James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (December 2004)
70 slides from James Hardie Industries's investor presentation, Dec 10, 2004
Slide 1: USA Fibre Cement
@) James Hardie James Hardie USA Fibre Cement December 2004 Orlando, Florida
Slide 2: Company history and early focus
>) James Hardie Commenced operations in 1990; primary focus on roofing » Aone plant, one line business in 1991 Shifted our focus from Roofing to Siding in 1992 Moved to high throughput, low unit cost manufacturing Strictly a sell and make approach Revenue growth led to investments in new capacity
Slide 3: Direct competition entered the market
@ James Hardie’ Direct competition entered the market ... Etex (Cemplank) - 1989 » ABTco - 1997 = Temple Inland - 1998 * CertainTeed - 2000 After realising significant gains in process technology, we began to make advancements in product technology Selected “Product Leadership” as our go-forward str
Slide 4: Capacity additions and 4-year CAGR
i James Hardie’ Added regional flat capacity: Peru, IL - 2000 » Waxahachie, TX - 2001 Purchased Cemplank - 2002 * Currently commissioning our 9'* plant (Reno. NV) Trim capacity investments in Cleburne and Peru, IL ColorPlus investments in Peru, IL 4yr CAGR: * 20% Volume 24% Revenue » 30% EBIT
Slide 5: Building Products
JH Building Products ——. JH Canada —=>——— JH Pipes —r——~ Artisan {Reofing) —__ JH Australia/ New Zealand ————~ JH Philippines ——— JH Fibro Cementos (Chile) —+ JH Europe ——$____ eh) James Hardie
Slide 6: USA FC management team
@) James Hardie’ = Don Merkley — Executive Vice President R&D and Business Development Dave Merkley — Executive Vice President Engineering, Process Development and Construction Jamie Chilcoff — Vice President International » Robert Russell — Vice President Established Markets - USA FC Nigel Rigby —
Slide 7: Alignment around aggressive business goals
@ James Hardie’ Alignment around aggressive business goals Emphasis on growth » Constantly changing game » Step change vs. incremental improvements Capability (and cost) ahead of revenue Key leadership positions » Marketing and Segment managers Regional Sales Managers » Plant Managers Project Manage
Slide 8: Building organisational capabilities
*) James Hardie Initially built superior organisational capabilities in manufacturing and sales Then focused on building similar capabilities in marketing and R&D Recruit from a wide range of related industries Recruit at all levels of the organisation Regularly fast-track high potential people * Mu
Slide 9: Strategic objectives
io) James Hardie Aggressively grow the market for fibre cement Secure our desired overall market position while defending our share in existing market segments Leverage our superior technology to offer differentiated products and systems of superior value to those of competitors, to reduce direct pr
Slide 10: Primary demand and category share
@® James Hardie Primary Demand Create awareness at the consumer level Target the builder and contractor (decision maker) Access the market through traditional channels = Category Share Brand program Differentiated product offering Long term price positioning Performance Indicators (Measurements) Rev
Slide 11: Revenue growth outstripping volume growth
i) dames Hardie’ Revenue Growth Continuing to Outstrip Volume Growth $800 $700 $600 $500 $400 Revenue (USDM) a JH Volume * JH Revenue $300 —— Housing Starts _ A $200 Volume (mmsf') / Starts (000’s Units) $100 $0 90 91 92 93 94 95 96 97 98 99 00 o1 02 03 04 05 11
Slide 12: Exterior and interior product portfolio
ic) James Hardie » Exterior product portfolio includes: * A full wrap exterior bundle » Siding, Trim and Soffits » Repair & Remodel * Big Boxes * One Steppers » Manufactured Housing * Hardboard substitute * Vinyl upgrade » Interior product portfolio includes: » %” grid backer - Floors * Proprietary
Slide 13: Established and emerging markets
| James Hardie F Exteriors: Siding, Trim & Soffit » Established Markets: South = Emerging Markets: North Interiors: Backer board = National Market q uemauoreyses (J Emerging Markets 22 Established Markets 13
Slide 14: USA FC Exteriors
i) James Hardie USA FC Exteriors 14
Slide 15: Share of US exterior products market
eh) James Hardie’ xterio » 12% of US exterior products market vs. long term target of 35% Significant growth opportunity in vinyl category * Taking share from vinyl » Stucco and masonry remain static * Wood-based products continue to decline * Includes siding, Trim, Soffit & Facia 15
Slide 16: Average selling price management
@ James Hardie’ Managed average selling price up 24% in past five years Average Selling Price $/msf Expanded our product 5604 lines 540 5207 Direct competition can’t 8 soo match to Value price new products 3 404 * Not influenced by direct “ competition 4207 400 * Price “base products” to FY99 FY00 F
Slide 17: New construction penetration
ic James Hardie’ | USA FC Exte We continue to increase our penetration in the new construction exterior products segment*. We expect our share in this segment to continue to grow rapidly over the next 3 years * Includes siding, Trim, Soffit & Facia 17
Slide 18: Repair and remodel opportunity
| James Hardie Significant opportunity for growth in the R&R segment Our penetration in this segment is increasing but is still low Lower terminal FC share than new construction since we position a “remove and replace” solution against Vinyl’s “recover” approach 18
Slide 19: Manufactured housing
i James Hardie’ Factory built homes account for 6.2% of new construction starts Positioning » Wood substitute » Vinyl upgrade Approach » Dedicated sales/marketing « Program sell 7 Vinyl ; 73% Continued growth despite depressed MH market 19
Slide 20: Siding growth
@® James Hardie’ i Siding is the largest part of our business * Qur siding products continue to grow in all Siding Growth markets * Expanding product range * Penetration against vinyl * Repair and remodelling segment 1997 1998 1999 2000 2001 2002 2003 2004 20
Slide 21: Trim: Harditrim and XLD
@ James Hardie’ Launched Harditrim in Nov 98 * Positioning * Durability and wood-like appearance Priced at a premium to other Trim Growth manufactured trims Launched XLD » Allows increased thickness * IP protection in place Demand increasing ; 1998 1999 2000 2001 2002 2003 2004 » Additional capacity
Slide 22: ColorPlus
| James Hardie Launched Colorplus in Jan ’02 * Helps to take share from vinyl » Lifts selling prices » Lifts margins Internal color capability being developed » Ramp up ongoing — Peru plant * 20 by 20 Color and SKU regional matrix » Supply chain compression - 22
Slide 23: Soffit
James Hardie Includes soffit panels, planks and premium vented soffit Soffit Growth High throughput JH automated manufacturing capacity now in place 1998 1999 2000 2001 2002. «2003 = 2004 23
Slide 24: Established and emerging market drivers
ea dames Hardie’ » Established Markets: South Knock out punch to hardboard (Collins, Temple, LP) Rural market growth Repair and Remodel * Emerging Markets: North Vinyl substitution Cedar substitution 24
Slide 25: Established markets position
7) James Hardie » High share position in most markets Major builders and dealers High awareness of the JH brand Trade and consumers * Continued growth Smaller builders More products per house Rural markets Repair and remodel 25
Slide 26: Established market growth
@) James Hardie FC accounts for 1/3 of siding sales in established markets EM account for over 76% of our exterior products sales » High share position in most markets JH Established Market Growth » Major builders and dealers High awareness of the JH brand » Trade and consumers » Continued growth Sm
Slide 27: Terminal share and growth band
a) James Hardie’ Terminal share of 40 — 50% 7% - 15% targeted growth band * Hardboard and brick substitution in New Construction Vinyl alternative in R&R » Rural market growth » New product launches Protect category share 27
Slide 28: Emerging market opportunity
@ James Hardie’ Emerging market opportunity » Vinyl belt * High population » Strong growth in new const. * Aging housing stock 28
Slide 29: Strategy and tactics versus vinyl
@ James Hardie’ Strategy: Segment the single family construction based on house value Target move-up and luxury homes Position Hardiplank as a viable upgrade to vinyl Tactics: » Accelerate awareness at the consumer level (marketing) » Align channel: actively manage “on the wail” cost (field sales) »
Slide 30: ColorPlus as a substitute for vinyl
*) James Hardie Color Plus as a substitute for vinyl * Top 1/3 of the market » Turn key capability » Efficient supply chain » Product bundle includes JH siding, trim and color 30
Slide 31: USA FC Interiors
i) James Hardie USA FC Interiors 31
Slide 32: USA interior cement board market
i James Hardie USA Interior Cement Board Market (est. 0.97bsf) James Hardie 25% - 30%, Note -- This information is based cn the latest market survey data collected and analysed by James Hardie and is based on source maierial from the NAHB, NAHB Builder Practices Survey and Consumer Practices Survey,
Slide 33: Cement board market and distribution
James Hardie = Total cement board market estimated to be 1bsf JH has the leading position in the 4” market due to clear technology advantage for floor applications G2 technology driving penetration on wall applications Broad distribution base » Pro-tile » Lumber » Dry-wall 33
Slide 34: Volume growth
@ James Hardie te i Volume Growth Mar-90 Mar-94 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97/, Mar-98 Mar-99 Mar-00 Mar-01 Mar-02/) Mar-03 Mar-04 34
Slide 35: Hardibacker 1/4" volume growth
i James Hardie’ » Existing Hardibacker launched 1990 1/4" Volume Growth * Used as substrate for ceramic tiles Mostly used on floors (i.e. bathrooms, kitchens, entries) * Initially strong in R&R applications, now established in new construction also FY97 FY98 FY99 FYOO FYO41 FYo2 FYO3 FYO4 35
Slide 36: Launch of G2
Loe i Gh] James Hardie Launched in March 2003 Raises the bar » Adds value for both Pro-tile and DIY
Slide 37: G2 technology
ca James Hardie “G2” technology is: Easier to cut and fasten G-2 Volume Growth 15% lighter Ideal for walls 3x5’ and 4’x8’ FY97 FY98 FY99 FY0O FyYo1* FY02 FY03 FYo4 37
Slide 38: Retail channel growth
@) James Hardie » We continue to grow rapidly in the retail channel Backer ~- 2600/2600 Stores — 100% Siding - 1550/2600 Stores —- 60% Backer — 100% of 1650 Retail Volume Growth Stores Siding - 55% or 900/1650 Stores - Backer - 100% of 950 Stores - Siding — 68% or 650/950 FY00 FYO1 FY02 FY03 FY04 St
Slide 39: Distribution channels
@) James Hardie il te = Pro-tile Channel » Manufacturer/distributors * Import/distributors » Dealers Lumber Channel * National/regional building materials chains » Independent yards *« Gypsum Channel > Drywall distributors 39
Slide 40: Long-term backer board objectives
@ James Hardie Long-term — a high terminal share of US backer board market Penetrate against glass mesh and other cement boards on ceramic tile underlayment applications » Substitute against green board in new construction Protect position in retail channel 40
Slide 41: Manufacturing Operations & Capacity
@) James Hardie Manufacturing Operations & Capacity “41
Slide 42: Manufacturing capital efficiency
*) James Hardie » Capital Efficiency Unit cost of production Ability to deliver differentiated products « Aligned » Patterned * Thick » Scale to build purpose built machines Culture focused on operational and engineering step change 42
Slide 43: Process engineering and forming platforms
* James Hardie’ Created centralised process engineering to support: » New product development and launch ' Efficiency gap closure = Design change projects » Implement next generation ideas into the business units « Created next generation engineering to work on step- change forming platforms and ope
Slide 44: Plant locations and flat sheet capacity
a 1 dames Hardie oo 2 IF Anche — i DO fe ee ig Plant Locations Flat Sheet Capacity Plants (mmsf) Fontana, California 180 Plant City, Florida 300 . Cleburne, Texas ° 500 Tacoma, Washington 200 4 Peru, IHinois 560? / . Waxahachie, Texas 360 | Co : Blandon, Pennsylvania 200 Summerville, South 190 4 Car
Slide 45: Revenue growth and EBIT targets
@) James Hardie’ 15% to 25% Revenue growth band » 20% to 25% EBIT/revenue ratio 45
Slide 46: Revenue 26% CAGR
1 James Hardie’ Revenue — 26% CAGR in Last 5 years 9004 8004 USDM FY99 FYO0 FY01 FY02 FY03 FY04 46
Slide 47: Price
Price 520 500 480 460 USD PER MSF 440 420 400 FY99 FY00 FY01 FY02 FY03 FY04 47
Slide 48: Cost
@ James Har Cost: Normalised like for like, factory costs continue to decline Capacity ramp ups and start ups = Waxahachie, Cleburne XLD, Blandon, Reno and Peru XLD Funding several key growth initiatives » Market Development — R&R, Color Plus & Roofing 48
Slide 49: Margins and EBIT
i) James Hardie’ Margins — Last 5 years EBIT —- CAGR 30% 250 EBIT 30% ~~ EBIT% SALES 8% 200 25% 20% 150: 15% ESIT (USDM) EBIT % Sales 100. 10% 50: 5% On 1 0% Fy99 Fyoo FY01 FY02 FY03 FY04 49
Slide 50: Revenue per employee
i) James Hardie _ $500 $450 $400 $350 $300 $250 $200 $150 Revenue per Employee (USD) $100 $50 $0 4992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 ©2003 2004 2 # of Employees Revenue —— Revenue Per Employee 50
Slide 51: Strategic priorities
James Hardie Continue to substitute FC for existing materials in exterior & interior construction applications « Use our superior FC technology & manufacturing capability to develop new products in a high throughput/low unit cost environment Increase and upgrade our manufacturing capability Manage d
Slide 52: Basis for growth
i) James Hardie Based on: Large market opportunity # Superior value proposition for target customers Proprietary and/or protected technology Current R&D investments point to large upsides ® Significant organisational advantages Focused strategy and organisational effort Installed capacity and market
Slide 53: USA FC Q2 FY05 Operating Review
@) James Hardie 7) James Hardie USA FC Q2 FYO5 Operating Review
Slide 54: 2nd Quarter Result
2°4 Quarter Result Net Sales Sales Volume Average Price EBIT' EBIT Margin‘ up up up down down f)| James Hardie 21% to US$231.0 million 18% to 459.7 mmsf! 3% to US$503 per msf' 9% to US$49.0 million 6.9 pts to 21.2% 54
Slide 55: Key Points
1c James Hardie’ Key Points Continued strong demand for fibre cement Further penetration of established and emerging markets * Strong sales growth in exterior and interior product markets Growth in differentiated, higher-priced products Operating issues at several plants Higher manufacturing and fre
Slide 56: Plant Performance Issues
@®) dames Hardie Plant Performance Issues Ramp up and management issues at Blandon, Pennsylvania; Summerville, South Carolina and Waxahachie, Texas Capacity constrained Increased operating costs — US$8M impact: * Freight » Labour » Maintenance issues addressed and largely behind us 56
Slide 57: EBIT/Sales margin higher costs
i) James Hardie’ . Q2’05 HY’05 EBIT/Sales Margin Us$m US$m Higher costs » Higher raw material prices 47 8.2 ® Freight (capacity constraint ght (capacity 6.2 11.3 related and higher fuel cost impact) » SG&A (growth initiatives) 46 11.6 Long term band 20-25% 57
Slide 58: EBIT US$M and margin
50 T 40 20 30 EBIT US$M EBIT MARGIN % 20 ce oe 10 | be be bo Q2 FY99 Q2 FY00 Q2 FY01 Q2 FY02 Q2 FY03 Q2 FY04 Q2 FY05 *Excludes restructuring and other operating expenses 58
Slide 59: Outlook
i) James Hardie’ Outlook Continued strong demand for fibre cement » Housing construction to remain strong over short term Low interest rates New starts, permits and builder confidence at healthy levels Sales growth to continue Further penetration in established and emerging markets and across produc
Slide 60: Hardie Pipe
ca James Hardie 7) James Hardie Hardie® Pipe
Slide 61: FRC pipe in the US
@ James Hardie » FRC pipes manufactured in Australia for over 70 years « Entered US market in 2000 in Florida, with capacity at Plant City 100,000 tons machine to service the SE region 61
Slide 62: Pipe positioning
i James Hardie Position as an RCP equivalent in mid-diameter range between plastic & RCP * Installation time and cost savings ® High throughput/high yield manufacturing * Target markets nationally 62
Slide 63: Market recognition of FRCP
James Hardie The market recognises FRCP value in mid-diameters Full range of 12” to 36” diameters now available Florida penetration curve consistent with our forecasts Manufacturing progress has continued, but targets have still not been met « Approaching cash breakeven 63
Slide 64: Artisan Roofing
@) James Hardie 7) James Hardie Artisan Roofing
Slide 65: Roofing scalability program
1 James Hardie « $15M CER approved in 02 « Prove scalability of roofing technology Product Design Product Performance » Manufacturing capability » Market positioning 65
Slide 66: Roofing positioning
i) James Hardie Positioning Wood shake and natural slate substitute Light weight, fire resistant, nailable & walkable > Price Equivalent to fire treated wood shake / FC competitors * Distribution One step roofing distribution Southern California only 66
Slide 67: Lower than expected Q2 result
i James Hardie Lower than expected Q2 result Sub-standard US manufacturing performance — issues largely behind us * High input costs » Ramp-up costs of growth initiatives » High corporate costs (SCI related) = Remain on track to meet business growth targets 67
Slide 68: Outlook and expected operating profit
eh) James Hardie’ Top line growth momentum of first half continuing into 3 quarter Improved manufacturing performance in North America business * Several start-ups planned for the 2"¢ half * Reno * Peru XLD Trim * Peru ColorPlus Expected operating profit US$135M to US$145M* “Expected operating profi
Slide 69: Forward-looking statements
This presentation contains forward-looking statements. We may from iime io time make forward-looking statements in our periodic reports filed with the Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering circulars and prospectuses, in media rel
Slide 70: Definitions
1c James Hardie’ ll KN ne oa i Ns a This Management Presentation forms part of a package of information about the company’s results. {f should be read in conjunction with the other parts of this package, including Management's Analysis of Results, a Media Release, a Financial Report and Results at a
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