Boral — Investor Day (September 2008)
35 slides from Boral's investor day presentation, Sep 18, 2008
Slide 1: Boral Bricks
Boral Bricks President, US Bricks – Bob Kepford Brick Plant, Terre Haute, IN Sacramento 17 & 18 September 2008 Boral Bricks is the industry leader with a market share of ~20%. USA Brick Market Share by Calendar Year 1995 2007 ACME ACME Others Others Boral Boral Cherokee Sanford US Brick Wienerberger
Slide 2: Housing downturn impacted bricks throughout FY08
The downturn in housing activity significantly impacted bricks throughout FY08 and is continuing to in FY09. External Sales volume % price % EBITDA % FY08 US$ % ∆ ∆ ∆ ∆ Bricks 346 (28) (27) (2) Market-related volume declines that began in FY07 continued through FY08 and impacted revenue and EBITDA
Slide 3: Bricks: Perform & Grow priorities
Bricks: Perform & Grow priorities Perform Perform Grow Grow •• Maintain Maintainpricing pricingthrough through •• Grow Growdirect directdistribution distribution downturn downturn •• Launch Launchand andgrow grow •• Implement Implementadditional additionalStep Step complementary complementaryresale
Slide 4: Industry Overview: capacity, utilization and pricing
Industry Overview: US Brick Industry’s capacity & utilization behaviour has been rational; share and price have largely held. Supply / Demand Balance 1995 to 2008 All US Markets 18.0 $300 Average Selling Price 15.0 ($/MSBE) (RHS) $250 Brick (billions of SBEs) Permanent 12.0 Shutdowns $200 Nameplate
Slide 5: Perform: network capacity utilisation and Project Next Level II
Perform: Boral Bricks network is running at 40% capacity utilisation. 4 plants running at >80% capacity Canada 11 plants running at <80% capacity 9 plants currently mothballed NY WI MI PA IA MD OH IN IL WV VA KS MO KY NC TN AR OK SC GA MS AL TX LA FL Mexico >80% practical capacity <80% practic
Slide 6: Perform: headcount reductions and network optimization
Perform: Headcount reductions have been undertaken quite aggressively, but direct sales is critical to our revenue so we have been careful about cuts to the sales force. Headcount (FTE) – Year End Bricks Employees -33% Other Sales 2006 2007 2008 Bricks reduced headcount by 642 employees or 33% since
Slide 7: Perform: alternative fuel technologies
Perform: Boral continues to be at the forefront of pioneering alternative fuel technologies. Direct Injection Landfill Gas New Technologies EVOLUTION 1978 to … 2005 to … 2007 to … PLANTS Salisbury Union City (new plant – 10/06) Augusta 4 (woodchips/gasification) Augusta 5 Terre Haute (new plant – 03
Slide 8: Grow: direct footprint and greenfield plants
Grow: We have grown revenue through our direct footprint and where necessary with plant capacity. 24 Brick Plants Brick plant New brick plant opened in last 3 years Columbus 53 Boral Direct centers ILLINOIS INDIANA OHIO Boral direct center WEST Louisville VIRGINIA New Boral direct Lexington VIRGINIA
Slide 9: Grow: Terre Haute new products and direct business
Grow: The Terre Haute plant has provided the opportunity to introduce new products to the marketplace with enthusiastic market response. Allendale Hill Modular Merom Bluff Modular Falls Canyon Modular Springwood Modular Sycamore Ridge Modular Bridgeton Modular USA Analyst Site Visit 2008 17 USA Anal
Slide 10: Roof Tiles: MonierLifetile market leadership
Roof Tiles President & CEO MonierLifetile – Mike Penny US TilePlant, MonierLifetile Plant,Lakes Ione, Wales, CA FL Sacramento 17 & 18 September 2008 MonierLifetile is maintaining the leading US position. While competition has added capacity, MonierLifetile has maintained its market leadership positi
Slide 11: Housing downturn impacted MonierLifetile earnings
The housing downturn has significantly impacted tile industry earnings – including MonierLifetile’s. Boral share of equity volume % price % accounted profits US$m FY08 FY07 ∆ ∆ Concrete Tile (21) (4) (42) (5) Prices have been under pressure in FY08 due to over capacity and an aggressive new entran
Slide 12: MonierLifetile: Perform & Grow priorities
MonierLifetile: Perform & Grow priorities Perform Perform Grow Grow •• Maintain Maintainleading leadingUS USmarket market Use Use‘Sales-Up!’ ‘Sales-Up!’program programto: to: position position •• Utilize Utilizeexisting existingcapacity capacityto to •• Match Matchproduction productionwith withdeman
Slide 13: MonierLifetile capacity utilization and Project Escalator
Perform: MonierLifetile’s network is operating at around 27% of capacity utilization. MonierLifetile plants WA NV CO MO CA AZ % utilization of actual capacity TX >80% practical capacity FL <80% practical capacity Mothballed Mexico USA Analyst Site Visit 2008 25 USA Analyst Site Visit 2008 25 Perform
Slide 14: Project Escalator organisation review and CIP
Perform: Project “Escalator” was the vehicle for an organisation review. MonierLifetile Employees Headcount (FTE) – Year End -55% Other Sales 2006 2007 2008 MLT reduced headcount by 725 employees or 55% since the peak USA Analyst Site Visit 2008 27 USA Analyst Site Visit 2008 27 Perform: A sustained
Slide 15: Sales Up! program and re-roof market opportunity
Perform: MLT is now focusing on the top line to achieve improved revenue performance through the efforts of “Sales Up!” program. Expected Volume Performance (Indexed) 100% +7% in 2008 Actual Volume +12% annualized Volume with "Sales Up!"* Start of roll-out Volume (Indexed) Business As Usual 80% Key
Slide 16: Roof Tiles: US Tile
Grow: Despite the downturn in the market, MonierLifetile continues to innovate with new products. Prioritized Innovations / Product Concepts USA Analyst Site Visit 2008 31 USA Analyst Site Visit 2008 31 Roof Tiles President, US Tile – Steve Gast US Tile Plant, Ione, CA Sacramento 17 & 18 September 2
Slide 17: Lower volumes impacted FY08 US Tile earnings
Lower volumes impacted FY08 US Tile earnings. External sales volume % Price % EBITDA % FY08 US$ % ∆ ∆ ∆ ∆ Clay Tiles 25 (8) (11) 4 Approximately 80% of our sales are in CA and single family starts were off by more than 45% in the CA markets 1.5% price increase was announced in March 2008, 7% ann
Slide 18: US Tile: Perform & Grow priorities
US Tile: Perform & Grow priorities Perform Perform Grow Grow •• Increase Increasere-roof re-roofvolumes volumes •• Develop Developnon-core non-coremarkets markets •• Pricing Pricing productsto products torecover recover •• Introduce Introduce slate andgrade slate and grade cost cost increases andmai
Slide 19: Grow: Ione plant and Trinidad products
Grow: In US Tile, our greenfield growth strategy has been to supply under- served markets with low cost, close to market capacity. Ione US$30m new, low cost, state-of-the- art plant 130K squares pa when fully operational Plant commissioning slower than originally planned as need has arisen to
Slide 20: Construction Materials
Grow: Launch of new clay tile products for existing and new markets. Cielo has been launched to capture more share in ultra-high custom home market Grade One, freeze/thaw product has been produced and shipped Improved look to ProShake products and engobing process First shipment on new slate
Slide 21: Strengthening US construction materials position
We are strengthening our construction materials position in the USA. OR MI IL OH NV IN MD Boral Fly Ash states CO KS MO WV KY VA CA BMTI Fly Ash production OK TN AZ AR NC Concrete & Quarry MS AL SC (& Fly Ash) states TX LA GA Oklahoma Concrete & Quarries FL • Acquired Schwarz & AMI for Denver Concre
Slide 22: Key US construction materials markets down
Key US Construction Material markets are down year-on-year impacting volumes. % change in Dwellings Starts FY08 vs FY07 0 to -9% -10 to -19% -20 to -29% CO VA -30 to -39% AZ OK -40 to -49% -50 to -59% GA -60 to -69% TX -70 to -79% BMTI Key Market FL -80 to -89% Construction Materials Operations Sour
Slide 23: Fly ash markets and construction exposure
However, three states (GA, FL, AZ) that are important fly ash markets are having weaker economic performance. State Level Gross Domestic Product Quarterly Percent Change 4.0% 3.0% State Coincident Index1 (% Change) 2.0% 1.0% 2007 2008 % Growth Q2 Q3 Q4 Q1 Q2 0.0% Georgia 0.6% 0.4% 0.3% 0.2% -0.2% -1
Slide 24: BMTI: Perform & Grow priorities
BMTI: Perform & Grow priorities Perform Perform Grow Grow •• Secure Securesupply supplyin inmarket marketterritory territory •• Develop Developfly flyash ashapplications applicationsfor for •• Deploy construction construction marketsbeyond markets beyond DeployFACT FACTtechnology technologyin inaalo
Slide 25: Construction Materials: Perform & Grow priorities
Construction Materials: Perform & Grow priorities Perform Perform Grow Grow •• Managing Managingmargin margingrowth growthby by •• Bolt-on Bolt-onacquisitions acquisitionsto tothe the strong strong price and costcontrol price and cost control Colorado platform Colorado platform •• Implementation Imp
Slide 26: Oklahoma revenue and cost management; step change program
Perform: Oklahoma revenue enhancement and cost management are the key areas of ongoing attention, and will be rolled into a step change project. Revenue Management Cost Management Business Mix: Ongoing evaluation of end Raw Materials: Mix design optimization, market segments and customer mix to
Slide 27: Grow: expand into contiguous markets
Grow: Develop the business from our existing platforms and expand into contiguous markets. We will continue developing this strategy through acquisitions and organic growth. Focus on contiguous markets Leverage off current two platforms Opportunistic step-outs from current markets NE UT CO KS
Slide 28: Commitment to innovation and technology
Boral USA recently increased it commitment to innovation and technology as part of a broad strategy designed to add a third leg to Boral’s growth platform in the US. PATHWAYS TO GROWTH RECENT ACTIVITIES Union City, Terre Haute and grow Driven by Organic Growth Organic Growth direct distribution -
Slide 29: Innovation pipeline and FACT technology
The goal is to expand the technology-base developed within BMTI to create an innovation pipeline for new products more broadly across Boral’s US divisions. New Binder #1 Innovation Pipeline New Technology #3 New Product #1 Fly Ash Carbon Treatment (FACT), FACT2, Celceram, Micron3 Stage 1 Stage 2 Sta
Slide 30: Utility emission compliance and fly ash quality; PACT
Technical Solutions: Utility compliance with emission requirements will drastically change the fly ash industry over the next 5 years. Deteriorating fly ash quality represents both a major challenge and a huge opportunity. Impact of PAC on Concrete Air Powdered Activated Carbon 14 Stack gas Fly Ash
Slide 31: Micron3 and Celceram specialty products
Proactive Innovations - Micron3 TM is a specialty product developed for the niche, high performance concrete market. ™ Micron3 - a Highly R&D Reactive Pozzolan Engineered for Performance Branded Product & Value in Traditional Markets –Engineered performance Ash Processing –Proprietary Technical Sa
Slide 32: Technology Development Summary
Technology and Development will continue to provide the US Business Units with market driven innovations promoting change and creating value. Business Unit Needs Technology Technology & & New New Products Products & & Development Development Revenue Revenue Streams Streams Market Demands USA Analyst
Slide 33: Well positioned to manage through the downturn
Whilst we expect and plan for FY09 to be a tough year, we are well positioned to manage through the current downturn and we will emerge a stronger business as markets return to more normal levels of demand. Strong low cost resource and market positions Demonstrated price and cost management capa
Slide 34: California market overview and quick facts
Market: California is one of the most important markets in the United States, with one of the largest economies on the world. Quick Facts Rank by Size of Economy4 Rank Country / State GDP GDP US$1.812 trillion (US $m) Population1 36.5 million Global $54,311,608 1 United States $13,843,825 Households
Slide 35: Ione Clay Tile Plant and Stockton Concrete Tile Plant
Ione Clay Tile Plant Raw materials with additional storage and grinding capacity/reclaimer storage for souring the body mixes Extrusion line with two extruders for faster changeover times and less downtime Tunnel dryer – similar to what is being used in Trinidad (different to Corona) State o