James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q4 FY2009 Earnings Presentation
69 slides from James Hardie Industries's earnings presentation, May 21, 2009
Slide 1: James Hardie Q4 FY09 Results Management Presentation
James Hardie Q4 FY09 Results Management Presentation - 20 May 2009 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 60. The comp
Slide 2: Disclaimer
2 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 the annual reports to shareholders
Slide 3: Agenda
3 Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda
Slide 4: Overview
4 Overview Operating results significantly affected by further declines in the US housing market and overall market downturn Net operating profit for the quarter and full year affected by favourable asbestos adjustments, unfavourable ASIC expenses and unfavourable tax adjustments US$ Millions Q4 FY0
Slide 5: Operating Review
Operating Review Louis Gries, CEO
Slide 6: Global Strategy
6 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 Introduce differentiated products to reduce direct price competition Global Str
Slide 7: USA Fibre Cement: 4th Quarter Result
7 4th Quarter Result * Net Sales down 20% to US$185.0 million Sales Volume down 23% to 305.1 mmsf Average Price up 3% to US$606 per msf EBIT down 35% to US$32.6 million EBIT Margin down 3.8 pts to 17.8% USA Fibre Cement *Comparison is of the 4th quarter of the current fiscal year versus the 4th quar
Slide 8: USA Fibre Cement: Full Year Result
8 Full Year Result * Net Sales down 20% to US$910.9 million Sales Volume down 21% to 1,508.9 mmsf Average Price up 1% to US$604 per msf EBIT down 36% to US$200.8 million EBIT Margin down 5.4 pts to 22.0% USA Fibre Cement *Comparison is of the current full year versus the prior full year
Slide 9: 4th Quarter Market Conditions
9 4th Quarter Market Conditions Ongoing deterioration in the US housing market - both new construction and repair and remodel continue to weaken March 2009 housing starts of 510,000* down 77% from January 2006 peak of 2.265 million* Q4 FY09 housing starts down 50% to 523,000* compared to Q4 FY08 FY0
Slide 10: 4th Quarter Key Points
10 4th Quarter Key Points Sales down due to declining market Sales volumes were lower across all regions ColorPlus(r) again increased as a percentage of our product mix Lower SG&A costs and higher average selling price partially offset lower volumes and higher unit costs USA Fibre Cement
Slide 11: Total Housing Starts - NAHB
11 Total Housing Starts - NAHB NAHB forecast of 2009 Housing Starts is down 46% to 491k (including MF-high) Source: NAHB Executive Level Forecasts - Total US Housing Starts (incl. SF, MF-low and MF-high) Latest NAHB downgrade to 491k in 2009 2010 NAHB - U.S. Housing Starts Forecasts 400 600 800 1,00
Slide 12: The HardieZone System
12 The HardieZone(tm) System James Hardie is currently undertaking a major product launch in the United States. The HardieZoneTM System: provides specific product performance attributes relative to the climate where the product is used across full range of engineered products - Plank, Panel, Trim, F
Slide 13: The HardieZone System: 7th Generation versus 2nd Generation
13 The HardieZone(tm) System 7th Generation versus 2nd Generation generic fibre cement The HardieZone(tm) System represents a logical extension of Hardie technology
Slide 14: The HardieZone System: The Right Exterior - Every Time
14 The HardieZone(tm) System The Right Exterior - Every Time Geographic zones based on 8 climatic variables: Temperature range UV Humidity Rainfall Snow Hail Hurricane (high wind load) Topographical factors
Slide 15: The HardieZone System: Two product lines emerged
15 The HardieZone(tm) System Two product lines emerged:
Slide 16: The HardieZone System HZ5
16 The HardieZone(tm) System HZ5 HZ5 Climates: Extreme seasonal temperature variation Freezing temperatures Snow and ice Substrate engineered for performance: Resists damage from snow and ice Resists damage from excessive moisture Resists damage from freezing temperatures Maintains dimensional stabi
Slide 17: The HardieZone System HZ10
17 The HardieZone(tm) System HZ10 HZ10 Climates: High humidity Dry heat High precipitation Substrate engineered for performance: Resists damage from moisture Resistant to cracking, splitting, rotting and swelling Dimensional stability Broadest industry coverage in high wind and hurricane areas Non c
Slide 18: The HardieZone System plus
18 The HardieZone(tm) System plus Factory controlled finish for maximum consistency and durability Resistant to cracking, fading and chipping Reduces costly weather delays plus Factory-controlled finish for maximum consistency and durability Resists peeling, chipping, cracking or marring Colour rete
Slide 19: The HardieZone System: Our finest siding ever
19 The HardieZone(tm) System Our finest siding ever Engineered for Climate(tm) Highest protection from the elements Sustained beauty with less maintenance Higher customer satisfaction Differentiation from generic fiber cement Seven strategically located manufacturing facilities The warranty homebuye
Slide 20: Outlook
20 Outlook Business has been set to optimise our results in a market that we think is close to bottoming out: Set for < 500,000 new construction starts Anticipate a reduction of > 15% in the Repair & Remodel opportunity The HardiZone(tm) System launch is planned to be completed in FY 2010 We expect
Slide 21: Outlook - continued
21 Outlook - continued At current low level of housing starts, market is nearing the bottom Affordability has improved as housing prices and mortgages have both declined Inventory level of new homes remains high Credit availability remains tight Consumer confidence has improved - but from very low l
Slide 22: USA Fibre Cement: Top Line Growth
22 USA Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau Top Line Growth Volume (mmsf) / Starts (000s Units) Revenue (US$M) JH Volume JH Revenue Housing Starts 0 400 800 1,200 1,600 2,000 2,400 2,800 $0 $200 $400 $600 $800 $1,000 $1,200 90 91
Slide 23: USA Fibre Cement: Primary Growth Performance
23 USA Fibre Cement Primary Growth Performance Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $ expenditures less CPI Note: • US Census discontinued their R&R $ expenditures report in 2007 • 2008 R&R = avg. published Home Depot & Lowe's same store sales less CPI
Slide 24: Average Net Selling Price
24 Average Net Selling Price US$ per MSF USA Fibre Cement 360 400 440 480 520 560 600 640 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Slide 25: USA Fibre Cement: EBIT and EBIT Margin
25 USA Fibre Cement *Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02 and impairment charges of US$45.6 million in Q4 FY08 EBIT and EBIT Margin* 0 20 40 60 80 100 120 140 FY03 FY04 FY05 FY06 FY07 FY08 FY09 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales
Slide 26: Asia Pacific Fibre Cement: 4th Quarter Result
26 4th Quarter Result * Net Sales down 28% to US$52.6 million Sales Volume down 6% to 89.2 mmsf Average Price up 4% to A$883 per msf EBIT down 37% to US$6.7 million EBIT Margin down 1.9 pts to 12.7% Asia Pacific Fibre Cement *Comparison is of the 4th quarter of the current fiscal year versus the 4th
Slide 27: Asia Pacific Fibre Cement: Full Year Result
27 Full Year Result * Net Sales down 8% to US$273.3 million Sales Volume down 2% to 390.6 mmsf Average Price up 2% to A$879 per msf EBIT down 6% to US$47.1 million EBIT Margin up 0.3 pts to 17.2% Asia Pacific Fibre Cement *Comparison is of the current full year versus the prior full year
Slide 28: Asia Pacific Fibre Cement: Key Points
28 Key Points Fourth Quarter Australia improved sales result despite overall market downturn NZ and Philippines performance affected by continuing decline in domestic economies US$ financial results affected negatively by depreciation of Asia Pacific currencies Sales of differentiated products conti
Slide 29: Asia Pacific Fibre Cement: Outlook
29 Outlook Building approvals expected to continue to fall in Australia, partially offset by increased activity in medium density dwellings, and renovations New Zealand housing approvals to remain at current levels Non-differentiated products in Australia are expected to remain subject to strong com
Slide 30: Financial Review
Financial Review Russell Chenu, CFO
Slide 31: Overview
31 Overview Result affected by further decline in housing construction activity in all markets Net operating profit affected by asbestos, ASIC expenses and tax adjustments Third and fourth FY09 instalment payments to AICF during Q4 Reduced cash flow as a result of ATO settlement payment, quarterly i
Slide 32: Consequences of depreciating A$ versus US$
32 Consequences of depreciating A$ versus US$ Unfavourable impact from translation of Asia Pacific results Favourable impact on corporate costs incurred in Australian dollars Favourable impact from translation of asbestos liability balance Unfavourable impact from translation of Australian dollar de
Slide 33: Results - Q4
33 Results - Q4 US$ Millions Q4'09 Q4'08 % Change Net sales 241.3 312.9 (23) Gross profit 69.2 107.2 (35) SG&A expenses (47.1) (60.3) 22 Research & development expenses (6.0) (7.5) 20 Asset impairments - (38.6) - Asbestos adjustments (176.5) (182.3) 3 EBIT (160.4) (181.5) 12 Net interest expense (1.
Slide 34: Results - Q4 (continued)
34 Results - Q4 (continued) US$ Millions Q4'09 Q4'08 % Change Net operating loss (129.6) (146.9) 12 Asbestos: Asbestos adjustments 176.5 182.3 (3) AICF SG&A (income) expenses (0.7) 1.3 - AICF interest income (1.6) (2.4) 33 Impairment of AICF investments 14.8 - - Tax benefit related to asbestos adjus
Slide 35: Results - Full Year
35 Results - Full Year US$ Millions FY 2009 FY 2008 % Change Net sales 1,202.6 1,468.8 (18) Gross profit 388.8 530.0 (27) SG&A expenses (208.8) (228.2) 9 Research & development expenses (23.8) (27.3) 13 Asset impairments - (71.0) - Asbestos adjustments 17.4 (240.1) - EBIT 173.6 (36.6) - Net interest
Slide 36: Results - Full Year (continued)
36 Results - Full Year (continued) US$ Millions FY 2009 FY 2008 % Change Net operating profit (loss) 136.3 (71.6) - Asbestos: Asbestos adjustments (17.4) 240.1 - AICF SG&A expenses 0.7 4.0 (83) AICF interest income (6.4) (9.4) 32 Impairment of AICF investments 14.8 - - Tax benefit related to asbesto
Slide 37: Segment Net Sales - Q4
37 US$ Millions Q4'09 Q4'08 % Change USA and Europe Fibre Cement 188.7 239.4 (21) Asia Pacific Fibre Cement 52.6 73.5 (28) Total 241.3 312.9 (23) Segment Net Sales - Q4
Slide 38: Segment Net Sales - Full Year
38 US$ Millions FY 2009 FY 2008 % Change USA and Europe Fibre Cement 929.3 1,170.5 (21) Asia Pacific Fibre Cement 273.3 298.3 (8) Total 1,202.6 1,468.8 (18) Segment Net Sales - Full Year
Slide 39: Segment EBIT - Q4
39 US$ Millions Q4'09 Q4'08 % Change USA and Europe Fibre Cement 32.3 47.5 (32) Asia Pacific Fibre Cement 6.7 10.7 (37) Research & development1 (4.2) (5.0) 16 Total segment EBIT 34.8 53.2 (34) General Corporate excluding ASIC expenses and impairment related charges (17.7) (8.9) (99) Total EBIT exclu
Slide 40: Segment EBIT - Full Year
40 US$ Millions FY 2009 FY 2008 % Change USA and Europe Fibre Cement 199.3 306.3 (35) Asia Pacific Fibre Cement 47.1 50.3 (6) Research & development1 (18.9) (18.1) (4) Total segment EBIT 227.5 338.5 (33) General Corporate excluding ASIC expenses and impairment related charges (56.6) (51.3) (10) Tota
Slide 41: Corporate Costs - Q4
41 US$ Millions Q4'09 Q4'08 % Change Stock compensation expense 2.1 2.7 22 Earnings-related bonus 0.9 1.2 25 ASIC expenses 1.7 1.1 (55) SFAS 5 legal provisions 9.4 - - Other costs 5.3 7.5 29 Total 19.4 12.5 (55) Corporate Costs - Q4
Slide 42: Corporate Costs - Full Year
42 US$ Millions FY 2009 FY 2008 % Change Stock compensation expense 7.2 7.7 6 Earnings-related bonus 2.2 3.2 31 ASIC expenses 14.0 5.5 - SFAS 5 legal provisions 9.4 4.0 - Other costs 37.8 39.6 4 Total 70.6 60.0 (18) Corporate Costs - Full Year
Slide 43: Net Interest (Expense) Income
43 Net Interest (Expense) Income US$ Millions Q4'09 Q4'08 FY 2009 FY 2008 Gross interest expense (3.9) (4.6) (11.2) (11.1) Interest income 1.2 - 1.8 2.8 Net interest expense excluding AICF net interest income (2.7) (4.6) (9.4) (8.3) AICF net interest income 1.6 2.4 6.4 9.4 Net interest (expense) inc
Slide 44: Income Tax Expense - Q4
44 Income Tax Expense - Q4 US$ Millions Q4'09 Q4'08 Operating (loss) profit before income taxes (176.3) (183.7) Asbestos: Asbestos adjustments 176.5 182.3 AICF SG&A (income) expenses (0.7) 1.3 AICF interest income (1.6) (2.4) Loss on AICF investments 14.8 - Asset impairments: Impairment charges - 38
Slide 45: Income Tax Expense - Full Year
45 Income Tax Expense - Full Year US$ Millions FY 2009 FY 2008 Operating profit (loss) before income taxes 155.8 (35.5) Asbestos: Asbestos adjustments (17.4) 240.1 AICF SG&A expenses 0.7 4.0 AICF interest income (6.4) (9.4) Loss on AICF investments 14.8 - Asset impairments: Impairment charges - 71.0
Slide 46: EBITDA - Q4
46 US$ Millions Q4'09 Q4'08 % Change EBIT USA and Europe Fibre Cement 32.3 47.5 (32) Asia Pacific Fibre Cement 6.7 10.7 (37) Research & development (4.2) (5.0) 16 General Corporate excluding ASIC expenses and impairment related charges (17.7) (8.9) (99) Depreciation and Amortisation USA and Europe F
Slide 47: EBITDA - Full Year
47 US$ Millions FY 2009 FY 2008 % Change EBIT USA and Europe Fibre Cement 199.3 306.3 (35) Asia Pacific Fibre Cement 47.1 50.3 (6) Research & development (18.9) (18.1) (4) General Corporate excluding ASIC expenses and impairment related charges (56.6) (51.3) (10) Depreciation and Amortisation USA an
Slide 48: Cash Flow
48 Cash Flow US$ Millions FY 2009 FY 2008 % Change EBIT 173.6 (36.6) - Non-cash items - Asbestos adjustments (17.4) 240.1 - - Other non-cash items 6.1 7.8 (22) - Change in restricted cash - asbestos 69.0 44.7 54 - Asset impairments - 71.0 - Net working capital movements (24.0) 70.3 - Cash generated
Slide 49: Capital Expenditure
49 US$ Millions FY 2009 FY 2008 % Change USA and Europe Fibre Cement 21.2 32.9 36 Asia Pacific Fibre Cement 4.9 5.6 12 Total 26.1 38.5 32 Capital Expenditure
Slide 50: Debt
50 Debt Weighted average remaining term of the total facilities was 1.6 years at 31 March 2009 US$51.6 million of the total facilities maturing in June 2009 will not be extended James Hardie remains well within its financial debt covenants US$ Millions Total facilities 498.3 Gross Debt 324.0 Cash 42
Slide 51: Key Ratios
51 Key Ratios FY09 FY08 FY07 EPS (Diluted)1 22.3c 36.9c 49.3c Dividend Paid per share 8.0c 27.0c 9.0c Return on Shareholders' Funds1 11.2% 17.7% 24.0% Return on Capital Employed2 16.7% 24.2% 27.7% EBIT/ Sales (EBIT margin)2 14.2% 19.2% 21.6% Gearing Ratio1 24.0% 21.5% 12.5% Net Interest Expense Cove
Slide 52: Summary
52 EBIT affected by reduced contribution from US and Asia Pacific businesses due to declines in overall housing market activity Corporate costs continuing to be inflated by remaining legacy issues Net operating profit affected by favourable asbestos adjustments, unfavourable ASIC expenses, unfavoura
Slide 53: Legacy Issues Update
53 Legacy Issues Update ASIC Proceedings Further hearing in relation to exoneration and penalties pending ATO tax assessments Settled FY 2002-2006 audits Court hearing for FY1999 amended assessment scheduled for September 2009 Domicile Review continuing Complexity driven by Dutch corporate law, Aust
Slide 54: Asbestos Compensation Funding Arrangements
54 Updated actuarial report completed as at 31 March 2009 Discounted central estimate increased to A$1,781.6 million from A$1,446.6 million As per AFFA, no contribution will be made to AICF in FY 2010 Asbestos Compensation Funding Arrangements
Slide 55: Updated Actuarial Estimate
55 Updated Actuarial Estimate A$ Millions KPMG Actuaries expected estimate for 31 March 2009, based on 31 March 2008 estimate A$1,446.6 Increased by: Increase in numbers of claims 236.3 Lower discount rate 188.2 Reduced by: Reduction in average claims cost and legal costs (72.6) Claims inflation (16
Slide 56: Updated Actuarial Estimate: Net accounting liability under Amended FFA
56 Updated Actuarial Estimate Net accounting liability under Amended FFA A$ millions (except where stated) 31-Mar-09 31-Mar-08 Central Estimate - Discounted 1,781.6 1,426.3 Discounting and inflation allowance (257.3) (40.1) Provision for claims handling costs of AICF 72.0 73.5 Other US GAAP adjustme
Slide 57: Updated Actuarial Estimate Comparison
57 Updated Actuarial Estimate Comparison* A$ Billions 30-Jun-04 31-Mar-05 30-Jun-05 31-Mar-06 30-Sep-06 31-Mar-07 31-Mar-08 31-Mar-09 Central Estimate - Discounted 1.536 1.685 1.568 1.517 1.555 1.355 1.426 1.782 Central Estimate - Undiscounted 3.586 3.604 3.131 3.079 3.169 2.811 3.027 3.124 Range -
Slide 58: Asbestos Fund Update
58 Asbestos Fund Update AICF holdings at 31 March 2009 A$143.1m - cash and short-term investments Net claims paid FY09: A$ millions AICF FY09* KPMG Actuarial Estimate FY09 AICF FY08* Claims Paid 101.9 81.3 67.2 Legal Costs 9.6 4.1 7.1 Insurance and cross claim recoveries (20.8) (14.2) (19.2) Total n
Slide 59: Questions & Answers
@ sames Hardie Questions & Answ
Slide 60: Endnotes: Definitions
60 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
Slide 61: Endnotes: Financial Ratios
61 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 de
Slide 62: Non-US GAAP Financial Measures
62 Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos, ASIC expenses and asset impairments - EBIT and EBIT margin excluding asbestos, ASIC expenses and asset impairments are not measures of financial performance under US GAAP and should not be considered to be more meaningful tha
Slide 63: Non-US GAAP Financial Measures (continued)
63 Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, ASIC expenses, asset impairments and tax adjustments - Net operating profit excluding asbestos, ASIC expenses, asset impairments and tax adjustments is not a measure of financial performance under US GAAP and shou
Slide 64: Non-US GAAP Financial Measures (continued)
64 Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, ASIC expenses, asset impairments and tax adjustments - Diluted earnings per share excluding asbestos, ASIC expenses, asset impairments and tax adjustments is not a measure of financial performance under US G
Slide 65: Non-US GAAP Financial Measures (continued)
65 Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos and tax adjustments - Effective tax rate excluding asbestos and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The
Slide 66: Non-US GAAP Financial Measures (continued)
66 Non-US GAAP Financial Measures (continued) Q4 Q4 US$ Millions FY 2009 FY 2008 FY 2009 FY 2008 Operating (loss) profit before income taxes $ (176.3) $ (183.7) $ 155.8 $ (35.5) Asbestos: Asbestos adjustments 176.5 182.3 (17.4) 240.1 AICF SG&A expenses (0.7) 1.3 0.7 4.0 AICF interest income (1.6) (2
Slide 67: Non-US GAAP Financial Measures (continued)
67 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
Slide 68: Non-US GAAP Financial Measures (continued)
68 Non-US GAAP Financial Measures (continued) Net cash (used in) provided by operating activities excluding payments to the AICF and ATO settlement payment - Net cash (used in) provided by operating activities excluding payments to the AICF and ATO Settlement payment is not a measure of financial pe
Slide 69: James Hardie Q4 FY09 Results Management Presentation
James Hardie Q4 FY09 Results Management Presentation - 20 May 2009 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 60. The comp
James Hardie Industries — Q4 FY2009 Earnings Presentation on 6ix