expenses (24.4) (27.9) 13 Depreciation and Amortisation USA and Europe Fibre Cement 23.1 23.1 - Asia Pa
Slide 38: Cash Flow
US$ Millions HY'09 HY'08 % Change EBIT 215.1 119.7 80 Non-cash items - Asbestos adjustments (100.3) 59.0 - - Other non-cash items 35.5 60.1 (41) Change in restricted cash - asbestos 38.7 21.5 80 Net working capital movements (28.3) 20.0 - Cash generated by trading activities 160.7 280.3 (43) Tax pay
Slide 39: Capital Expenditure
US$ Millions HY'09 HY'08 % Change USA and Europe Fibre Cement 6.9 21.0 67 Asia Pacific Fibre Cement 2.5 3.2 22 Total 9.4 24.2 61 Capital Expenditure
Slide 40: Debt
Weighted average remaining term of the total facilities was 2.0 years at 30 September 2008. Declined extension beyond December 2008 of US$41.7m of facilities due to terms that we deemed unacceptable In November 2008 signed new credit facility for US$50.0m with terms consistent with current facilitie
Slide 41: Key Ratios
Q2' FY09 FY08 FY07 EPS (Diluted)1 17.6c 36.9c 49.3c Dividend Paid per share 8.0c 27.0c 9.0c Return on Shareholders' Funds1 18.0% 17.7% 24.0% Return on Capital Employed2 22.4% 24.2% 27.7% EBIT/ Sales (EBIT margin)2 17.3% 19.2% 21.6% Gearing Ratio1 17.0% 21.5% 12.5% Net Interest Expense Cover2 30.6x 3
Slide 42: Asbestos Fund Update
AICF holdings at 30 September 2008 A$110.6m - cash and short-term investments Net claims paid HY FY09: A$ Millions AICF HY FY09 KPMG Actuarial Estimate* AICF HY FY08 Claims Paid 46.8 39.8 32.4 Legal Costs 4.8 2.0 3.3 Insurance and cross claim recoveries (9.1) (6.2) (11.0) Total net claims costs 42.5
Slide 43: Summary
Net operating line affected by favourable asbestos adjustments, unfavourable ASIC expenses and unfavourable tax adjustments Results significantly affected by further declines in US housing market EBIT affected by reduced contribution from US business Ongoing business re-set to reduce US organisation
Slide 44: Questions & Answers
James Hardie Questions & Answers
Slide 45: Forward-looking statements
This Management Presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering
Slide 46: Definitions
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 Management's Analysis of Results, a Media Release and a Financial Report. Definitions Financial Measures - US GAAP equival
Slide 47: Financial Ratios - Endnotes
Financial Ratios Gearing Ratio - Net debt (cash) divided by net debt (cash) plus shareholders' equity. Net interest expense cover - EBIT divided by net interest expense. Net interest paid cover - EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payback -
Slide 48: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos and ASIC expenses - EBIT and EBIT margin excluding asbestos and ASIC expenses are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has
Slide 49: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, ASIC expenses and tax adjustments - Net operating profit excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningfu
Slide 50: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments - Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be mo
Slide 51: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos and tax adjustments - Effective tax rate excluding asbestos and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The com
Slide 52: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) EBITDA - is not a measure of financial performance under US GAAP and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by US GAAP or as a measure of profitability or liquidity. N
Slide 53: Non-US GAAP financial measures notice
In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non- US GAAP financial measures included in the Definitions section of this document starting on page 46. The company presents financial measures that it believes are customarily u
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