James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Q2 FY2006 Earnings Presentation
47 slides from James Hardie Industries's earnings presentation, Nov 22, 2005
Slide 1: FY06 2nd Quarter and Half Year Results
FY06 2nd Quarter and Half Year Results 10 November 2005 In this Management Presentation, we present financial measures that we believe are customarily used by our Australian investors. In each case where we present one of these measures, the equivalent US GAAP financial measure is defined in the Def
Slide 2: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Voluntary asbestos-related compensation funding proposal - Russell Chenu, CFO Questions and Answers Agenda
Slide 3: Overview
Overview Strong 2nd quarter results Very strong top-line growth Significant EBIT improvement, despite higher costs On track to meet business targets for year Strong cashflow generation Further strengthening of balance sheet Further progress on Principal Deed discussions
Slide 4: Overview 2nd Quarter and Half Year FY06
Overview 2nd Quarter and Half Year FY06 Q2'06 % HY'06 % Net Sales up 25 up 21 Gross Profit up 41 up 36 EBIT up 91 up 66 Operating Profit from Continuing Operations up 93 up 67 Net Operating Profit Including Discontinued Operations up 92 up 69
Slide 5: Highlights 2nd Quarter
Highlights 2nd Quarter USA Fibre Cement - EBIT up 76% Australia and New Zealand Fibre Cement - EBIT up 3% Philippines Fibre Cement - EBIT positive Hardie Pipe - EBIT loss reduced
Slide 6: Exceeding Targets
Exceeding Targets HY'06 Actual Long Term Target2 Revenue Growth 25% >15% EBIT1/Sales 22% >15% ROA (EBIT1/GCE) 37% >15% 1Includes SCI and related expenses of US$9.9 million 2 Per annum 1Includes SCI and related expenses of US$9.9 million 2 Per annum
Slide 7: Operating Review
Operating Review Louis Gries, CEO
Slide 8: USA Fibre Cement
USA Fibre Cement Photo
Slide 9: USA Fibre Cement 2nd Quarter Trading Conditions
USA Fibre Cement 2nd Quarter Trading Conditions New housing construction and repair and remodelling remained at very solid levels Modest interest rate increases, but rates still low Strong house prices Consumer and builder confidence Severe hurricanes hit Gulf Coast But Louisianna and Mississippi le
Slide 10: USA Fibre Cement Key Points
USA Fibre Cement Key Points Very strong sales growth Significant market penetration against alternative materials ColorPlusTM strategy continuing to progress well More paint lines being built Both interior and exterior products growing strongly Growth across both emerging and established markets Inc
Slide 11: USA Fibre Cement Outlook
USA Fibre Cement Outlook New housing construction activity to slow slightly, but maintain a healthy pace More modest interest rate increases Permits strong Builder and consumer confidence strong Repair and remodelling activity to remain healthy Further growth in demand for fibre cement More market s
Slide 12: USA Fibre Cement Top Line Growth
USA Fibre Cement Top Line Growth 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 HYFY06 Volume (mmsf)/ Starts (000s Units) $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 Revenue (US$M) JH Volume JH Revenue Housing Starts
Slide 13: USA Fibre Cement Average Selling Price
USA Fibre Cement Average Selling Price US$ per MSF 360 380 400 420 440 460 480 500 520 540 560 580 FY00 FY01 FY02 FY03 FY04 FY05 HY06
Slide 14: USA Fibre Cement EBIT and EBIT Margin
USA Fibre Cement *Excludes restructuring and other operating expenses of US$12.6 million in Q3'FY02 0 10 20 30 40 50 60 70 80 90 100 FY01 FY02 FY03 FY04 FY05 Q2FY06 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales EBIT and EBIT Margin*
Slide 15: USA Fibre Cement Strategy
USA Fibre Cement Strategy Aggressively grow demand for fibre cement in our targeted markets Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors, introducing differentiated products to reduce direct price
Slide 16: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement Photo
Slide 17: Asia Pacific Fibre Cement 2nd Quarter Result
Asia Pacific Fibre Cement 2nd Quarter Result Net Sales up 2% to US$63.5 million Sales Volume down 9% to 93.7 mmsf EBIT down 2% to US$12.0 million EBIT Margin down 0.8 pt to 18.9%
Slide 18: Asia Pacific Fibre Cement Strategy
Strategy Grow primary demand for fibre cement Vigorously protect and grow category share in existing market segments Leverage our superior technology to offer differentiated products and systems with superior value to those of competitors Asia Pacific Fibre Cement
Slide 19: Australia and New Zealand - Key Points
Asia Pacific Fibre Cement Australia and New Zealand - Key Points New housing construction weaker in both Australia and New Zealand Some new product bans and boycotts in Australia Net sales up 4% EBIT up 3%, EBIT margin 19.6%
Slide 20: Asia Pacific Fibre Cement Industrial Dispute
Asia Pacific Fibre Cement Industrial Dispute Involves flat sheet and pipes plants in Queensland Current EBA now up for renegotiation Seeking separate EBAs Flat sheet and pipes businesses are fundamentally different Needed for sustainability of pipes business
Slide 21: Australia and New Zealand - Outlook
Asia Pacific Fibre Cement Australia and New Zealand - Outlook No improvement in new housing construction and renovation activity expected short term Growth in primary demand for fibre cement in Australia Product bans and boycotts to remain until voluntary asbestos compensation arrangement finalised
Slide 22: Philippines - Key Points
Asia Pacific Fibre Cement Philippines - Key Points Domestic construction continues to be affected by political and economic uncertainty Net sales down on higher selling prices EBIT positive Outlook Improved building and construction activity Stronger demand Developments in political environment rema
Slide 23: Other Fibre Cement USA Hardie Pipe - Key Points
Other Fibre Cement USA Hardie Pipe - Key Points Non-residential construction activity in Florida remained buoyant Softer demand due to higher prices EBIT loss reduced, cash positive for first half
Slide 24: Other Fibre Cement Europe Fibre Cement
Other Fibre Cement Europe Fibre Cement Demand continuing to build steadily Artisan(tm) Roofing Early market development progressing
Slide 25: Overall Outlook
Overall Outlook Housing construction and repair and remodeling activity in North America to remain healthy over second half Further market penetration against alternative materials Confident of achieving 15%-25% revenue growth for FY06 Expect to run above EBIT margin target over short term No materi
Slide 26: Financial Review
Financial Review Russell Chenu, CFO
Slide 27: Overview
Overview Continued to generate strong operating cashflow Financial position further strengthened Net cash US$23.5m v US$45.8m net debt (pcp) Interim dividend of US 4.0 cents Payable 16 December 2005 to shareholders registered 29 November 2005
Slide 28: Results - Q2
US$ Million Q2'06 Q2'05 % Change Net sales 376.6 300.9 25 Gross profit 137.3 97.1 41 SG&A expenses (49.7) (45.5) 9 Research & development expenses (7.1) (5.3) 34 SCI and other related expenses (4.7) (5.6) (16) Other operating income / (expenses) 0.6 (0.7) (186) EBIT 76.4 40.0 91 Net interest expense
Slide 29: Results - Half Year
Results - Half Year US$ Million HY'06 HY'05 % Change Net sales 736.0 607.0 21 Gross profit 282.6 208.4 36 SG&A expenses (95.2) (90.6) 5 Research & development expenses (13.4) (10.3) 30 SCI and other related expenses (9.9) (8.5) 16 Other operating income / (expenses) (0.8) (0.7) 14 EBIT 163.3 98.3 66
Slide 30: Segment Net Sales - Q2
Segment Net Sales - Q2 US$ Million Q2 '06 Q2 '05 % Change USA Fibre Cement 307.4 231.0 33 Asia Pacific Fibre Cement 63.5 62.5 2 Other Fibre Cement 5.7 7.4 (23) Total 376.6 300.9 25
Slide 31: Segment Net Sales - Half Year
Segment Net Sales - Half Year US$ Million HY '06 HY '05 % Change USA Fibre Cement 594.9 471.7 26 Asia Pacific Fibre Cement 125.2 119.8 5 Other Fibre Cement 15.9 15.5 3 Total 736.0 607.0 21
Slide 32: Segment EBIT - Q2
Segment EBIT - Q2 US$ Million Q2 '06 Q2 '05 % Change USA Fibre Cement 86.1 49.0 76 Asia Pacific Fibre Cement 12.0 12.3 (2) Other Fibre Cement (2.6) (4.2) 38 R & D (4.0) (3.4) (18) Total Segment EBIT 91.5 53.7 70 General Corporate (15.1) (13.7) (10) Total EBIT 76.4 40.0 91 R&D includes "core" R&D exp
Slide 33: Segment EBIT - Half Year
Segment EBIT - Half Year US$ Million HY '06 HY '05 % Change USA Fibre Cement 180.2 112.1 61 Asia Pacific Fibre Cement 24.4 24.3 - Other Fibre Cement (6.1) (7.5) 19 R & D (7.2) (7.5) 4 Total Segment EBIT 191.3 121.4 56 General Corporate (28.0) (23.1) (21) Total EBIT 163.3 98.3 66 R&D includes "core"
Slide 34: Corporate Costs - Q2 and Half Year
Corporate Costs - Q2 and Half Year US$ Million Q2'06 Q2'05 HY'06 HY'05 Stock compensation expense 1.2 0.5 2.3 0.7 SCI and other related expenses 4.7 5.6 9.9 8.5 Other costs 9.2 7.6 15.8 13.9 Total 15.1 13.7 28.0 23.1
Slide 35: Net Interest Expense
Net Interest Expense US$ Million Q2'06 Q2'05 %Change Net interest expense (1.0) (1.3) (23) HY'06 HY'05 %Change Net interest expense (1.7) (3.8) (55)
Slide 36: Income Tax Expense
Income Tax Expense US$ Million Q2'06 Q2'05 %Change Income tax expense (27.8) (12.1) 130 Rate 36.9% 32.9% HY'06 HY'05 %Change Income tax expense (58.1) (30.8) 89 Rate 36.0% 33.3%
Slide 37: EBITDA - Q2
EBITDA - Q2 Q2'06 Q2'05 %Change EBIT USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R & D General Corporate 86.1 12.0 (2.6) (4.0) (15.1) 49.0 12.3 (4.2) (3.4) (13.7) 76 (2) 38 (18) (10) Depreciation and Amortisation USA Fibre Cement Asia Pacific Fibre Cement Other 10.2 2.2 0.7 5.8 2.4
Slide 38: EBITDA - Half Year
EBITDA - Half Year HY'06 HY'05 %Change EBIT USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R & D General Corporate 180.2 24.4 (6.1) (7.2) (28.0) 112.1 24.3 (7.5) (7.5) (23.1) 61 - 19 4 (21) Depreciation and Amortisation USA Fibre Cement Asia Pacific Fibre Cement Other 16.3 4.7 1.5 11.
Slide 39: Capital Expenditure - Half Year
Capital Expenditure - Half Year Capital Expenditure Capital Expenditure Depreciation Depreciation US$ Million HY'06 HY'05 HY'06 HY'05 USA Fibre Cement 71.4 77.1 16.3 11.6 Asia Pacific Fibre Cement 2.8 2.4 4.7 4.7 Other 0.8 1.6 1.5 1.6 Total Segments 75.0 81.1 22.5 17.9 Other includes Other Fibre Cem
Slide 40: Key Ratios
Key Ratios HY'06 FY'05 FY '04 EPS (Diluted) 22.3c 27.7c 27.2c Dividend Paid per share 6.0c 3.0c 5.0c Return on Shareholders Funds* # 31.0% 22.4% 27.6% Return on Capital Employed# 36.9% 23.6% 23.4% EBIT/ Sales (EBIT margin) 22.3% 16.2% 17.5% Gearing Ratio^ (3.4)% 6.8% 17.0% Net Interest Expense Cover
Slide 41: Voluntary asbestos-related compensation funding proposal
Voluntary asbestos-related compensation funding proposal Russell Chenu, CFO
Slide 42: Voluntary Asbestos Compensation Funding Proposal Update
Voluntary Asbestos Compensation Funding Proposal Update Further progress made on points of difference in Principal Deed discussions - now working on draft 12 Continuing to discuss tax deductibility of payments to Special Purpose Fund with Australian Taxation Office and Federal Treasury Not possible
Slide 43: Summary
Summary Strong operating performance The company's financial position remains strong Continuing to narrow points of difference in Principal Deed discussions Tax deductibility of payments to the SPF remains a key issue for "affordability" SCI related expenses continue to be a significant cost burden
Slide 44: Questions & Answers
Questions & Answers
Slide 45: Disclaimer
Disclaimer This Management's 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 our annual reports to shareholders
Slide 46: Endnotes - Definitions
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, a Financial Report and Results at a Glance document. Definitio
Slide 47: Endnotes - Financial Ratios
Endnotes Financial Ratios Net debt payback - Net cash/debt divided by cash flows from operations times 12 months. Gearing Ratio -is borrowings less cash (net debt) divided by net debt plus shareholders' equity. Net Interest Expense Cover - EBIT divided by Net Interest Expense. Net Interest Paid Cove
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