James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2018 Earnings Presentation
45 slides from James Hardie Industries's earnings presentation, Nov 9, 2017
Slide 1: Q2 FY18 Management Presentation
Q2 FY18 MANAGEMENT PRESENTATION 09 November 2017 Exhibit 99.4
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 • Fermacell Acquisition – Louis Gries, CEO • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers – Q2 • Questions and Answers – Fermacell Acquisition 5
Slide 6: Fermacell Acquisition
FERMACELL ACQUISITION Louis Gries, CEO
Slide 7: Fermacell: Transaction Summary
PAGE Fermacell: Transaction Summary 7 Valuation ► All-cash transaction valued at €473 million (approximately US$549 million) ► Represents ~9x multiple on projected CY2017 EBITDA Financial Impact Financing ► Committed bridge financing from HSBC ► Plan to replace bridge financing with long-term debt ►
Slide 8: Fermacell: Transaction Rationale
PAGE Fermacell: Transaction Rationale 8 Compelling Strategic Fit Creates Platform for Leading European Fiber Cement Business Attractive Opportunity ► Category leader ► Differentiated product ► Strong brand ► Technical Sales ► Track record of growth ► Strong management team ► Deep knowledge of Europe
Slide 9: Fermacell: Leading Producer of Premium Fiber Gypsum Boards
PAGE Fermacell: Leading Producer of Premium Fiber Gypsum Boards 9 ► Differentiated category of fiber gypsum and floor boards ► Top player in the category ► A European business of scale ► Consistent, profitable growth ► Strong management team Commercial Residential New Construction Residential Repair
Slide 10: Fermacell: a European Business of Scale
PAGE Fermacell: a European Business of Scale 10 Manufacturing R&D Headquarters Countries with own salesforce (exl. UAE) ► CY2017 projected revenue of ~€270million ► ~800 employees ► 6 manufacturing plants ► Salesforce in 12 countries ► #1 category share position in key countries ► HQ in Germany
Slide 11: Transaction Enables Step-Change Growth in Fiber Cement
PAGE Transaction Enables Step-Change Growth in Fiber Cement 11 What we can leverage from Fermacell… …leading to a step- change in Fiber Cement Growth …enables strong returns for Fiber Cement Deep knowledge of European markets Strong industry relationships Established technical salesforce Routes to m
Slide 12: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 13: Group Overview
PAGE GROUP OVERVIEW 13 • North America Fiber Cement: Manufacturing stabilizing and improving; volume still tracking slightly behind market index due to prior year capacity constraint. Confident we are on the right track. • International Fiber Cement out performing expectations • Declared first half
Slide 14: North America Fiber Cement Summary
PAGE NORTH AMERICA FIBER CEMENT SUMMARY Volume • Growth below market index • FY17 capacity constraint dampened FY18 demand Price • Favorably impacted by annual changes in strategic pricing effective April 2017; and tactical pricing strategies Manufacturing Capacity and Production Costs • Stabilizing
Slide 15: North America Delivered Unit Cost
PAGE NORTH AMERICA DELIVERED UNIT COST 15 • Delivered unit cost improved Q2FY18 vs Q1FY18 • Throughputs, freight and spending all improved Q2FY18 vs Q1FY18 • Continued improvements expected throughout the second half of FY18 • Delivered unit cost in Q2 FY18 and 1H FY18 remains higher than pcp
Slide 16: North America Fiber Cement Quarterly EBIT and EBIT Margin
PAGE 0 5 10 15 20 25 30 0 10 20 30 40 50 60 70 80 90 100 FY13 FY14 FY15 FY16 FY17 FY18 EBI T M argi n EBI T US$ M Quarterly EBIT and EBIT Margin1 EBIT EBIT/Sales NORTH AMERICA FIBER CEMENT 16 HY FY18 EBIT Margin % down 310 bps to 22.4% compared to pcp, but remains within target range 1 Excludes asse
Slide 17: North America Fiber Cement
PAGE NORTH AMERICA FIBER CEMENT 17 • Strategic price increase effective April 2017 • Satisfied with tactical pricing and price positioning • US housing starts outpace our volume growth 1 Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau $0 $400 $800 $1,20
Slide 18: International Fiber Cement Summary
PAGE 18 Volume • Growth primarily in our Philippines and Australian businesses Lower average selling price compared to pcp • Favorably impacted by modest annual changes in Australia strategic pricing • Adversely impacted by tactical pricing strategies and volume growth in the Philippines EBIT • Stro
Slide 19: International Fiber Cement (USD)
PAGE INTERNATIONAL FIBER CEMENT (USD) 19 Australia • Strong market and PDG performance • EBIT favorably impacted by volume, price and product mix New Zealand • Higher net sales driven by higher volume • Higher EBIT driven by increased net sales and reduced SG&A expenses Philippines • Q2 favorably im
Slide 20: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 21: Results – 2nd Quarter FY18
PAGE Net sales increased 6% • Higher average net sales price in North America Fiber Cement segment • Volume growth in International Fiber Cement segment Gross profit increased 3%, gross margin % down 110 bps SG&A expenses increased 9% Adjusted net operating profit decreased 1% • North America Fiber
Slide 22: Results – Half Year FY18
PAGE Net sales increased 6% • Higher average net sales price in North America Fiber Cement segment • Volume growth in International Fiber Cement segment Gross profit decreased 1%, gross margin % down 240 bps SG&A expenses increased 5% • Investing in future growth and organization capability Adjusted
Slide 23: Changes in AUD vs. USD
PAGE 1 As Reported 1H'18 figures converted using 1H'17 weighted average exchange rates 2 Reflects the difference between 1H'18 As Reported and 1H'18 using 1H'17 w ighted average exchange rates CHANGES IN AUD vs. USD 23 0.60 0.70 0.80 30 Sep 15 31 Dec 15 31 Mar 16 30 Jun 16 30 Sep 16 31 Dec 16 31 Mar
Slide 24: North America Input Costs
PAGE NORTH AMERICA INPUT COSTS • The price of NBSK pulp increased 11% compared to pcp • Cement prices continue to rise, up 5% compared to pcp • Freight market prices increased 16% compared to pcp • Gas prices are up 13% compared to pcp • Electricity prices are down 5% compared to pcp 24 The informat
Slide 25: North America Fiber Cement – Q2 FY18 vs Q1 FY18
PAGE NORTH AMERICA FIBER CEMENT – Q2 FY18 vs Q1 FY18 25 2Q’18 Gross margin improved 270 bps compared to 1Q’18 • Average net sales price improved Full quarter of strategic price change Tactical pricing • Production costs improved as expected • Continuing to invest in SG&A and organization capabil
Slide 26: Segment EBIT – 2nd Quarter and Half Year FY18
PAGE North America Fiber Cement EBIT summary • Q2 EBIT remained flat and 1H EBIT decreased 8% compared to pcp • Primarily driven by higher production costs and increased SG&A expenses SEGMENT EBIT – 2nd QUARTER and HALF YEAR FY18 26 International Fiber Cement EBIT summary • Q2 EBIT increased 20% and
Slide 27: Segment EBIT – 2nd Quarter and Half Year FY18
PAGE Other Businesses • Incremental investment in product and manufacturing capabilities R&D • On strategy to invest 2-3% of net sales General Corporate Costs • Increase driven by higher discretionary expenses and decrease in recognized foreign exchange gains • 1H increase partially offset by the ga
Slide 28: 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 23.8% estimated adjusted effective tax rate for the year • Adjusted income tax expense decreased due to changes in geographical mix of earnings
Slide 29: Cashflow
PAGE 1 CASHFLOW 29 Decrease in net operating cash flow • Building inventory levels • Increase in the payment to AICF Higher investing activities • Increase in capacity expansion related capital expenditures • Includes proceeds from the sale of a storage building near our Fontana facility Lower finan
Slide 30: Capital Expenditures
PAGE CAPITAL EXPENDITURES • Half year CAPEX spend of US$83.6 million increased US$48.0 million compared to pcp • North America capacity projects during Q2 FY18: Completed the start-up of the 4th sheet machine at our Plant City facility Continued the start-up at our Summerville facility Continu
Slide 31: Financial Management Supporting Growth
PAGE FINANCIAL MANAGEMENT SUPPORTING GROWTH 31 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 32: Liquidity Profile
PAGE LIQUIDITY PROFILE 32 Strong balance sheet US$78.8 million cash US$601.9 million net debt3 at 30 September 2017 42% liquidity on bank debt at 30 September 2017 Corporate debt structure US$500 million unsecured revolving credit facility, with a December 2020 maturity US$400 million seni
Slide 33: 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$251 million and US$279 million • Management expects full year Adjusted net operating profit to be between US$245 million and US$275 mil
Slide 34: Questions – Q2
(@) sames Hardie QUESTIONS- Q2
Slide 35: Questions – Fermacell Acquisition
QUESTIONS – FERMACELL ACQUISITION
Slide 36: Appendix
(@) sames Hardie APPENDIX
Slide 37: Financial Summary
PAGE FINANCIAL SUMMARY 1 Excludes Asbestos related expenses and adjustments 2 Excludes AICF interest income/expense 37 US$ Millions Q2'18 Q2'17 % Change 1H'18 1H'17 % Change Net Sales North America Fiber Cement 398.1$ 384.5$ 4 791.2$ 754.8$ 5 International Fiber Cement 123.9 106.6 16 234.7 209.5 12
Slide 38: Asbestos Claims Data
PAGE ASBESTOS CLAIMS DATA 38 • Quarter and half year claims received were 8% and 5% above actuarial estimates, respectively • Quarter and half year claims received increased by 19% and 6%, respectively, compared to pcp • Claims reporting during the half year for mesothelioma: • 11% higher than actua
Slide 39: Depreciation and Amortization
PAGE DEPRECIATION AND AMORTIZATION 39 US$ Millions Q2'18 Q2'17 1H'18 1H'17 Depreciation and amortization North America Fiber Cement 18.2$ 15.2$ 35.3$ 30.2$ International Fiber Cement 3.3 3.0 6.4 5.9 Other Businesses 0.6 0.6 1.1 1.1 Research and Development 0.4 0.5 0.8 0.9 General Corporate 0.9 1.1 1
Slide 40: 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 41: 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 42: Non-US GAAP Financial Measures: Adjusted EBIT and Net Operating Profit
PAGE Financial Measures – US GAAP equivalents NON-US GAAP FINANCIAL MEASURES 42 Adjusted EBIT US$ Millions Q2'18 Q2'17 1H'18 1H'17 EBIT 97.1$ 88.5$ 181.1$ 206.3$ Asb stos: Asbestos adjustments 6.6 17.2 10.5 (3.4) AICF SG&A expenses 0.4 0.4 0.8 0.8 Adjusted EBIT 104.1$ 106.1$ 192.4$ 203.7$ Net sales
Slide 43: Non-US GAAP Financial Measures: Adjusted EPS and Tax Rate
PAGE 43 NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Q2'18 Q2'17 1H'18 1H'17 Adjusted net operating profit (US$ Millions) 73.9$ 74.7$ 135.6$ 141.4$ Weighted average common shares outstanding - Diluted (millions) 441.5 445.4 441.5 446.4 Adjusted diluted earnings per share (US ce
Slide 44: Non-US GAAP Financial Measures: Adjusted EBITDA and SG&A
PAGE NON-US GAAP FINANCIAL MEASURES 44 Adjusted EBITDA excluding Asbestos US$ Millions Q2'18 Q2'17 1H'18 1H'17 EBIT 97.1$ 88.5$ 181.1$ 206.3$ Depreciation and amortization 23.4 20.4 45.2 39.9 Adjusted EBITDA 120.5$ 108.9$ 226.3$ 246.2$ Asbestos: Asbestos adjustments 6.6 17.2 10.5 (3.4) AICF SG&A exp
Slide 45: Q2 FY18 Management Presentation
Q2 FY18 MANAGEMENT PRESENTATION 09 November 2017
James Hardie Industries — Q2 FY2018 Earnings Presentation on 6ix