James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Q1 FY2008 Earnings Presentation
48 slides from James Hardie Industries's earnings presentation, Aug 17, 2007
Slide 1: Results for the 1st Quarter Ended 30 June 2007
15 August 2007 James Hardie Industries N.V. Results for the 1 st Quarter Ended 30 June 2007 Three Months Ended 30 June US GAAP — US$ Millions FY 2008 FY 2007 % Change Net Sales USA Fibre Cement $ 346.1 $ 348.9 (1 ) Asia Pacific Fibre Cement 71.2 59.2 Other 7.1 7.4 (4 ) Total Net Sales $ 424.4 $ 415.
Slide 2: James Hardie FY08 1st Quarter Results
James Hardie FY08 1st Quarter Results 15 August 2007 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 40. The company presents f
Slide 3: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda
Slide 4: Overview
US$ Million Q1 FY08 Q1 FY07 % Change Net operating profit 39.1 35.5 10 Net operating profit excluding asbestos 68.6 62.7 9 Diluted earnings per share, excluding asbestos (US cents) 14.6 13.4 9 Strong operating performance despite further weakness in major markets Net operating profit affected by asb
Slide 5: Overview: 1st Quarter highlights
1st Quarter USA Fibre Cement - improved market penetration, price growth and cost management helped deliver a very strong EBIT result despite further weakness in US housing Asia Pacific Fibre Cement - both sales and EBIT up despite weak Australian and New Zealand housing and renovation markets Busin
Slide 6: Operating Review
Operating Review Louis Gries, CEO
Slide 7: US Coastal Living Idea House, with HardiePlank siding
USA Fibre Cement US Coastal Living Idea House, with HardiePlankTM siding
Slide 8: USA Fibre Cement 1st Quarter Result
1st Quarter Result Net Sales down 1% to US$346.1 million Sales Volume down 5% to 573.4 mmsf Average Price up 5% to US$604 per msf EBIT up 11% to US$114.4 million EBIT Margin up 3.5 pts to 33.1% USA Fibre Cement
Slide 9: 1st Quarter Market Conditions
1st Quarter Market Conditions Further weakness in new housing construction activity Starts down 22% and 31% for June and March quarters, respectively Market demand affected by affordability issues: Higher interest rates Tighter lending standards (related to subprime mortgage concerns) Inventory leve
Slide 10: Key Points
Key Points Impact of weaker housing market on sales largely offset by: Seasonal order build in anticipation of improved housing demand Market penetration Higher average net sales price Sales volumes of exterior products were lower in Southern and Northern Divisions, but higher in Western Division Wi
Slide 11: Outlook
Outlook Housing construction activity to remain weak, with the potential for further deterioration Slight decline in repair and remodelling activity expected in short to mid-term James Hardie will continue investment in growth initiatives Further market penetration against alternative materials USA
Slide 12: Top Line Growth
1 Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau. USA Fibre Cement Top Line Growth 200 600 1,000 1,400 1,800 2,200 2,600 3,000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 JH Volume (mmsf), Starts (000's Units) $100 $300 $500 $700 $900 $1,100 $1,
Slide 13: Primary Growth Performance
USA Fibre Cement Primary Growth Performance - -30% - -20% - -10% 0% 10% 20% 30% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 %JHBP Growth (sdft) New Construction/Repair & Remodel Growth Rolling 4Qtr - %JHBP Growth (sdft) Rolling 4Qtr - New Construction/Repair & Remodel Growth
Slide 14: Average Net Selling Price
USA Fibre Cement Average Net Selling Price US$ per MSF 360 380 400 420 440 460 480 500 520 540 560 580 600 620 FY02 FY03 FY04 FY05 FY06 FY07 Q1 FY08
Slide 15: Strategy
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, introducing differentiated products to reduce direct price competition
Slide 16: EBIT and EBIT Margin
*Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02 EBIT and EBIT Margin* USA Fibre Cement 0 20 40 60 80 100 120 140 FY02 FY03 FY04 FY05 FY06 FY07 Q1 FY08 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales
Slide 17: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement Stockland, Rawson Homes and Cosmopolitan Homes at Murrays Beach, Lake Macquarie NSW, featuring a range of ScyonTM products
Slide 18: Asia Pacific Fibre Cement 1st Quarter Result
1st Quarter Result Net Sales up 20% to US$71.2 million Sales Volume up 7% to 98.0 mmsf EBIT up 20% to US$12.4 million EBIT Margin flat 17.4% Asia Pacific Fibre Cement
Slide 19: Asia Pacific Fibre Cement Strategy
Strategy Grow primary demand for our products Leverage our superior technology to offer differentiated products and systems with superior value to those of competitors Promote a smarter way to build composite construction houses using our products Vigorously defend our position in existing market se
Slide 20: Asia Pacific Fibre Cement Key Points
Key Points Further weakness in new housing and renovations activity in Australia, flat in New Zealand and slightly stronger construction activity in the Philippines US$ financial results assisted by appreciation of Asia Pacific currencies compared with same period last year Net sales up 8% in A$; vo
Slide 21: Asia Pacific Fibre Cement Outlook
Outlook Further weakness in new housing and renovations activity in Australia and New Zealand in short-term Further growth in primary demand for fibre cement in Australia and New Zealand Non-differentiated products to remain subject to strong competition More manufacturing efficiencies and other cos
Slide 22: USA Hardie Pipe, Europe Fibre Cement and Other
USA Hardie Pipe Q1 net sales lower due to weaker residential housing activity in Florida Impact of lower volumes partly offset by higher average net sales price and improved manufacturing performance Small EBIT loss for the quarter Europe Fibre Cement Sales continuing to grow steadily Further reduct
Slide 23: Overall Outlook for Operations
USA Fibre Cement Some further weakness in US housing activity expected through the remainder of 2007 Expect to continue outperforming the market overall Asia Pacific Fibre Cement Market conditions to remain challenging in Australia and New Zealand, but further growth in primary demand for fibre ceme
Slide 24: Financial Review
Financial Review Russell Chenu, CFO
Slide 25: Overview
Strong Q1 operating performance in significantly weaker market conditions Strong Q1 net operating profit excluding asbestos Asbestos adjustments: US$33.2m - unfavourable impact of stronger A$ on estimated A$ asbestos liability US$3.1m - favourable other adjustments Strong balance sheet excluding net
Slide 26: Share buy-back
Share buy-back On market buy-back program announced Up to 10% of issued capital (up to approximately 46.8 million shares) Focus on improving efficiency of capital structure Shares to be purchased opportunistically, subject to market conditions and operating environment Additional funding facilities
Slide 27: Results - Q1
US$ Million Q1'08 Q1'07 % Change Net sales 424.4 415.5 2 Gross profit 166.9 157.7 6 SG&A expenses (55.5) (51.7) (7) Research & development expenses (6.3) (7.5) 16 SCI and other related expenses - (2.4) - Asbestos adjustments (30.1) (27.2) (11) EBIT 75.0 68.9 9 Net interest income (expense) 0.5 (2.0)
Slide 28: Results - Q1 (excluding asbestos)
US$ Million Q1'08 Q1'07 % Change Net operating profit 39.1 35.5 10 Asbestos: Asbestos adjustments 30.1 27.2 (11) Tax expense related to asbestos adjustments 0.4 - - AICF SG&A expenses 0.6 - - AICF interest income (1.6) - - Net operating profit excluding asbestos 68.6 62.7 9 Results - Q1
Slide 29: Segment Net Sales - Q1
US$ Million Q1'08 Q1'07 % Change USA Fibre Cement 346.1 348.9 (1) Asia Pacific Fibre Cement 71.2 59.2 20 Other 7.1 7.4 (4) Total 424.4 415.5 2 Segment Net Sales - Q1
Slide 30: Segment EBIT - Q1
US$ Million Q1'08 Q1'07 % Change USA Fibre Cement 114.4 103.3 11 Asia Pacific Fibre Cement 12.4 10.3 20 Other (1.3) (2.7) 52 R & D1 (4.1) (4.6) 11 Total Segment EBIT 121.4 106.3 14 General Corporate excluding asbestos (15.7) (10.2) (54) Total EBIT excluding asbestos 105.7 96.1 10 Asbestos adjustment
Slide 31: Corporate Costs - Q1
US$ Million Q1'08 Q1'07 % Change Stock compensation expenses 1.5 1.5 - Earnings-related bonus 0.9 (1.8) - SCI and other related expenses - 2.4 - Non-US warranty provision 4.0 - - ASIC proceedings 1.2 - - AICF SG&A costs 0.6 - - Other costs 8.1 8.1 - Total 16.3 10.2 60 Corporate Costs - Q1
Slide 32: Net Interest Expense
US$ Million Q1'08 Q1'07 Net interest income (expense) 0.5 (2.0) Note - Q1'08 includes US$1.6 million of AICF interest income. Q1'07 includes a US$6.0 million make-whole payment on prepayment of US$ notes in May 2006. Net Interest Expense
Slide 33: Income tax expense - Q1
US$ Million Q1'08 Q1'07 Operating income before income taxes 75.5 66.9 Asbestos: Asbestos adjustments 30.1 27.2 AICF SG&A expenses 0.6 - AICF interest income (1.6) - Operating profit before income taxes excluding asbestos 104.6 94.1 Income tax expense 36.4 32.3 Asbestos: Tax expense related to asbes
Slide 34: EBITDA - Q1
US$ Million Q1'08 Q1'07 % Change EBIT USA Fibre Cement 114.4 103.3 11 Asia Pacific Fibre Cement 12.4 10.3 20 Other (1.3) (2.7) 52 R & D (4.1) (4.6) 11 General Corporate excluding asbestos (15.7) (10.2) (54) Depreciation and Amortisation USA Fibre Cement 10.8 7.9 37 Asia Pacific Fibre Cement 2.7 2.5
Slide 35: Cash Flow - Q1
US$ Million Q1'08 Q1'08 Q1'07 Q1'07 % Change EBIT EBIT 75.0 68.9 9 9 Non-Cash Items Non-Cash Items - Asbestos adjustments - Asbestos adjustments 30.1 27.2 11 11 - Other Non-Cash Items - Other Non-Cash Items 27.0 11.9 - - Net Working Capital Movements Net Working Capital Movements 8.1 (37.2) - - Cash
Slide 36: Capital Expenditure - Q1
US$ Million Q1'08 Q1'07 % Change USA Fibre Cement 13.9 32.9 58 Asia Pacific Fibre Cement 1.8 2.6 30 Other 0.8 - - Total 16.5 35.5 54 Capital Expenditure - Q1
Slide 37: Key Ratios
Q1' FY08 FY07 FY06 EPS (Diluted)1 14.6c 47.6c 44.9c Dividend Paid per share - 9.0c 10.0c Return on Shareholders' Funds1 27.3% 24.0% 29.1% Return on Capital Employed2 34.3% 26.6% 28.9% EBIT/ Sales (EBIT margin)2 24.9% 20.7% 18.9% Gearing Ratio1 4.4% 12.8% (1.6)% Net Interest Expense Cover2 96.1x 49.1
Slide 38: Summary
Strong overall operating performance for Q1FY08 Strong cash flow generation The company's financial position remains strong Share buy-back announced Results subject to fluctuation in A$ : US$ exchange rate for foreseeable future Summary
Slide 39: Questions & Answers
Questions & Answers
Slide 40: Disclaimer
Disclaimer 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,
Slide 41: Endnotes: Definitions
Endnotes 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 GAA
Slide 42: Endnotes: 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 payb
Slide 43: Non-US GAAP Financial Measures: EBIT
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos - EBIT and EBIT margin excluding asbestos 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 included these financial measures to
Slide 44: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos- Net operating profit excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than net income. The company has included this financial measure to p
Slide 45: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos - Diluted earnings per share excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than diluted earnings per share. The company has include
Slide 46: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos - Effective tax rate excluding asbestos is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The company has included this financial measure
Slide 47: Non-US GAAP Financial Measures (continued): EBITDA
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 48: FY08 1st Quarter Results
FY08 1st Quarter Results 15 August 2007 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 40. The company presents financial meas
Hardie James Industries — Q1 FY2008 Earnings Presentation on 6ix