James Hardie Industries plc. · NYSE:JHX
James Hardie Industries — Q1 FY2015 Earnings Presentation
49 slides from James Hardie Industries's earnings presentation, Aug 15, 2014
Slide 1: Q1 FY15 Management Presentation
Q1 FY15 MANAGEMENT PRESENTATION 15 AUGUST 2014
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 – Matt Marsh, 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 se
Slide 5: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 6: Group Overview
GROUP OVERVIEW1 Q1 Q1 % US$ Millions 1 FY 2015 FY 2014 Change Net operating profit 28.9 142.2 (80) Adjusted net operating profit 50.1 52.0 (4) Adjusted diluted earnings per share (US cents) 11 12 Net operating profit reflects: • Higher sales volumes and average net sales prices in both the USA and E
Slide 7: USA and Europe Fiber Cement 1st Quarter Summary
USA AND EUROPE FIBER CEMENT 1ST QUARTER SUMMARY USA and Europe Fiber Cement results reflected:1 • Higher sales volume; • Higher average net sales price; • Higher production costs, primarily related to higher input costs and plant inefficiencies; • Higher compensation related expenses due to increase
Slide 8: USA and Europe Fiber Cement 1st Quarter Result
USA AND EUROPE FIBER CEMENT 1st Quarter Result1 Net Sales up 16% to US$321.5 million Sales Volume up 8% to 463.3 mmsf Average Price up 7% to US$680 per msf EBIT up 14% to US$68.0 million EBIT Margin down 0.2 pts to 21.2% 1 Comparisons are of the 1st quarter of the current fiscal year versus the 1st
Slide 9: USA and Europe Quarterly EBIT and EBIT Margin
USA AND EUROPE FIBER CEMENT Quarterly EBIT and EBIT Margin1 80 35 70 30 EBIT Margin EBIT US$M 60 25 50 20 40 15 30 10 20 10 5 0 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 EBIT EBIT Margin 1 Excludes asset impairment charges of US$14.3 million in 4th quarter FY12, US$5.8 million in 3rd quarter FY13 and US$
Slide 10: USA Fiber Cement: Housing Starts
USA FIBER CEMENT Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau PAGE 10
Slide 11: USA and Europe Average Net Sales Price
USA AND EUROPE FIBER CEMENT Average Net Sales Price 710 670 US$680 630 US$ per MSF 590 550 FY10 FY11 FY12 FY13 FY14 Q1 FY15 PAGE 11
Slide 12: Asia Pacific Fiber Cement 1st Quarter Summary
ASIA PACIFIC FIBER CEMENT 1ST QUARTER SUMMARY1 1 Asia Pacific Fiber Cement results reflected: • Increased sales volume as housing starts and repairs and remodel markets rose in Australia; • Higher average net sales price in Australian dollars; and • Higher production costs due to higher input costs
Slide 13: Asia Pacific Fiber Cement 1st Quarter Result
ASIA PACIFIC FIBER CEMENT 1st Quarter Result1 Net Sales up 1% to US$95.3 million Sales Volume up 6% to 108.5 mmsf Average Price up 2% from A$916 per msf to A$931 per msf EBIT2 down 2% to US$20.7 million, +4% in AUD EBIT Margin2 down 0.7 pts to 21.7% 1 Comparisons are of the 1st quarter of the curren
Slide 14: Manufacturing Capacity Expansion
MANUFACTURING CAPACITY EXPANSION The following major capacity expansion projects in the USA and Europe and Asia Pacific Fiber Cement businesses are in progress: Approximate Estimated Project Description Investment Commission Date th Plant City, Florida - 4 sheet machine and ancillary facilities US$6
Slide 15: Group Outlook
GROUP OUTLOOK USA and Europe Fiber Cement • The US operating environment continues to recover, but at a more modest pace than expected earlier this year • The recent flattening in housing activity has created some uncertainty about the pace of the recovery in the short-term • Our medium-term view on
Slide 16: Financial Review
FINANCIAL REVIEW Matt Marsh, CFO
Slide 17: Group Results
GROUP RESULTS • Earnings impacted by: • Higher sales volumes and average sales prices across all business units; • Higher production costs, primarily due to higher market prices for input costs and plant inefficiencies; and • Higher organizational spend, primarily due to an increase in stock compens
Slide 18: Results for the 1st Quarter
RESULTS FOR THE 1ST QUARTER US$ Millions Q1 '15 Q1 '14 % Change Highlights: Net sales 416.8 372.2 12 • Net sales increased 12% favorably impacted by: Gross profit 140.2 126.3 11 • Higher sales volumes; and • Higher average net sales prices in local currencies SG&A expenses (59.9) (54.9) (9) R&D expe
Slide 19: Results for the 1st Quarter (continued)
RESULTS FOR THE 1ST QUARTER (continued) US$ Millions Q1 '15 Q1 '14 % Change Summary: Net operating profit 28.9 142.2 (80) • Asbestos adjustments were favorable due to Asbestos: a 2% favorable change in the Australian Asbestos adjustments 21.5 (94.5) dollar spot exchange rate against the US dollar fr
Slide 20: Segment EBIT – 1st Quarter
SEGMENT EBIT – 1ST QUARTER US$ Millions Q1 ’15 Q1 ’14 % Change Summary: USA and Europe Fiber Cement 68.0 59.4 14 1 US and Europe FC EBIT +14% driven Asia Pacific Fiber Cement 20.7 21.1 (2) by volume and price, partially offset 2 Research & Development (6.8) (6.1) (11) by higher input costs and SG&
Slide 21: Changes in AUD vs. USD
CHANGES IN AUD vs. USD 1.20 1.10 AUD/USD Exchange Rate 1.00 0.90 0.80 0.70 0.60 30 Sep 10 31 Dec 10 31 Mar 11 30 Jun 11 30 Sep 11 31 Dec 11 31 Mar 12 30 Jun 12 30 Sep 12 31 Dec 12 31 Mar 13 30 Jun 13 30 Sep 13 31 Dec 13 31 Mar 14 30 Jun 14 Earnings Balance Sheet • Unfavorable impact from translation
Slide 22: US Input Costs
US INPUT COSTS Quarterly US Input Costs 1,200 10 Discussion: 9 1,000 • Input costs are significantly up over the 8 prior year, primarily driven by pulp, silica 7 and cement Gas and Electric Prices 800 6 • Many of our input costs fluctuate in-line Pulp Prices 600 5 with commodity prices tracked by ex
Slide 23: Income Tax Expense – 1st Quarter
INCOME TAX EXPENSE – 1ST QUARTER US$ Millions Q1 ’15 Q1 ’14 Summary: Operating profit before income taxes 45.6 157.1 Adjusted effective tax rate increased compared to Asbestos: the prior corresponding quarter due to a shift in the Asbestos adjustments 21.5 (94.5) geographic mix of earnings. 1 Othe
Slide 24: Cashflow
CASHFLOW US$ Millions Q1 ’15 Q1 ’14 EBIT 50.4 156.9 Non-cash items: 1 Asbestos adjustments 21.5 (94.5) Other non-cash items 18.4 16.0 Net working capital movements (6.7) 9.5 Cash Generated By Trading Activities 83.6 87.9 Tax payments, net (1.9) (1.7) Change in other non-trading assets and liabilitie
Slide 25: Capital Expenditure
CAPITAL EXPENDITURE US$ Millions Q1 ’15 Q1 ’14 % Change USA and Europe Fiber Cement (including 38.5 11.6 Research and Development) Asia Pacific Fiber Cement 10.1 14.5 (30) Total 48.6 26.1 86 • We continued to spend on previously announced capital expansion projects at our Plant City, Florida, Clebur
Slide 26: Capital Management Framework
CAPITAL MANAGEMENT FRAMEWORK Objectives • To optimize our capital structure with a view towards a target net debt position in the range of 1-2 times EBITDA excluding asbestos Strategy • While reinvesting in R&D and capacity expansion required for growth; • Provide consistent dividend payments within
Slide 27: Liquidity and Capital Allocation
LIQUIDITY AND CAPITAL ALLOCATION Liquidity • In May 2014, we added US$150.0 million of credit facilities intended to replace and augment an existing US$50.0 million credit facility which expired on 14 February 2014 • With the addition of this facility, we have US$505.0 million of combined credit fac
Slide 28: Debt
DEBT At 30 June 2014: US$ Millions Total facilities 505.0 Gross debt - Cash 32.1 Net cash 32.1 Unutilised facilities and cash 537.1 • Weighted average remaining term of debt facilities was 3.0 years at 30 June 2014, up from 2.4 years at 31 March 2014 • We remain well within our financial debt covena
Slide 29: New Zealand Weathertightness Claims
NEW ZEALAND WEATHERTIGHTNESS CLAIMS New Zealand Weathertightness Claims: • Since FY02, our NZ subsidiaries have been joined to weathertightness claims that relate to buildings primarily constructed from 1998 to 2004. These claims often involve multiple parties and allege losses due to excessive mois
Slide 30: Asbestos Fund – Proforma (unaudited)
ASBESTOS FUND – PROFORMA (unaudited) A$ millions AICF cash and investments - 31 March 2014 65.5 Insurance recoveries 18.8 Interest expense, net (0.2) Claims paid (32.7) Operating costs (1.1) Other 1.6 AICF cash and investments - 30 June 2014 51.9 • Year to date claims experience of liable entities w
Slide 31: Summary
SUMMARY • Adjusted net operating profit of US$50.1 million, reflects: • Improved sales volumes and higher average net sales prices in both the USA and Europe and the Asia Pacific Fiber Cement segments • Higher production costs due to higher input costs and plant inefficiencies across all business un
Slide 32: FY2015 Guidance
FY2015 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2015 is between US$226 million and US$261 million • Management expects full year Adjusted net operating profit to be between US$205 million and US$235 million
Slide 33: Questions
(@) vames Hardie QUESTIONS
Slide 34: Appendix
(@) vames Hardie APPENDIX
Slide 35: Financial Summary
FINANCIAL SUMMARY US$ Millions Q1 '15 Q1 '14 % Change Net Sales USA and Europe Fiber Cement 321.5 278.1 16 1 Asia Pacific Fiber Cement 95.3 94.1 1 Total Net Sales 416.8 372.2 12 EBIT - US$ Millions USA and Europe Fiber Cement 68.0 59.4 14 Asia Pacific Fiber Cement 20.7 21.1 (2) Research & Developmen
Slide 36: Key Ratios
KEY RATIOS 3 Months 3 Months 3 Months FY2015 FY2014 FY2013 EPS (Diluted) (US Cents) 1 11c 12c 10c EBIT/ Sales (EBIT margin) 2 17.1% 18.1% 17.0% Gearing Ratio (3.3)% (16.5)% (32.1)% 1 Net Interest Expense Cover 2 79.1x 84.4x 57.7x Net Interest Paid Cover 2 89.0x 67.5x 115.4x 1 Excludes asbestos adjus
Slide 37: EBITDA – 1st Quarter
EBITDA – 1ST QUARTER Q1 ’15 Q1 ’14 % Change US$ Millions EBIT USA and Europe Fiber Cement 68.0 59.4 14 Asia Pacific Fiber Cement 1 20.7 21.1 (2) Research & Development (6.8) (6.1) (11) General corporate excluding asbestos and ASIC expenses (10.7) (6.9) (55) Depreciation and Amortisation USA and Euro
Slide 38: Net Interest (Expense) Income
NET INTEREST (EXPENSE) INCOME US$ Millions Q1 ’15 Q1 ’14 Gross interest expense (0.9) (1.0) Interest income 0.2 0.1 Realised loss on interest rate swaps (0.2) (0.1) Net interest expense excluding AICF interest income (0.9) (1.0) AICF net interest (expense) income (0.2) 1.1 Net interest (expense) inc
Slide 39: Total US Housing Starts
TOTAL US HOUSING STARTS PAGE 39
Slide 40: Definitions and Other Terms
DEFINITIONS AND OTHER 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 Statements Defi
Slide 41: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS 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 Condensed Consolidated Financial
Slide 42: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS 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
Slide 43: Non-US GAAP Financial Measures
NON-US GAAP FINANICAL MEASURES Adjusted EBIT and Adjusted EBIT margin – Adjusted EBIT and Adjusted EBIT margin are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. Management has included these financial measures to pro
Slide 44: Non-US GAAP Financial Measures
NON-US GAAP FINANICAL MEASURES Adjusted Net operating profit – Adjusted net operating profit is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than net operating profit. Management has included this financial measure to provide investors with
Slide 45: Non-US GAAP Financial Measures
NON-US GAAP FINANICAL MEASURES Adjusted Diluted earnings per share – Adjusted diluted earnings per share is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than diluted earnings per share. Management has included this financial measure to provi
Slide 46: Non-US GAAP Financial Measures
NON-US GAAP FINANICAL MEASURES Adjusted effective tax rate on earnings – Adjusted effective tax rate on earnings is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. Management has included this financial measure to provi
Slide 47: Non-US GAAP Financial Measures
NON-US GAAP FINANICAL MEASURES 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 liquidity. Not
Slide 48: Non-US GAAP Financial Measures
NON-US GAAP FINANICAL MEASURES Adjusted selling, general and administrative expenses – Adjusted selling, general and administrative expenses is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than selling, general and administrative expenses. M
Slide 49: Q1 FY15 Management Presentation
Q1 FY15 MANAGEMENT PRESENTATION 15 AUGUST 2014
James Hardie Industries — Q1 FY2015 Earnings Presentation on 6ix