James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q3 FY2014 Earnings Presentation
58 slides from James Hardie Industries's earnings presentation, Mar 3, 2014
Slide 1: Q3 FY14 Management Presentation
Exhibit 99.4 Q3 FY14 MANAGEMENT PRESENTATION 28 February 2014
Slide 2: Disclaimer
DISCLAIMER This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering circulars, invitation
Slide 3: Disclaimer (continued)
DISCLAIMER (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 intended to identify forward-looking
Slide 4: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, CFO • Questions and Answers 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 se
Slide 5: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 6: Group Overview
1 GROUP OVERVIEW Q3 Q3 % 9 Months 9 Months % US$ Millions FY 2014 FY 2013 Change FY 2014 FY 2013 Change Net operating profit 92.2 31.5 286.3 115.0 Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product 43.7 26.7 64 152.0 109.4 39 liability and tax adjustments
Slide 7: USA and Europe Fibre Cement Quarter Summary
1 rd 1 USA AND EUROPE FIBRE CEMENT 3 QUARTER SUMMARY USA and Europe Fibre Cement results reflected: • Higher sales volume due to increased activity in new construction market and increased market penetration • Higher average net sales price 2 • Improved production costs due to economies of scale • H
Slide 8: USA and Europe Fibre Cement 3rd Quarter Result
USA AND EUROPE FIBRE CEMENT 1 3rd Quarter Result Net Sales up 17% to US$262.6 million Sales Volume up 11% to 389.2 mmsf 2 Average Price up 5% to US$659 per msf 3 EBIT up 75% to US$53.1 million 3 EBIT Margin up 6.7 pts to 20.2% 1 Comparisons are of the 3 rd quarter of the current fiscal year versus t
Slide 9: USA and Europe Fibre Cement Nine Months Result
USA AND EUROPE FIBRE CEMENT 1 Nine Months Result Net Sales up 17% to US$839.4 million Sales Volume up 14% to 1,263.5 mmsf 2 Average Price up 3% to US$651 per msf 3 EBIT up 44% to US$179.8 million 3 EBIT Margin up 3.9 pts to 21.4% 1 Comparisons are of the nine months of the current fiscal year versus
Slide 10: Quarterly EBIT and EBIT Margin
USA AND EUROPE FIBRE CEMENT Quarterly EBIT and EBIT Margin¹ 80 35 70 30 60 25 50 20 40 15 30 10 20 5 10 0 0 FY09 FY10 FY11 FY12 FY13 FY14 EBIT EBIT Margin 1 Excludes asset impairment charges of US$14.3 million in 4 th quarter FY12, US$5.8 million in 3 rd quarter FY13 and US$11.1 th million in 4 quar
Slide 11: USA Fibre Cement Top Line Growth
USA FIBRE CEMENT Top Line Growth 3,000 $1,300 2,800 $1,200 2,600 2,400 $1,100 2,200 $1,000 2,000 $900 1,800 $800 1,600 $700 1,400 $600 1,200 $500 1,000 800 $400 600 $300 400 $200 200 $100 0 $0 JH Volume Housing Starts JH Revenue Rolling 12 month average of seasonally adjusted estimate of housing sta
Slide 12: Average Net Sales Price (US dollars)
USA AND EUROPE FIBRE CEMENT 1 Average Net Sales Price (US dollars) 670 US$651 630 590 550 FY09 FY10 FY11 FY12 FY13 Q3 YTD FY14 1 Prior period amounts have been restated to conform with current year refined methodology for calculating average net sales price 12
Slide 13: Asia Pacific Fibre Cement Quarter Summary
rd 1 ASIA PACIFIC FIBRE CEMENT 3 QUARTER SUMMARY Asia Pacific Fibre Cement results reflected: 2 • Higher average net sales price in local currencies • Slight increase in sales volume constrained by a reported 4.8% reduction in the repair and remodel market • Depreciation of local currencies against
Slide 14: Asia Pacific Fibre Cement 3rd Quarter Result
ASIA PACIFIC FIBRE CEMENT 3rd Quarter Result ¹ Net Sales down 6% to US$90.6 million Sales Volume up/flat Slight increase to 100.3mmsf from 100.2mmsf Average Price ² up 6% to A$963 per msf EBIT³ up 11% to US$21.3 million A$ EBIT³ up 21% to A$22.8 million EBIT Margin ³ up 3.5 pts to 23.5% 1 rd rd Comp
Slide 15: Asia Pacific Fibre Cement Nine Months Result
ASIA PACIFIC FIBRE CEMENT 1 Nine Months Result Net Sales down 1% to US$278.0 million Sales Volume up 4% to 310.3 mmsf 2 Average Price up 4% to A$937 per msf 3 EBIT up 11% to US$64.5 million 3 A$ EBIT up 21% to A$68.2 million EBIT Margin up 2.4 pts to 23.2% 3 1 Comparisons are of the nine months of t
Slide 16: Group Outlook
GROUP OUTLOOK USA and Europe Fibre Cement • The US operating environment continues to reflect an increasing number of housing starts • The company is continuing with its plan to expand production capacity through new capital investments and re-commissioning of idled facilities in future periods • Fu
Slide 17: Manufacturing Capacity Expansion
MANUFACTURING CAPACITY EXPANSION USA and Europe Fibre Cement • The company continues to refurbish its Fontana, California plant at a cost of US$37.9 million to date. The company intends recommencement of production with a nominal capacity of 250 mmsf1 in the fourth quarter of fiscal 2014 • A fourth
Slide 18: Financial Review
FINANCIAL REVIEW Matt Marsh, CFO
Slide 19: Highlights
HIGHLIGHTS • Earnings impacted by: • Higher volumes and average net sales price in local currencies • Higher EBIT and EBIT margins in all major business units • A benefit from asbestos adjustments of US$126.2 million during the nine month period primarily as a result of the 14% depreciation of the A
Slide 20: Results – Q3
RESULTS – Q3 US$ Millions Q3 '14 Q3 '13 % Change Highlights: Net sales 353.2 320.4 10 Net sales and gross profit both favorably impacted by: Gross profit 121.5 96.2 26 Higher sales volumes; and Higher average net sales prices in local SG&A expenses (53.8) (59.7) 10 currencies Research & development
Slide 21: Results – Q3 (continued)
RESULTS – Q3 (CONTINUED) US$ Millions Q3 '14 Q3 '13 % Change Highlights: Net operating profit 92.2 31.5 Legacy New Zealand product liability Asbestos: moved from a US$7.5 million expense in the prior corresponding Asbestos adjustments (35.8) (11.7) quarter to a US$4.2 million benefit in the current
Slide 22: Results – Nine Months
RESULTS – NINE MONTHS US$ Millions 9 Months 9 Months Highlights: FY 2014 FY 2013 % Change Net sales 1,117.4 994.5 12 Net sales and gross profit both favorably impacted by: Gross profit 380.9 317.5 20 Higher sales volumes; and SG&A expenses (162.5) (160.6) (1) Higher average net sales prices in local
Slide 23: Results – Nine Months (continued)
RESULTS – NINE MONTHS (CONTINUED) 9 Months 9 Months US$ Millions FY 2014 FY 2013 % Change Highlights: Net operating profit 286.3 115.0 Improved headline net operating profit Asbestos: driven by higher net sales and gross profit Asbestos adjustments (126.2) (14.5) Asbestos adjustments driven by the e
Slide 24: Segment EBIT – Q3
SEGMENT EBIT – Q3 US$ Millions Highlights: Q3 '14 Q3 '13 % Change USA and Europe Fibre Cement exluding asset Adjusted USA and Europe Fibre 53.1 30.4 75 impairments Asia Pacific Fibre Cement, excluding New Zealand Cement EBIT margin increased product liability expenses 21.3 19.2 11 6.7 percentage poi
Slide 25: Segment EBIT – Nine Months
SEGMENT EBIT – NINE MONTHS 9 Months 9 Months Highlights: US$ Millions FY 2014 FY 2013 % Change USA and Europe Fibre Cement excluding asset Adjusted USA and Europe Fibre 179.8 124.7 44 impairments Cement EBIT margin increased 3.9 Asia Pacific Fibre Cement excluding New Zealand percentage points to 21
Slide 26: Changes in A$ versus US$
CHANGES IN A$ VERSUS US$ Earnings Balance Sheet • Unfavourable impact from translation of Asia Pacific results – Q314 vs Q313 N/A N/A • Favorable impact on corporate costs incurred in Australian dollars – Q314 vs Q313 • Favourable impact from translation of asbestos liability balance – 31 December 2
Slide 27: Income Tax Expense – Q3
INCOME TAX EXPENSE – Q3 Q3 '14 Q3 '13 US$ Millions Highlights: Income tax expense excluding Operating profit before income taxes 95.6 35.1 asbestos-related and other tax Asbestos: adjustments for the quarter increased due to higher taxable earnings. Asbestos adjustments (35.8) (11.7) Other asbestos¹
Slide 28: Income Tax Expense – Nine Months
INCOME TAX EXPENSE – NINE MONTHS US$ Millions 9 Months 9 Months Highlights: FY 2014 FY 2013 Effective tax rate excluding Operating profit before income taxes 320.2 141.3 asbestos, asset impairments, Asbestos: New Zealand product liability Asbestos adjustments (126.2) (14.5) and tax adjustments 1 dec
Slide 29: Cashflow
1 CASHFLOW US$ Millions 9 Months 9 Months FY 2014 FY 2013 EBIT 319.5 137.8 Non-cash items: Asbestos adjustments (126.2) (14.5) Asset impairments - 5.8 Other non-cash items 51.2 52.3 Net working capital movements 24.3 30.8 Cash Generated By Trading Activities 268.8 212.2 Tax payments, net (22.9) (85.
Slide 30: Capital Expenditure
CAPITAL EXPENDITURE 9 Months 9 Months US$ Millions FY 2014 FY 2013 % Change USA and Europe Fibre Cement (including 48.3 34.1 42 Research and Development) Asia Pacific Fibre Cement 25.0 7.7 Total 73.3 41.8 75 • In Q1 FY14, the company completed the purchase of the previously-leased land and buildings
Slide 31: Capital Management Framework
Capital Management Framework Objectives • To optimize JHX capital structure with a view towards a target net debt position in the range of 1-2 1 times Adjusted EBITDA Strategy • While reinvesting in R&D and capacity expansion required for growth; • Provide consistent dividend payments with the payou
Slide 32: Capital Management and Dividends
CAPITAL MANAGEMENT AND DIVIDENDS Dividends • The company announced today a 125 year anniversary special dividend of US28.0 cents per security in recognition of the company's 125 year anniversary • Declared in US currency and will be paid on 30 May 2014 with a record date of 21 March 2014 • Effective
Slide 33: Debt
DEBT At 31 December 2013: US$ Millions Total facilities 405.0 Gross debt - Cash 185.2 Net cash 185.2 Unutilised facilities and cash 590.2 • Weighted average remaining term of debt facilities was 2.3 years at 31 December 2013, down from 3.1 years at 31 March 2013 • On 14 February 2014, US$50.0 millio
Slide 34: NZ Product Liability Claims and NZ MOE Representative Action
NZ PRODUCT LIABILITY CLAIMS AND NZ MOE REPRESENTATIVE ACTION New Zealand Product Liability claims: • Since FY02 James Hardie NZ subsidiaries have been joined to product liability claims that relate to buildings primarily constructed from 1998 to 2004 • These claims often involve multiple parties and
Slide 35: Asbestos Fund – Proforma (Unaudited)
ASBESTOS FUND – PROFORMA (UNAUDITED) A$ millions AICF cash and investments - 31 March 2013 128.1 Insurance and cross-claim recoveries 18.8 Interest and investment income 3.4 Proceeds from loan facility 25.3 Claims paid (104.6) Operating costs (3.2) Other 1.6 AICF cash and investments - 31 December 2
Slide 36: FY2014 Guidance
FY2014 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2014 is between US$189 million and US$202 1 million • Management expects full year earnings excluding asbestos, asset impairments, ASIC expenses, New Zealand p
Slide 37: Summary
SUMMARY • Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments was US$43.7 million and US$152.0 million, for the quarter and nine months, respectively rd • The 3 quarter results reflected: • Higher volume in the USA and Europe F
Slide 38: Questions
QUESTIONS a
Slide 39: Appendix
() James Hardie = APPENDIX
Slide 40: Financial Summary
FINANCIAL SUMMARY 9 Months 9 Months US$ Millions Q3 '14 Q3 '13 % Change FY 2014 FY 2013 % Change Net Sales USA and Europe Fibre Cement $ 262.6 $ 224.5 17 $ 839.4 $ 714.6 17 Asia Pacific Fibre Cement 90.6 95.9 (6) 278.0 279.9 (1) Total Net Sales $ 353.2 $ 320.4 10 $ 1,117.4 $ 994.5 12 EBIT - US$ Mill
Slide 41: Key Ratios
KEY RATIOS 9 Months 9 Months 9 Months FY2014 FY2013 FY2012 1 EPS (Diluted) 34c 25c 25c EBIT/ Sales (EBIT margin) 2 17.5% 14.5% 16.5% 1 Gearing Ratio (13.4)% (13.9)% (2.0)% 2 Net Interest Expense Cover 63.0x 43.6x 25.9x 2 Net Interest Paid Cover 65.1x 110.8x 25.1x Net Debt Payback - - - 1 Excludes as
Slide 42: EBITDA – Q3
EBITDA – Q3 US$ Millions Q3 '14 Q3 '13 % Change EBIT 1 USA and Europe Fibre Cement 53.1 30.4 75 Asia Pacific Fibre Cement 2 21.3 19.2 11 Research & Development (6.4) (6.8) 6 General corporate excluding ASIC expenses (12.8) (8.1) (58) Depreciation and Amortisation USA and Europe Fibre Cement 13.5 14.
Slide 43: EBITDA – Nine Months
EBITDA – NINE MONTHS 9 Months 9 Months % Change US$ Millions FY 2014 FY 2013 EBIT 1 USA and Europe Fibre Cement 179.8 124.7 44 Asia Pacific Fibre Cement 2 64.5 58.2 11 Research & Development (18.0) (19.1) 6 General corporate excluding ASIC expenses (30.9) (19.8) (56) Depreciation and Amortisation US
Slide 44: General Corporate Costs – Q3
GENERAL CORPORATE COSTS – Q3 US$ Millions Q3 '14 Q3 '13 % Change Stock compensation expense 4.6 3.1 (48) Other costs 8.2 5.0 (64) General corporate costs excluding ASIC 12.8 8.1 (58) expenses ASIC expenses - 0.1 General corporate costs 12.8 8.2 (56) 44
Slide 45: General Corporate Costs – Nine Months
GENERAL CORPORATE COSTS – NINE MONTHS 9 Months 9 Months US$ Millions FY 2014 FY 2013 % Change Stock compensation expense 8.3 8.7 5 Other costs 22.6 19.3 (17) General corporate costs excluding ASIC expenses, recovery of RCI legal costs and 30.9 28.0 (10) intercompany foreign exchange gain ASIC expens
Slide 46: Net Interest (Expense) Income
NET INTEREST (EXPENSE) INCOME US$ Millions 9 Months 9 Months Q3 '14 Q3 '13 FY 2014 FY 2013 Gross interest expense (1.0) (0.9) (3.0) (2.5) Interest income 0.2 0.1 0.4 0.7 Realised loss on interest rate swaps (0.2) (0.5) (0.5) (1.5) Net interest expense excluding AICF interest income (1.0) (1.3) (3.1)
Slide 47: Total US Housing Starts
«Thousands of Starts) U.S. Housing Starts Calendar Quarters 4 Ss o eo Housing starts —--%Growth (same QtrPY) av < o ¢ ae > 0% 0% 47
Slide 48: Endnotes
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 the Management’s Analysis of Results, Media Release and Condensed Consolidated Financial Statements Definitions N
Slide 49: Endnotes (continued)
ENDNOTES (CONTINUED) 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 consolidated financial statements under
Slide 50: Endnotes (continued)
ENDNOTES (CONTINUED) 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 square foot is defined as a standard square foot of
Slide 51: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES EBIT and EBIT margin excluding asbestos, asset impairments, ASIC expenses and New Zealand product liability – EBIT and EBIT margin excluding asbestos, asset impairments, ASIC expenses and New Zealand product liability are not measures of financial performance under US
Slide 52: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments – Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments is no
Slide 53: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Diluted earnings per share excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments – Diluted earnings per share excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjus
Slide 54: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Effective tax rate excluding asbestos, asset impairments, New Zealand product liability and tax adjustments – Effective tax rate on earnings excluding asbestos, asset impairments, New Zealand product liability and tax adjustments is not a measure of financi
Slide 55: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Adjusted 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 liq
Slide 56: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) General corporate costs excluding ASIC expenses, intercompany foreign exchange gain and recovery of RCI legal costs – General corporate costs excluding ASIC expenses, intercompany foreign exchange gain and recovery of RCI legal costs is not a measure of fin
Slide 57: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Selling, general and administrative expenses excluding New Zealand product liability – Selling, general and administrative expenses excluding New Zealand product liability is not a measure of financial performance under US GAAP and should not be considered
Slide 58: Q3 FY14 Management Presentation
Q3 FY14 MANAGEMENT PRESENTATION 28 February 2014
James Hardie Industries — Q3 FY2014 Earnings Presentation on 6ix