James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (March 2018)
50 slides from James Hardie Industries's investor presentation, Mar 6, 2018
Slide 1: Investor Presentation March 2018
For personal use only INVESTOR PRESENTATION MARCH 2018
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS For personal use only 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 an
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and sim
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
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 For personal use only principles in the United States (US GAAP). These fina
Slide 5: Agenda
AGENDA For personal use only • Strategic Focus and Business Overview • North America Fiber Cement • International Fiber Cement • Capital Management Framework • Appendix PAGE 5
Slide 6: Our Strategic Focus
OUR STRATEGIC FOCUS For personal use only PEOPLE Continue to invest in the safety, development and promotion of our people DRIVING PROFITABLE GROWTH BRAND PROMISE DELIVERING MARKET POSITION Build on industry leadership SUPERIOR Grow fiber cement market through unrivaled commitment to manufacturing,
Slide 7: A Growth Focused Company
A GROWTH FOCUSED COMPANY For personal use only • Annual net sales US$2.0b • Total assets US$2.2b • Strong operational cash generation • Operations in North America, Asia Pacific and Europe • 3,577 employees • Market cap US$8.1b • S&P/ASX 100 company • NYSE ADR listing Market capitalization per Bloom
Slide 8: World Leader in Fiber Cement
WORLD LEADER IN FIBER CEMENT For personal use only Geographic Mix¹ Net Sales International 22% North America 78% EBIT ² International 22% North America 78% 1 All percentages are for the fiscal year ended 31 March 2017 ² EBIT – excludes research and development and asbestos-related expenses and adjus
Slide 9: Group Overview 3rd Quarter FY18 Results
GROUP OVERVIEW 3rd QUARTER FY18 RESULTS For personal use only Adjusted Net Operating Profit1 Adjusted Diluted EPS 1 3rd Qtr Nine Months 3rd Qtr Nine Months US$69.9M 33% US$205.5M 6% US16 cents 33% US47 cents 7% Adjusted EBIT 2 Net Operating Cash Flow 3rd Qtr Nine Months Nine Months US$97.4M 33% US$2
Slide 10: Key Themes 3rd Quarter FY18 Results
KEY THEMES 3rd QUARTER FY18 RESULTS For personal use only • Higher volumes and net sales in North America Fiber Cement and International Fiber Cement segments • Higher average net sales price in North America Fiber Cement segment • North America Fiber Cement: YTD EBIT margin of 23.8%; manufacturing
Slide 11: Creating a Sustainable and Differentiated Advantage
CREATING A SUSTAINABLE AND DIFFERENTIATED ADVANTAGE For personal use only Research & Development: Significant and consistent investment • US$30.3m spent on Research & Development in FY17 and US$24.4m in 9M FY18 • US$493.9m spent on Research & Development since 2000 James Hardie Siding Products Histo
Slide 12: Driving Category and Market Share Gains
DRIVING CATEGORY AND MARKET SHARE GAINS For personal use only North America External Cladding Share¹ 8% 19% 8% Fiber Cement Vinyl 8% Wood (including engineered wood) Stucco Brick Stone 10% Other (aluminium etc) 26% 21% 35/90 Plan • Grow fiber cement share to 35% of the exterior cladding market again
Slide 13: Delivering Superior Product Performance
DELIVERING SUPERIOR PRODUCT PERFORMANCE For personal use only Fiber cement is more durable than wood and engineered wood, looks and performs better than vinyl, and is more cost effective and quicker to build with than brick Fiber Cement Vinyl Engineered Wood Fire resistant ? ? Hail resistant ? ? Res
Slide 14: Building a Portfolio of Products and Brands
BUILDING A PORTFOLIO OF PRODUCTS AND BRANDS For personal use only Primary Products Trim / Commercial Interior Walls / Soffit Backerboard Siding Flooring Fascia Exteriors Ceilings U.S. & Europe Asia Pacific Brand Portfolio PAGE 14
Slide 15: North America Fiber Cement Segment
NORTH AMERICA FIBER CEMENT SEGMENT For personal use only North America Plant Locations • Largest fiber cement producer in North America • 2,390 employees1 Tacoma, WA • 9 manufacturing plants2 • 2 research and development Peru, IL Reno, NV facilities Pulaski, VA Fontana, CA Summerville, 9 mths FY18 9
Slide 16: North America Manufacturing Capacity
NORTH AMERICA MANUFACTURING CAPACITY For personal use only Capacity Expansion Since Housing Downturn (billion stdft) 0.3 3.7 0.7 0.1 • Plant City 3 0.2 • Summerville 1 2.4 • Fontana 2 • Fontana 1 • Waxahachie 1 • Plant City 4 • Cleburne 3 FY10 FY13 FY14 FY17 FY18 FY18 Nameplate Wax Restart Fontana R
Slide 17: North America Manufacturing Capacity
NORTH AMERICA MANUFACTURING CAPACITY For personal use only North America Owned / Leased Design Capacity Plant Locations (mmsf)¹ Cleburne, Texas Owned 666 Peru, Illinois Owned 560 Plant City, Florida Owned 500 Pulaski, Virginia Owned 600 Reno, Nevada Owned 300 Tacoma, Washington2 Owned 200 Waxahachie
Slide 18: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY For personal use only Q3'18 9 Months FY18 Volume • FY17 capacity constraint dampened FY18 demand Net Sales US$376.8M US$1,168.0M 7% 6% • Marginal volume growth … Exterior volume in line with Sales Volume 528.9 mmsf 1,652.0 mmsf market index growth for the quarter 2
Slide 19: North America Delivered Unit Cost
NORTH AMERICA DELIVERED UNIT COST For personal use only Delivered unit cost improved quarter to quarter throughout FY18 • Improvements in manufacturing inefficiencies and production cost • Experiencing higher input costs PAGE 19
Slide 20: Aggressively Growing Demand for Our Products
AGGRESSIVELY GROWING DEMAND FOR OUR PRODUCTS For personal use only North America Fiber Cement Top Line Growth1 3,000 $1,600 JH Volume (mmsf), Starts (000s Units) 2,500 $1,200 Revenue (US$M) 2,000 1,500 $800 1,000 $400 500 0 $0 JH Volume Housing Starts JH Revenue • US housing conditions remain favora
Slide 21: Achieving the Right Value for Our Products
ACHIEVING THE RIGHT VALUE FOR OUR PRODUCTS For personal use only North America Fiber Cement Average Net Sales Price 710 700 669 666 665 670 641 US$ per MSF 630 630 616 590 550 FY12 FY13 FY14 FY15 FY16 FY17 9 Months FY18 • Strategic price increase effective April 2017 • Satisfied with tactical pricin
Slide 22: North America Delivering Strong Returns
NORTH AMERICA DELIVERING STRONG RETURNS For personal use only Quarterly EBIT and EBIT Margin1 120 30 100 25 80 20 EBIT Margin EBIT US$M 60 15 40 10 20 5 0 0 FY13 FY14 FY15 FY16 FY17 FY18 EBIT EBIT/Sales YTD 31 December 2018 EBIT Margin % in target range, but down 40 bps to 23.8% compared to pcp 1 Ex
Slide 23: International Fiber Cement Summary
INTERNATIONAL FIBER CEMENT SUMMARY For personal use only Q3'18 9 Months FY18 Volume Net Sales US$114.5M US$349.2M • Growth primarily in our Australian and Philippines 15% 13% businesses Sales Volume 131.7 mmsf 399.8 mmsf 14% 11% Average Price US$773 per msf US$775 per msf Lower average selling price
Slide 24: International Fiber Cement (USD)
INTERNATIONAL FIBER CEMENT (USD) For personal use only Q3'18 9 Months FY18 Australia Australia Australia Volume Net Sales EBIT Volume Net Sales EBIT • Strong market and PDG performance • EBIT favorably impacted by volume, price and manufacturing performance Q3'18 9 Months FY18 New Zealand New Zealan
Slide 25: International Delivering Strong Returns
INTERNATIONAL DELIVERING STRONG RETURNS International Fiber Cement Segment For personal use only Quarterly EBIT and EBIT Margin1 35 30 25 20 15 10 5 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY2013 FY2013 FY2014 FY2014 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 EBIT EBIT Margin 1 EBIT and E
Slide 26: International Manufacturing Capacity
INTERNATIONAL MANUFACTURING CAPACITY For personal use only International Owned / Design Plant Locations Leased Capacity (mmsf)¹ Australia Rosehill, New South Wales Owned 180 Carole Park, Queensland2 Owned 160 New Zealand Auckland Leased 75 Philippines Cabuyao City3 Owned 145 Total 560 ¹ Nameplate ca
Slide 27: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital For personal use only Liquidity and Funding Management Allocation • • Conservative leveraging of balance • Strong margins and operating Invest in R&D and capacity sheet at a target within 1-2 times cash flows expansion to su
Slide 28: Appendix
For personal use only APPENDIX
Slide 29: USA Marketplace
USA MARKETPLACE For personal use only PAGE 29
Slide 30: Australia & New Zealand Marketplace
AUSTRALIA & NEW ZEALAND MARKETPLACE For personal use only PAGE 30
Slide 31: Australia, New Zealand & Philippines Core Markets
AUSTRALIA, NEW ZEALAND & PHILIPPINES CORE MARKETS For personal use only Ceilings and partitions Exterior cladding Philippines Australia General purpose flooring Interior walls New Zealand Australia PAGE 31
Slide 32: Financial Summary
FINANCIAL SUMMARY For personal use only Three Months and Nine Months Ended 31 December 9 Months 9 Months US$ Millions Q3'18 Q3'17 % Change % Change FY18 FY17 Net Sales North America Fiber Cement $ 376.8 $ 350.9 7 $ 1,168.0 $ 1,105.7 6 International Fiber Cement 114.5 99.5 15 349.2 309.0 13 Other Bus
Slide 33: North America Fiber Cement – Year Results Overview
NORTH AMERICA FIBER CEMENT – 5 YEAR RESULTS OVERVIEW For personal use only FY13 FY14 FY15 FY16 FY17 Net Sales 914 1,084 1,225 1,335 1,493 US$m Sales Volume 1,468 1,673 1,822 1,969 2,215 mmsf EBIT US$m¹ 166 235 290 352 344 EBIT Margin %¹ 18 22 24 26 23 1 Excludes asset impairment charges of US$16.9 m
Slide 34: International Fiber Cement – Year Results Overview
INTERNATIONAL FIBER CEMENT – 5 YEAR RESULTS OVERVIEW For personal use only FY13 FY14 FY15 FY16 FY17 Net Sales 399 398 418 379 412 US$m Sales Volume 414 441 484 481 487 mmsf EBIT US$m¹ 75 86 90 78 95 EBIT Margin %¹ 19 22 22 21 23 1 Excludes New Zealand weathertightness claims PAGE 34
Slide 35: Results – 3rd Quarter FY18
RESULTS – 3rd QUARTER FY18 For personal use only Three Months Ended 31 December Net sales increased 9% • Higher average net sales price and volume in the North US$ Millions Q3'18 Q3'17 % Change America Fiber Cement segment Net sales 495.1 453.8 9 • Strong volume growth in International Fiber Cement
Slide 36: North America Input Costs
NORTH AMERICA INPUT COSTS For personal use only Quarterly US Input Costs • Freight market prices increased 21% 1,400 10 9 compared to pcp 1,200 Cement, Gas, Electric and Freight Prices 8 1,000 7 • The price of NBSK pulp increased 19% 6 compared to pcp Pulp Prices 800 5 600 4 400 3 • Electricity pric
Slide 37: Segment EBIT – 3rd Quarter and Nine Months FY18
SEGMENT EBIT – 3rd QUARTER and NINE MONTHS FY18 For personal use only North America Fiber Cement North America Fiber Cement EBIT summary 300 278.5 266.8 267.8 • Q3 EBIT increased 34% and nine months EBIT 250 US$ Millions 200 increased 4% compared to pcp 150 Q3 EBIT • Quarter increase primarily drive
Slide 38: Segment EBIT – 3rd Quarter and Nine Months FY18
SEGMENT EBIT – 3rd QUARTER and NINE MONTHS FY18 Other Businesses Other Businesses For personal use only (7) (6.2) (6) (5.8) • Additional investments in product and manufacturing US$ Millions (5) (4.7) (4) capabilities (3) (2.1) (2.1) (1.9) Q3 EBIT (2) (1) 9 months 0 FY16 FY17 FY18 Research and Devel
Slide 39: Income Tax
INCOME TAX For personal use only Three Months and Nine Months Ended 31 December 23.1% estimated adjusted effective tax rate for 9 Months 9 Months US$ Millions Q3’18 Q3’17 the year FY18 FY17 Operating profit before taxes 110.1 102.9 277.5 295.9 • YTD Adjusted income tax expense decrease driven 1 Asbe
Slide 40: Cashflow
CASHFLOW 9 Months 9 Months Change For personal use only US$ Millions FY18 FY17 (% ) Net Income 203.7 232.0 (12) Decrease in net operating cash flow Adjustment for non-cash items 1 62.1 50.5 23 • Building inventory levels Annual AICF contribution (102.2) (91.1) (12) • Increase in the payment to AICF
Slide 41: Capital Expenditures
CAPITAL EXPENDITURES For personal use only CAPEX Spend • YTD CAPEX spend of US$148.8 million increased 70 US$90.3 million compared to pcp 60 • North America capacity projects during Q3 FY18: 50 Continued the start-up at our Summerville facility Continued construction of a greenfield expansion in U
Slide 42: Changes in AUD vs. USD
CHANGES IN AUD vs. USD For personal use only Excluding Translation As Reported Translation Impact 2 Impact 1 9 Months 9 Months 9 Months $ Favorable US$ Millions % Change % Change % FY18 FY17 FY18 (Unfavorable) Net sales $ 1,528.6 1,427.3 t 7% $ 1,525.2 t 7% 3.4 - Gross profit 539.1 513.9 t 5% 537.6
Slide 43: Liquidity Profile
LIQUIDITY PROFILE For personal use only Debt Profile Strong balance sheet US$ Millions US$231.3 million cash 1 US$552.6 million net debt 3 at 31 December 2017 $250 2 100% liquidity on bank debt at 31 December 2017 $627 Corporate debt structure $500 US$400 million 4.75% senior unsecured notes
Slide 44: Asbestos Claims Data
ASBESTOS CLAIMS DATA For personal use only Claims Received • Quarter and nine months claims received were 9% 433 432 428 below and in line with actuarial estimates, respectively • Quarter and nine months claims received decreased 8% and increased 1%, respectively, 131 144 143 compared to pcp • Mesot
Slide 45: Non-US GAAP Financial Measures and Terms
NON-US GAAP FINANCIAL MEASURES AND TERMS For personal use only This Management Presentation forms part of a package of information about the company’s results. It should be read in conjunction with the other parts of this package, including the Management’s Analysis of Results, Media Release and Con
Slide 46: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES For personal use only Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non-US GAAP, but are consistent with those used by Australian companies. Because the company prepares its Condense
Slide 47: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES For personal use only Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months and Nine Months Ended 31 December Q3'18 Q3'17 9 Months FY18 9 Months FY17 EBIT $ 143.9 $ 108.7 $ 325.0 $ 315.0 Asbestos: Asbestos adjustments (47.0) (35.6) (36.5) (39
Slide 48: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES For personal use only Adjusted diluted earnings per share Three Months and Nine Months Ended 31 December Q3'18 Q3'17 9 Months FY18 9 Months FY17 Adjusted net operating profit (US$ Millions) $ 69.9 $ 52.6 $ 205.5 $ 194.0 Weighted average common shares outstanding - 442.
Slide 49: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos For personal use only US$ Millions Three Months and Nine Months Ended 31 December Q3'18 Q3'17 9 Months FY18 9 Months FY17 EBIT $ 143.9 $ 108.7 $ 325.0 $ 315.0 Depreciation and amortization 23.4 22.6 68.6 62.5 Adjusted EBITDA $ 167.3 $
Slide 50: For personal use only
For personal use only INVESTOR PRESENTATION MARCH 2018
James Hardie Industries — Investor Presentation (March 2018) on 6ix