James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2014 Earnings Presentation
57 slides from James Hardie Industries's earnings presentation, Nov 15, 2013
Slide 1: Q2 FY14 Management Presentation
Exhibit 99.4 Q2 FY14 MANAGEMENT PRESENTATION 14 November 2013
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 – Russell Chenu, 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
Slide 5: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 6: Group Overview
1 GROUP OVERVIEW Q2 Q2 % HY HY % US$ Millions FY 2014 FY 2013 Change FY 2014 FY 2013 Change Net operating profit 51.9 15.0 194.1 83.5 Net operating profit excluding asbestos, ASIC expenses, New Zealand product liability expenses and tax 56.3 38.9 45 108.3 82.7 31 adjustments Diluted earnings per sha
Slide 7: USA and Europe Fibre Cement 2nd Quarter Summary
1 1 USA AND EUROPE FIBRE CEMENT 2 nd QUARTER SUMMARY USA and Europe Fibre Cement results reflected: • Higher sales volume due to increased activity in new construction market and modest growth in R&R market • Higher average net sales price 2 • Higher production costs, including higher input costs •
Slide 8: USA and Europe Fibre Cement 2nd Quarter Result
USA AND EUROPE FIBRE CEMENT 1 2nd Quarter Result Net Sales up 25% to US$298.7 million Sales Volume up 21% to 446.4 mmsf 2 Average Price up 4% to US$658 per msf EBIT up 53% to US$67.3 million EBIT Margin up 4.0 pts to 22.5% 1 Comparisons are of the 2 nd quarter of the current fiscal year versus the 2
Slide 9: USA and Europe Fibre Cement Half Year Result
USA AND EUROPE FIBRE CEMENT 1 Half Year Result Net Sales up 18% to US$576.8 million Sales Volume up 15% to 874.3 mmsf 2 Average Price up 2% to US$648 per msf EBIT up 34% to US$126.7 million EBIT Margin up 2.8 pts to 22.0% 1 Comparisons are of the 1 st half of the current fiscal year versus the 1 st
Slide 10: USA and Europe Fibre Cement
USA AND EUROPE FIBRE CEMENT 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 million in 4 th quarter FY13 10
Slide 11: USA Fibre Cement
USA FIBRE CEMENT Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau 11
Slide 12: Average Net Sales Price (US dollars)
USA AND EUROPE FIBRE CEMENT 1 Average Net Sales Price (US dollars) 670 US$648 630 590 550 FY09 FY10 FY11 FY12 FY13 HY FY14 1 Prior period amounts have been restated to conform with current year refined methodology for calculating average net sales price 12
Slide 13: Asia Pacific Fibre Cement 2nd Quarter Summary
1 ASIA PACIFIC FIBRE CEMENT 2 nd QUARTER SUMMARY Asia Pacific Fibre Cement results reflected: • Higher sales volume • Improvement in Australia’s new residential market; however, revenue growth constrained by decrease in the R&R market • Continued increase in New Zealand housing activity • Higher A$
Slide 14: Asia Pacific Fibre Cement 2nd Quarter Result
ASIA PACIFIC FIBRE CEMENT 1 2nd Quarter Result Net Sales down 3% to US$93.3 million Sales Volume up 5% to 107.7 mmsf 2 Average Price up 4% to A$933 per msf 3 EBIT up 4% to US$22.1 million 3 A$ EBIT up 15% to A$23.9 million 3 EBIT Margin up 1.6 pts to 23.7% 1 Comparisons are of the 2 nd quarter of th
Slide 15: Asia Pacific Fibre Cement Half Year Result
ASIA PACIFIC FIBRE CEMENT 1 Half Year Result Net Sales up 2% to US$187.4 million Sales Volume up 6% to 210.1 mmsf 2 Average Price up 3% to A$924 per msf 3 EBIT up 11% to US$43.2 million 3 A$ EBIT up 18% to A$45.3 million 3 EBIT Margin up 1.9 pts to 23.1% 1 Comparisons are of the 1 st half of the cur
Slide 16: Group Outlook
GROUP OUTLOOK USA and Europe Fibre Cement • The US operating environment continues to reflect an increasing number of housing starts and improving house values • The company is continuing with its plan to expand capacity through new capital investments and re- commissioning of idled facilities in fu
Slide 17: Manufacturing Capacity Expansion
MANUFACTURING CAPACITY EXPANSION Asia Pacific Fibre Cement • In Q1 FY14, James Hardie acquired the previously-leased land and buildings at its existing Carole Park (Brisbane) plant and is expanding production capacity at the site - investment of approximately A$89 million • New production capacity o
Slide 18: Financial Review
FINANCIAL REVIEW Russell Chenu, CFO
Slide 19: Financial Review
FINANCIAL REVIEW Overview • Earnings impacted by: • Higher sales volumes, local currency revenues, EBIT and EBIT margins in all major business units • Unfavourable movement in the accounting provision for legacy product liability claims in New Zealand, resulting in an expense of US$0.3 million and U
Slide 20: Results - Q2
RESULTS - Q2 US$ Millions Q2 '14 Q2 '13 % Change Net sales 392.0 334.4 17 Gross profit 133.1 111.3 20 SG&A expenses (53.8) (56.6) 5 Research & development expenses (7.4) (9.5) 22 Asbestos adjustments (4.1) (22.4) 82 EBIT 67.8 22.8 Net interest expense (0.4) - Other income 0.1 0.3 (67) Income tax exp
Slide 21: Results - Q2 (continued)
RESULTS - Q2 (CONTINUED) US$ Millions Q2 '14 Q2 '13 % Change Net operating profit 51.9 15.0 Asbestos: Asbestos adjustments 4.1 22.4 (82) Other asbestos 1 (0.2) (0.7) 71 ASIC expenses - 0.3 New Zealand product liability expenses 0.3 5.7 (95) Asbestos and other tax adjustments 0.2 (3.8) Net operating
Slide 22: Results – Half Year
RESULTS – HALF YEAR US$ Millions HY '14 HY '13 % Change Net sales 764.2 674.1 13 Gross profit 259.4 221.3 17 SG&A expenses (108.7) (100.9) (8) Research & development expenses (16.4) (17.9) 8 Asbestos adjustments 90.4 2.8 EBIT 224.7 105.3 Net interest expense (income) (0.3) 0.2 Other income 0.2 0.7 (
Slide 23: Results - Half Year (continued)
RESULTS - HALF YEAR (CONTINUED) US$ Millions HY '14 HY '13 % Change Net operating profit 194.1 83.5 Asbestos: Asbestos adjustments (90.4) (2.8) Other asbestos 1 (0.8) (1.5) 47 ASIC expenses - 0.4 New Zealand product liability expenses 4.9 5.7 (14) Asbestos and other tax adjustments 0.5 (2.6) Net ope
Slide 24: Segment EBIT – Q2
SEGMENT EBIT – Q2 US$ Millions Q2 '14 Q2 '13 % Change USA and Europe Fibre Cement 67.3 44.0 53 Asia Pacific Fibre Cement, excluding New Zealand 22.1 21.3 4 product liability expenses Research & Development 1 (5.5) (6.3) 13 Total segment EBIT excluding New Zealand 83.9 59.0 42 product liability expen
Slide 25: Segment EBIT – Half Year
SEGMENT EBIT – HALF YEAR US$ Millions HY '14 HY '13 % Change USA and Europe Fibre Cement 126.7 94.3 34 Asia Pacific Fibre Cement, excluding New Zealand 43.2 39.0 11 product liability expenses 1 Research & Development (11.6) (12.3) 6 Total segment EBIT excluding New Zealand 158.3 121.0 31 product lia
Slide 26: Changes in A$ versus US$
CHANGES IN A$ VERSUS US$ Earnings Balance Sheet N/A • Unfavourable impact from translation of Asia Pacific results – Q2 FY14 vs Q2 FY13 • Favourable impact on corporate costs incurred in Australiandollars – Q2 FY14 vs N/A Q2 FY13 • Favourable impact from translation of asbestos liability balance – 3
Slide 27: Income Tax Expense – Q2
INCOME TAX EXPENSE – Q2 Q2 '14 Q2 '13 US$ Millions Operating profit before income taxes 67.5 23.1 Asbestos: Asbestos adjustments 4.1 22.4 Other asbestos 1 (0.2) (0.7) New Zealand product liability expenses 0.3 5.7 Operating profit before income taxes excluding asbestos 71.7 50.5 and New Zealand prod
Slide 28: Income Tax Expense – Half Year
INCOME TAX EXPENSE – HALF YEAR US$ Millions HY '14 HY '13 Operating profit before income taxes 224.6 106.2 Asbestos: Asbestos adjustments (90.4) (2.8) 1 Other asbestos (0.8) (1.5) New Zealand product liability expenses 4.9 5.7 Operating profit before income taxes excluding asbestos 138.3 107.6 and N
Slide 29: Cashflow
1 CASHFLOW US$ Millions HY '14 HY '13 EBIT 224.7 105.3 Non-cash items: Asbestos adjustments (90.4) (2.8) Other non-cash items 33.4 30.5 Net working capital movements 31.4 (8.2) Cash Generated By Trading Activities 199.1 124.8 Tax payments, net (12.3) (84.9) Change in other non-trading assets and lia
Slide 30: Capital Expenditure
CAPITAL EXPENDITURE US$ Millions HY '14 HY '13 % Change USA and Europe Fibre Cement (including 23.0 20.9 10 Research and Development) Asia Pacific Fibre Cement 21.5 4.6 Total 44.5 25.5 75 • In Q1 FY14, the company completed the purchase of the previously-leased land and buildings at Carole Park, Bri
Slide 31: Capital Management and Dividends
CAPITAL MANAGEMENT AND DIVIDENDS • On 14 November 2013, the company announced an ordinary dividend of US8.0 cents per security, up from US5.0 cents per security in the prior corresponding half year. The dividend was declared in US currency and will be paid on 28 March 2014, with a record date of 19
Slide 32: Debt
DEBT • At 30 September 2013: US$ Millions Total facilities 405.0 Gross debt - Cash 126.6 Net cash 126.6 Unutilised facilities and cash 531.6 • Weighted average remaining term of debt facilities was 2.6 years at 30 September 2013, down from 3.1 years at 31 March 2013 • James Hardie remains well withi
Slide 33: 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 34: Asbestos Fund – Proforma (Unaudited)
ASBESTOS FUND – PROFORMA (UNAUDITED) A$ millions AICF cash and investments - 31 March 2013 128.1 Insurance and cross-claim recoveries 15.2 Interest and investment income 1.9 Claims paid (72.8) Operating costs (2.1) Other 1.8 AICF cash and investments - 30 September 2013 72.1 • Year to date claims ex
Slide 35: Summary
SUMMARY • Net operating profit excluding asbestos, ASIC expenses, New Zealand product liability expenses and tax adjustments was US$56.3 million and US$108.3 million, for the quarter and half year, respectively • The 2 nd quarter results reflected: • Improved sales volumes and higher average net sal
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$164 million and US$181 million 1 • Management expects full year earnings excluding asbestos, asset impairments, ASIC expenses, New Zealand p
Slide 37: Questions
QUESTIONS 5 ie
Slide 38: Appendix
(7) James Hardie 4 APPENDIX
Slide 39: Financial Summary
FINANCIAL SUMMARY US$ Millions Q2 '14 Q2 '13 % Change HY '14 HY '13 % Change Net Sales USA and Europe Fibre Cement $ 298.7 $ 238.1 25 $ 576.8 $ 490.1 18 Asia Pacific Fibre Cement 93.3 96.3 (3) 187.4 184.0 2 Total Net Sales $ 392.0 $ 334.4 17 $ 764.2 $ 674.1 13 EBIT - US$ Millions USA and Europe Fibr
Slide 40: Key Ratios
KEY RATIOS HY '14 HY '13 HY '12 1 EPS (Diluted) 24.4c 18.8c 18.5c 2 EBIT/ Sales (EBIT margin) 18.3% 16.2% 17.9% 1 Gearing Ratio (9.5)% (6.4)% 2.7% 2 Net Interest Expense Cover 66.8x 54.7x 32.0x 2 Net Interest Paid Cover 77.9x 109.3x 30.3x Net Debt Payback - - 0.2yrs 1 Excludes asbestos adjustments,
Slide 41: EBITDA – Q2
EBITDA – Q2 US$ Millions Q2 '14 Q2 '13 % Change EBIT USA and Europe Fibre Cement 67.3 44.0 53 Asia Pacific Fibre Cement 1 22.1 21.3 4 Research & Development (5.5) (6.3) 13 General corporate excluding asbestos and ASIC expenses (11.2) (7.4) (51) Depreciation and Amortisation USA and Europe Fibre Ceme
Slide 42: EBITDA – Half Year
EBITDA – HALF YEAR HY '14 HY '13 % Change US$ Millions EBIT USA and Europe Fibre Cement 126.7 94.3 34 1 43.2 39.0 11 Asia Pacific Fibre Cement Research & Development (11.6) (12.3) 6 General corporate excluding asbestos and ASIC expenses (18.1) (11.7) (55) Depreciation and Amortisation USA and Europe
Slide 43: General Corporate Costs – Q2
GENERAL CORPORATE COSTS – Q2 US$ Millions Q2 '14 Q2 '13 % Change Stock compensation expense 3.4 3.0 (13) Other costs 7.8 7.1 (10) General corporate costs excluding ASIC 11.2 10.1 (11) expenses and recovery of RCI legal costs ASIC expenses - 0.3 Recovery of RCI legal costs - (2.7) General corporate c
Slide 44: General Corporate Costs – Half Year
GENERAL CORPORATE COSTS – HALF YEAR US$ Millions HY '14 HY '13 % Change Stock compensation expense 3.7 5.6 34 Other costs 14.4 14.3 (1) General corporate costs excluding ASIC expenses, intercompany foreign exchange 18.1 19.9 9 gain and recovery of RCI legal costs ASIC expenses - 0.4 Recovery of RCI
Slide 45: Net Interest (Expense) Income
NET INTEREST (EXPENSE) INCOME US$ Millions Q2 '14 Q2 '13 HY '14 HY '13 Gross interest expense (1.0) (0.8) (2.0) (1.6) Interest income 0.1 0.2 0.2 0.6 Realised loss on interest rate swaps (0.2) (0.5) (0.3) (1.0) Net interest expense excluding AICF interest income (1.1) (1.1) (2.1) (2.0) AICF interest
Slide 46: Total US Housing Starts
(Thousands of Starts) U.S. Housing Starts Calendar Quarters THousing starts ---%Growth (same QtrPY) 46
Slide 47: 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 48: 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 U
Slide 49: 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 o
Slide 50: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES EBIT and EBIT margin excluding asbestos, ASIC expenses and New Zealand product liability expenses – EBIT and EBIT margin excluding asbestos, ASIC expenses and New Zealand product liability expenses are not measures of financial performance under US GAAP and should not
Slide 51: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Net operating profit excluding asbestos, ASIC expenses, New Zealand product liability expenses and tax adjustments – Net operating profit excluding asbestos, ASIC expenses, New Zealand product liability expenses and tax adjustments is not a measure of finan
Slide 52: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Diluted earnings per share excluding asbestos, ASIC expenses, New Zealand product liability expenses and tax adjustments – Diluted earnings per share excluding asbestos, ASIC expenses, New Zealand product liability expenses and tax adjustments is not a meas
Slide 53: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Effective tax rate excluding asbestos, New Zealand product liability expenses and tax adjustments – Effective tax rate on earnings excluding asbestos, New Zealand product liability expenses and tax adjustments is not a measure of financial performance under
Slide 54: 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 55: 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 56: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Selling, general and administrative expenses excluding New Zealand product liability expenses – Selling, general and administrative expenses excluding New Zealand product liability expenses is not a measure of financial performance under US GAAP and should
Slide 57: Q2 FY14 Management Presentation
Q2 FY14 MANAGEMENT PRESENTATION 14 November 2013
James Hardie Industries — Q2 FY2014 Earnings Presentation on 6ix