James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2019 Earnings Presentation
47 slides from James Hardie Industries's earnings presentation, Nov 8, 2018
Slide 1: Q2 FY19 Management Presentation
Q2 FY19 MANAGEMENT PRESENTATION 08 November 2018
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS 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 and Exchange Commission,
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (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 i
Slide 4: Note to the Reader
NOTE TO THE READER As of 30 June 2018, the Company changed its reportable operating segments. Previously, the Company reported on four operating segments: (i) North America Fiber Cement, (ii) International Fiber Cement, (iii) Other Businesses, and (iv) Research and Development. As of 30 June 2018, t
Slide 5: 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 principles in the United States (US GAAP). These financial measures are des
Slide 6: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers PAGE 6
Slide 7: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 8: Group Overview
GROUP OVERVIEW Adjusted Net Operating Profit1 Adjusted Diluted EPS1 2nd Qtr Half Year 2nd Qtr Half Year US$80.9M 7% US$160.8M 17% US18 cents 6% US36 cents 16% Adjusted EBIT 2 Net Operating Cash Flow 2nd Qtr Half Year Half Year US$106.9M 1% US$214.0M 10% US$184.1M 16% Adjusted EBIT Margin %2 2nd Qtr
Slide 9: Product Line Discontinuation Expenses
PRODUCT LINE DISCONTINUATION EXPENSES • Simplifying our Core ColorPlus product line • Capacity expansion • Refinement of color offering • Exiting Windows Business • Discontinuing MCT product line • In total, US$21.2 million of discontinuation expenses in Q2 PAGE 9
Slide 10: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY Q2'19 1H'19 Volume Net Sales US$435.6M US$869.4M • Positive PDG in exteriors, further momentum required to 9% 10% deliver higher PDG growth • Decline in interiors Sales Volume 591.7 mmsf 1,182.7 mmsf Price 5% 5% • Favorably impacted by annual change in our strategi
Slide 11: North America Fiber Cement Volume
NORTH AMERICA FIBER CEMENT VOLUME Growth % Exteriors • Volume increased 8% and 7% for the quarter and half year, respectively, compared to pcp • Focus remains on continuing to build momentum and delivering higher PDG • Volume decreased 6% and 2% for the quarter and half year, respectively, compared
Slide 12: North America Fiber Cement
NORTH AMERICA FIBER CEMENT 1H’19 EBIT Margin excluding1 % up 140 bps to 23.8% compared to pcp and remains within our target range 1 Excludes product line discontinuation expenses of US$5.4 million in Q2 FY19 PAGE 12
Slide 13: North America Fiber Cement
NORTH AMERICA FIBER CEMENT • FY19 strategic price increase effective April 2018 • US housing conditions remain favorable • Overall, satisfied with price positioning • Some signs of slightly softer market conditions 1 Rolling 12 month average of seasonally adjusted estimate of housing starts by US Ce
Slide 14: Asia Pacific Fiber Cement Summary
ASIA PACIFIC FIBER CEMENT SUMMARY Q2'19 1H'19 Volume Net Sales A$160.4M A$315.2M • Strong performance in Australian and Philippines businesses 12% 13% • Gains in category share and further market penetration Sales Volume 142.1 mmsf 280.1 mmsf 9% 12% Foreign Exchange Average Price A$996 per msf A$995
Slide 15: Asia Pacific Fiber Cement (Local Currency)
ASIA PACIFIC FIBER CEMENT (LOCAL CURRENCY) Q2'19 1H'19 Australia Australia Australia Volume Net Sales EBIT Volume Net Sales EBIT • Market penetration and strong growth above the market index • EBIT favorably impacted by higher net sales and favorable plant performance, partially offset by higher fre
Slide 16: Europe Building Products Summary
EUROPE BUILDING PRODUCTS SUMMARY1 Volume Q2'19 1H'19 • Increase driven by acquisition of Fermacell Net Sales US$87.4M US$182.8M Price Sales Volume 194.3 mmsf 403.9 mmsf • Decrease due to product mix • Fiber Gypsum has a lower average net sales price compared to Fiber Cement Average Price US$354 per
Slide 17: Europe Building Products Pro Forma
EUROPE BUILDING PRODUCTS PRO FORMA1 Q2'19 1H'19 Net Sales US$87.4M US$182.8M 3% 10% Operating profit US$8.5M US$19.9M before income taxes 18% 32% Net sales increased 3% and 10% for the quarter and half year, respectively, on a pro-forma basis compared to pcp 1 The unaudited pro forma information pre
Slide 18: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 19: Results – 2nd Quarter FY19
RESULTS – 2nd QUARTER FY19 Three Months Ended 30 September Net sales increased 23%, US$118.8 million US$ Millions Q2'19 Q2'18 % Change • The acquired Fermacell business in Europe contributed net Net sales 644.6 525.8 23 sales of US$77.8 million • Higher average net sales price and volumes in the Nor
Slide 20: Results – Half Year FY19
RESULTS – HALF YEAR FY19 Net sales increased 25%, US$262.1 million Half Year Ended 30 September US$ Millions 1H'19 1H'18 % Change • The acquired Fermacell business in Europe contributed net Net sales 1,295.6 1,033.5 25 sales of US$164.0 million • Higher average net sales price and volumes in North G
Slide 21: Segment EBIT – 2nd Quarter FY19
SEGMENT EBIT – 2nd QUARTER FY19 North America Fiber Cement EBIT1 summary • Q2 EBIT1 and 1H EBIT1 increased 2% and 17%, respectively, compared to pcp • North America margins continue to be compressed by elevated freight and raw material costs 1 Excludes product line discontinuation expenses PAGE 21
Slide 22: Product Line Discontinuation Expenses
PRODUCT LINE DISCONTINUATION EXPENSES Three Months and Half Year Ended US$ Millions 30 September Q2'19 1H'19 North America Fiber Cement segment: Discontinuation of MCT 1 $ 3.6 $ 3.6 Discontinuation of certain ColorPlus color palettes 2 1.8 1.8 Other Businesses segment: Discontinuation of Windows Bus
Slide 23: North America Input Costs
NORTH AMERICA INPUT COSTS • The price of NBSK pulp up 24% compared to pcp • Freight market prices up 20% compared to pcp • Cement prices up 2% compared to pcp • Gas prices down 2% compared to pcp • Electric prices are down 6% compared to pcp The information underlying the table above is sourced as f
Slide 24: Segment EBIT – Asia Pacific Fiber Cement
SEGMENT EBIT – 2nd QUARTER FY19 Asia Pacific Fiber Cement 60 56.9 55.8 48.6 US$ Millions 45 30.5 Q2 EBIT 30 27.5 25.5 1H EBIT 15 0 FY17 FY18 FY19 Asia Pacific Fiber Cement EBIT summary • Q2 and 1H EBIT decreased 10% and 2%, respectively, compared to pcp • Strong volume growth in Australia and the Ph
Slide 25: Translation Impact on Consolidated Results
TRANSLATION IMPACT ON CONSOLIDATED RESULTS Excluding Translation As Reported Translation Impact 2 Impact 1 % Change Q2'19 1H'19 Q2'19 1H'19 Q2'19 1H'19 Net Sales 23% 25% 25% 26% 2% 1% Gross Profit 11% 20% 12% 20% 1% - Adjusted EBIT 1% 10% 2% 11% 1% 1% Adjusted net o
Slide 26: Asia Pacific Fiber Cement Results AUD vs USD
ASIA PACIFIC FIBER CEMENT RESULTS AUD vs USD Three months and Half Year Ended 30 September Q2’19 1H’19 Results Results Impact of Results in Results in Impact of in AUD in USD FX AUD USD FX Average net sales price per unit +2% -5% -7% +1% -3% -4% (per msf) Net sales +12% +3% -9% +13% +9% -4% Gross Pr
Slide 27: Segment EBIT – Europe Building Products and Other Businesses
SEGMENT EBIT – 2nd QUARTER FY19 Europe Building Products EBIT summary Europe Building Products 4 • EBIT impacted by costs associated with acquisition: 3.4 3 • US$5.1 million and US$13.8 of transaction and integration costs US$ Millions 2 for the quarter and half year, respectively; and 1.0 Q2 EBIT •
Slide 28: Segment EBIT – R&D and General Corporate
SEGMENT EBIT – 2nd QUARTER FY19 R&D • On strategy to invest ~2-3% of net sales • Increased spend from overall increase in number of projects General Corporate Costs • Increase driven by higher stock compensation expenses • 1H was additionally impacted by: • Non-recurring gain of US$3.4 million in th
Slide 29: Income Tax
INCOME TAX Three Months and Half Year Ended 30 September 15.5% estimated adjusted effective tax rate for US$ Millions Q2’19 Q2’18 1H'19 1H'18 the year Operating profit before taxes 87.1 90.3 208.6 167.4 1 • Adjusted income tax expense decreased driven by Asbestos adjustments (14.3) 6.4 (39.4) 10.6 F
Slide 30: Cashflows
CASHFLOWS1 Change Increase in net operating cash flow US$ Millions 1H'19 1H'18 (% ) • Increase in net income adjusted for non-cash items Net Income 160.1 123.8 29 • Favorable movements in inventory driven by rebuilding Adjustment for non-cash items 1 65.1 71.1 (8) Annual AICF contribution (103.0) (1
Slide 31: Capital Expenditures
CAPITAL EXPENDITURES Half year CAPEX spend of US$140.0 million increased US$56.4 million compared to pcp • North America capacity projects: Continued the start-up of our greenfield expansion in Tacoma Continued the construction of our Prattville facility, expected to be commissioned in 1H FY20
Slide 32: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital Liquidity and Funding Management Allocation • Invest in R&D and capacity • Conservative leveraging of balance • Strong margins and operating sheet at a target within 1-2 times cash flows expansion to support organic Adjusted
Slide 33: Liquidity Profile at 30 September 2018
LIQUIDITY PROFILE AT 30 SEPTEMBER 2018 Strong balance sheet Debt Profile US$108.9 million cash Millions US$1,261.4 million net debt 3 1 US$370.5 million available on revolving credit facility US$250 2 US$500 US$120 Corporate debt structure €400 / €400 / US$466 2 US$4662 US$400 million 4.75%
Slide 34: FY2019 Guidance
FY2019 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2019 is between US$313 million and US$335 million • Management expects full year Adjusted net operating profit to be between US$280 million and US$320 million
Slide 35: Questions
(@)) vames Hardie QUESTIONS
Slide 36: Appendix
(@)) vames Hardie APPENDIX
Slide 37: Financial Summary
FINANCIAL SUMMARY Three Months and Half Year Ended 30 September US$ Millions Q2’19 Q2’18 % Change 1H'19 1H'18 % Change Net Sales North America Fiber Cement $ 435.6 $ 398.1 9 $ 869.4 $ 791.2 10 Asia Pacific Fiber Cement 117.3 113.4 3 234.4 215.0 9 Europe Building Products 87.4 10.5 182.8 19.7 Other B
Slide 38: Asbestos Claims Data
ASBESTOS CLAIMS DATA • Quarter and half year claims received were 8% above and 2% below actuarial estimates, respectively • Quarter and half year claims received were flat and 7% lower, respectively, compared to pcp • Claims reporting during the half year for mesothelioma: • 3% below actuarial estim
Slide 39: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Half Year Ended 30 September Q2’19 Q2’18 1H'19 1H'18 Depreciation and amortization North America Fiber Cement $ 19.5 $ 18.2 $ 37.6 $ 35.3 Asia Pacific Fiber Cement 3.3 3.3 6.4 6.4 Europe Building Products 5.7 - 10.4 - Other Businesses 0.6 0
Slide 40: Income Taxes
Income Taxes • How ETR is calculated under US GAAP changed in 1H FY19 • Recorded a net deferred tax asset of US$1,028.5 million arising from all previous intragroup transfers, including an internal restructuring which took place in Q4 FY18 to align certain intangible assets with our US business • Ef
Slide 41: Non-US GAAP Financial Measures and Terms
NON-US GAAP FINANCIAL MEASURES AND TERMS This Management Presentation forms part of a package of information about the company’s results. It should be read in conjunction with the other parts of this package, including the Management’s Analysis of Results, Media Release and Consolidated Financial St
Slide 42: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non-US GAAP, but are consistent with those used by Australian companies. Because the company prepares its Consolidated Financial Stateme
Slide 43: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months and Half Year Ended 30 September Q2'19 Q2'18 1H'19 1H'18 EBIT $ 99.5 $ 97.1 $ 231.4 $ 181.1 Asbestos: Asbestos adjustments (14.2) 6.6 (39.3) 10.5 AICF SG&A expenses 0.4 0.4 0.7 0.8 Fermace
Slide 44: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Europe Building Products Segment Adjusted EBIT excluding costs associated with the acquisition Three Months and Half Year Ended US$ Millions 30 September Q2'19 1H'19 EBIT $ 3.4 $ (1.2) Inventory fair value adjustment - 7.3 Transaction costs - 7.2 Integration costs 5.1
Slide 45: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months and Half Year Ended 30 September Q2'19 Q2'18 1H'19 1H'18 Adjusted net operating profit (US$ Millions) $ 80.9 $ 75.6 $ 160.8 $ 137.3 Weighted average common shares outstanding - 443.1 441.5 443.1 441.5 Diluted (millions)
Slide 46: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos US$ Millions Three Months and Half Year Ended 30 September Q2'19 Q2'18 1H'19 1H'18 EBIT $ 99.5 $ 97.1 $ 231.4 $ 181.1 Depreciation and amortization 30.8 23.4 58.9 45.2 Adjusted EBITDA $ 130.3 $ 120.5 $ 290.3 $ 226.3 Asbestos: Asbestos
Slide 47: Q2 FY19 Management Presentation
Q2 FY19 MANAGEMENT PRESENTATION 08 November 2018
James Hardie Industries — Q2 FY2019 Earnings Presentation on 6ix