James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Day (December 2003)
199 slides from James Hardie Industries's investor day presentation, Dec 4, 2003
Slide 1: Unique Technology Driving High Growth
7) James Hardie Unique Technology Driving High Growth December 2003
Slide 2: Agenda
@) James Hardie Agenda = Welcome » Introduction » Logistics » Agenda
Slide 3: Focussed on Fibre Cement
@) James Hardie Focussed on Fibre Cement Attractive Investment Attributes ® High growth = Unique proprietary technology = Sustainable competitive advantage ® Strong cashflows and balance sheet = Low cyclical risk =» Relentless will to win
Slide 4: Vision
@) James Hardie Vision To relentlessly pursue profitable fibre cement growth in a repositioned, differentiated fibre cement industry #« The decisions we make will be driven by three fundamental principles: = World’s Best Manufacturing * Profitable Growth = Winners # All principles must work together
Slide 5: Fundamental Principles: World's Best Manufacturers
Fundamental Principles World’s Best Manufacturers = We are the best in world at making fibre cement * We build plants faster at a lower cost * We achieve higher throughputs = We are the cost and quality leader ® We invest in product innovation and production technology In short =» We make fibre ceme
Slide 6: Fundamental Principles: Profitable Growth
@) James Hardie Fundamental Principles Profitable Growth = We deliver consistent growth (volume/revenue) # Growth is delivered through: s market penetration = geographic expansion ® product innovation In short = We are top line growth driven
Slide 7: Fundamental Principles: Winners
Fundamental Principles Winners « We are passionate about winning with fibre cement = Our drive is to beat the competition in: ® manufacturing * product offering = sales efforts s all other fields we decide to pursue In short = We do everything we can to beat the competition
Slide 8: Values
Values A high performance meritocracy High performance hurdles Continuous step changes required Our people need to # Relish competition and love winning * Be willing to learn and innovate = Challenge themselves and each other Rewards are material if value is created
Slide 9: Strategy
Strategy Industry Leadership and Profitable Growth # Aggressively grow the market # Secure differentiated position « Generate strong top line growth # Win high shares of large segments « Sustain attractive margins
Slide 10: High Growth from Unique Technology
@) James Hardie High Growth from Unique Technology Unique technology — drives growth # Existing products enhanced and more differentiated against competition « New products to access new markets # New production processes commercialised # Intellectual property protection enhanced Continuing to exten
Slide 11: High Growth from Unique Technology
@) James Hardie High Growth from Unique Technology # Business portfolio balanced to achieve short and long term growth = USA on track to double between 2002 - 2007 « Growth and attractive returns from ANZ = Numerous opportunities for growth > 5 years = Asset mix reflects this 11
Slide 12: James Hardie Business Portfolio FY03
@) James Hardie High Growth from Unique Technology James Hardie Business Portfolio — FY 03 USA — Established high growth/high return Asia Pacific — Established high return Other — Emerging opportunities (Pipes, Roofing, Europe, Chile) Total GCE 10% 21% 9% 100% 24% 1% 100% 17% (6%) 100% 12
Slide 13: High Growth from Unique Technology: Performance
@) James Hardie High Growth from Unique Technology Performance « FY04 YTD — strong growth in revenues and earnings # Strong cash generation and returns to shareholders # Strategic position enhanced # Strong competitive position in all markets # Technology advances and products in the pipeline 13
Slide 14: Long Term Financial Targets
@) James Hardie Long Term Financial Targets High Growth and Attractive Returns Targeted Target Actual FY03 Actual HY04 Revenue Growth > 15% p.a. 32% 24% EBIT Margins’ > 15% 16% 19% ROA > 15% 21% 22% 14
Slide 15: Unique Technology and Scale
@) James Hardie Unique Technology and Scale Sustainable Competitive Advantage # Unique plant engineering and proprietary process technology and product formulations s Superior capital cost efficiency — plant capital cost less than %% that of competitors « Largest, lowest cost manufacturer — plant op
Slide 16: Questions?
@) James Hardie QUESTIONS? 16
Slide 17: Disclaimer
@) James Hardie Disclaimer This presentation contains forward-looking statements. Words such as "believe," “anticipate,” “plan,” "expect," “intend,” "target," “estimate,” “project,” “predict,” "forecast," "guideline," "should," "aim" and similar expressions are intended to identify forward-looking s
Slide 18: Notes
@) James Hardie Notes 1, EBIT is defined as operating income. EBIT margin is delined as EBIT as a percentage of our net sales. We believe EBIT and EBIT margin to be relevant and useful information as these are the primary measures used by our management to measure the operating profit or loss of our
Slide 19: Unique Technology Driving High Growth
7) James Hardie Unique Technology Driving High Growth December 2003
Slide 20: USA Fibre Cement
@) 4ames Hardie 7) James Hardie USA Fibre Cement December 2003
Slide 21: A Quick History: 1991 - 1995
@) James Hardie A Quick History: 1991 - 1995 «= Commenced operations in 1990, with primary focus on roofing « A one plant, one line business in 1991 « Shifted our focus from Roofing to Siding in 1992 # Moved to a high throughput, low unit cost manufacturing * Strictly a sell and make approach # Reve
Slide 22: A Quick History: 1995 - 2000
A Quick History: 1995 - 2000 Direct competition entered the market ... ® Etex (Cemplank) - 1989 s» ABTco - 1997 » Temple Inland - 1998 = CertainTeed - 2000 After realizing significant gains in process technology, we began to make advancements in product technology Selected “Product Leadership” as ou
Slide 23: A Quick History: Growth
VOLUME (MMSF) 91 ‘A Quick History: Growth Revenue growth continuing to 92 Volume “== Revenue outstrip volume growth 93 94 95 96 600 REVENUE (US$M)
Slide 24: Organization: Approach
@) James Hardie Organization: Approach « Alignment around aggressive business goals « Emphasis on growth * Constantly changing game « Step change vs. incremental improvements # Capability (and cost) ahead of revenue # Key leadership positions « Marketing and Segment managers * Regional Sales Manager
Slide 25: Organization: Development
Organization: Development Initially built superior organizational capabilities in manufacturing and sales Then focused on building similar capabilities in marketing and R&D Recruit from a wide range of related industries Recruit at all levels of the organization Regularly fast-track high potential p
Slide 26: Overview: Strategy
@) James Hardie Overview: Strategy « Aggressively grow the market for Fibre Cement # Secure our desired overall market position while defending our share in existing market segments # Leverage our superior technology to offer differentiated products and systems of superior value to those of competit
Slide 27: Overview: Top-Line Growth
@) James Hardie Overview: Top-Line Growth « Primary Demand = Create awareness at the consumer level = Target the builder and contractor (decision maker) = Access the market thru traditional channels « Category Share » Brand program = Differentiated product offering » Long term price positioning « Pe
Slide 28: Product Portfolio
@) James Hardie » Exterior product portfolio now includes: = A full wrap exterior bundle « Siding, Trim and Soffits = Repair & Remodel « Big Boxes » One Steppers oC a = Manufactured Housing » Hardboard substitute » Vinyl upgrade ® Interior product portfolio now includes: ® ¥%” grid backer - Floors ®
Slide 29: Overview: Markets
@) James Hardie Overview: Markets * Exteriors: Siding, Trim & Soffit =» New Construction, R&R, MH ® Established Markets: South ® Emerging Markets: North AL kt ‘erritory Nunavut UBmayo}Eyses « Interiors: Backer board = Floors (1/4” market) ® Walls (1/2” market) [ Emerging Markets —ZJ Established Mark
Slide 30: Current State: Established Markets
@) James Hardie Current State: Established Markets « FC accounts for 1/3 of siding sales in established markets « EM account for over 75% of our exterior products sales ® High share position in most markets JH ESTABLISHED MARKET * Major builders and dealers GROWTH = High awareness of the JH brand »
Slide 31: Go Forward: Established Markets
@) James Hardie a Go Forward: Established Markets » Terminal share of 35 —~ 40% « 7% - 15% targeted growth band * Hardboard and brick substitution in new construction * Wood substitution as vinyl alternative in R&R * Rural market growth « New Product Launches * Protect Category Share 12
Slide 32: Current State: Emerging Markets
@) James Hardie Current State: Emerging Markets « FC currently has a low but rapidly growing market share « Emerging market opportunity: = Vinyl belt ® High population * 37% of housing starts* * Over 4.5 billion sq. feet siding market* * Accounts for over 40% of existing housing stock* * Including C
Slide 33: Go Forward: Emerging Markets
@) James Hardie _ _ Go Forward: Emerging Markets * Terminal market share of 35-40% in emerging markets * Target growth band of 35-50% « Vinyl/Cedar substitution with a pre-finished product protfolio = Segment and target move-up and luxury homes « Accelerate awareness at the consumer level (marketing
Slide 34: Current State: Interiors
@) James Hardie Current State: Interiors Leading position in the %” (Floor applications) backer market = Protect category share with grid Proprietary G2 technology driving rapid penetration on wall applications Rapid growth in retail channel Broad distribution base =» Pro-tile =» Lumber Backer Volum
Slide 35: Go Forward: Interiors
@) James Hardie Go Forward: Interiors # Long-term — a high terminal share of US backer board market = Penetrate against glass mesh and other cement boards on ceramic tile underlayment applications = Substitute against green board in new construction ® Protect position in retail channel Today 2007 16
Slide 36: Business Update
@) James Hardie Business Update Key Targets: = 20% Revenue Growth # 20% EBIT/Revenue Ratio 17
Slide 37: Business Overview: Revenue
@) James Hardie Business Overview Revenue — 25% CAGR in Last 5 years 700 600 500 4004 300 4 200 4 100 4 OF T T T 7 FY99 FY00 FY01 FY02 FY03 USDM 18
Slide 38: Business Overview: Price
@) James Hardie Business Overview USD PER MSF 490 480 470 460 450 440 430 420 410 400 Price — Last 5 years FY99 FY00 FY01 FY02 FY03 19
Slide 39: Business Overview: Cost
@) James Hard Business Overview Cost: * Normalised like for like factory costs continue to decline * Brought on new capacity » Waxahachie, Cleburne XLD, Summerville and Peru « Funding several key growth initiatives « Market Development — R&R, Retail efc « Product Development — Roofing, Fencing, Hard
Slide 40: Revenue per Employee
@) James Hardie $420 $370 $320 $270 $220 $170 $120 Revenue per Employee (USD) $70 $20 95 see -$30 1992 1993 1994 1995 1996 1987 1999 2000 2001 2002 2603 zz # of Employees lad Revenue ~~ Revenue Per Employee
Slide 41: Business Overview: Margins
@) James Hardie Business Overview Margins — Last 5 years EBIT —- CAGR 33% 1607 30% El EBIT 140 jon ° “> EBIT% SALES 25% 1204 aa L we ~— 20% 1004 e 15% EBIT (USDM) oe ° EBIT % Sales 10% 5% 0% FY99 FYOO FYO1 FY02 FY03 22
Slide 42: Going Forward
Going Forward # Continue to substitute FC for existing materials in exterior & interior construction applications « Use our superior FC technology & manufacturing capability to develop new products in a high throughput/low unit cost environment * Increase and upgrade our manufacturing capability » M
Slide 43: Sustainable Growth Model
@) James Hardie Sustainable Growth Model Based on: « Large market opportunity = Superior value proposition for target customers « Proprietary and/or protected technology « Current R&D investments point to large upsides # Significant organisational advantages « Focused strategy and organisational eff
Slide 44: Questions?
@) James Hardie QUESTIONS? 25
Slide 45: Disclaimer
@) James Hardie Disclaimer This presentation contains forward-looking statements. Words such as "believe," “anticipate,” “plan,” "expect," “intend,” "target," “estimate,” “project,” “predict,” "forecast," "guideline," "should," "aim" and similar expressions are intended to identify forward-looking s
Slide 46: USA Fibre Cement
@) 4ames Hardie 7) James Hardie USA Fibre Cement December 2003
Slide 47: Research and Development Technology Review
7) James Hardie Research and Development Technology Review December 2003
Slide 48: JH State of Technology
JH State of Technology Industry leading investment in fibre cement technology continues to widen the gap from competition Product development pipeline is full Next generation platforms are beginning to be commercialized
Slide 49: Technology Organization
@) James Hardie Technology Organization * Research and Development » Two centers located in our biggest markets, US and ANZ, focused on: * Core Research - providing sustainable, leading edge technologies « Product Development - delivering products and systems that support each BU’s objectives * Engi
Slide 50: @) James Hardie
@) James Hardie
Slide 51: Performance Characteristics
Performance Characteristics Balancing key attributes within classes, is like walking a tightrope
Slide 52: Performance Characteristics
Performance Characteristics Durability Performance Other Performance ., Next Generation Density Fibre Cement
Slide 53: @) James Hardie
@) James Hardie = Increased performance at lower densities * Durability » Ease of use
Slide 54: Resources - People
Resources - People = Diverse workforce of over 100 technologists # mixture of science and engineering *« 45% with greater than 5yrs service # +50% with advanced degrees » Focused on analytical and computational approaches to process development and product prototyping
Slide 55: Capabilities
@) James Hardie 7 Capabilities The JH approach is “hands on’, including the development of many proprietary processes, methods and procedures TS DF FIG IE Ig py ci cnn ie 2 nn, a
Slide 56: Product Development
@) James Hardie Product Development = Formulation # Installation « Fit for use # Systems = Design = Components « Shape « Tools « Texture » Risk Assesment » Finish = Durability « Sealer » Process Design « Primer «» Topcoat 10
Slide 57: Arctic White
@) James Hardie Arctic White
Slide 58: Product Innovation: HardiBacker with G2 Technology
@) James Hardie a Product Innovation HardiBacker with G2 Technology 12
Slide 59: Product Innovation: EZ Grid
@) James Hardie Product Innovation EZ Grid 1/4" Ceramic Tila Backerheard for Fiore BES te Layout Bike to Score BES to Fasten BES te Get the Job Diary The Ultimate Cement Backerboard 43
Slide 60: Product Innovation: ExoTec Facade Panel
Product Innovation @) James Hardie ExoTec Facade Panel > Six Sided Sealed ~ Enhanced performance ~ Improved stability for a wide range of finishes ~ Improved moisture resistance > Higher Impact Resistance > Faster Installation - vom ‘White Key Coat - Water ‘White Face Seater -UV Cured, Based Acrylic
Slide 61: Product Innovation: Linea Weatherboards
@) James Hardie Product Innovation Linea Weatherboards with CLD Technology * 16mm thickness — deep shadowline « Fire rating, low thermal movement, tongue & groove joins » JH proprietary Ceramic Low Density technology CD
Slide 62: Product Innovation: Artista Columns
@) James Hardie Product Innovation Artista™ Columns Lighter Weight (20-30 ~ ss Easier Handlin 1ieve Design Freedom. * Variety of Finishes — smo ‘Range of Accessories —.o ty like no other. act and scratch resistance earing Capacity :
Slide 63: Tools
@) James Hardie Tools HardiShear® = Developed in co-operation with power tool industry partners HardiBlade * Up to 5x longer cutting life than other carbide tipped blades 17
Slide 64: Core Research
@) James Hardie Core Research Focused on: = New raw materials ® light and durable « New formulation development » away from Hatschek norm = New process development = other fibre cement technologies « Understanding durability in all climates 18
Slide 65: Technology Innovations: HardiTrim w/XLD
@) James Hardie —s Technology Innovations HardiTrim w/XLD * Thickness and shape s JH proprietary low density technology « Advantaged fiber cement process 19
Slide 66: Technology Innovations: Roofing
@) James Hardie Technology Innovations Roofing « Durability and performance = Proprietary process, formula and materials 20
Slide 67: Intellectual Property Strategy and Integration
@) James Hardie Intellectual Property Strategy and Integration Strategy: =» Ensure O2P and O2E for all JH innovations s Maximize value/$ for James Hardie’s IP portfolio 21
Slide 68: Intellectual Property: IP Advantage Update
@) James Hardie Intellectual Propert IP Advantage - Update * Key technology and product 17 New Provisional Applications 52 Pending P: Applicatic patents have been granted. @ New Pators GratoAlowed bl We are now in a position to enforce 10 New Provisionai Applications . 55 Pending Patent Applications
Slide 69: Questions?
@) James Hardie QUESTIONS? 23
Slide 70: Disclaimer
@) James Hardie Disclaimer This presentation contains forward-looking statements. Words such as "believe," “anticipate,” “plan,” "expect," “intend,” "target," “estimate,” “project,” “predict,” "forecast," "guideline," "should," "aim" and similar expressions are intended to identify forward-looking s
Slide 71: Research and Development Technology Review
7) James Hardie Research and Development Technology Review December 2003
Slide 72: Global Manufacturing
@) 4ames Hardie 7) James Hardie Global Manufacturing December 2003
Slide 73: Manufacturing Advantage
@) James Hardie Global Manufacturing Manufacturing Advantage * Capital Efficiency($/sf) ® Manning(sf/man) » Unit cost of production($/sf) « Ability to deliver differentiated products = Aligned » Patterned = Thick = Scale to build purpose built machines * Culture focused on operational and engineerin
Slide 74: Hatschek Forming Machine
@) James Hardie Global Manufacturing | Hatschek Forming Machine — an Om mi ( i am O —
Slide 75: Global Manufacturing Vision
@) James Hardie Global Manufacturing James Hardie’s Manufacturing Vision is driven by: « Unique proprietary technology = Manufacturing excellence * Engineering innovation = Capacity construction
Slide 76: Manufacturing Excellence
@) James Hardie Global Manufacturing Manufacturing Excellence « Safety * Quality « People * Costs * Output
Slide 77: Manufacturing Excellence: Safety
@) James Hardie Manufacturing Excellence Safety # Striving for accident free culture « YEM 06 goal of 2.0 incident rate = Foundation programs in place = Achievable with current effort #« Program on track to achieve goal
Slide 78: Manufacturing Excellence: Quality
Manufacturing Excellence Quality # Traditionally, JH quality programs focused on product integrity # In 2000, JH redesigned the US quality system to achieve world class results in not only product integrity, but also aesthetics # Step change results achieved due to program # Program rolled out in al
Slide 79: Manufacturing Excellence: People
@) James Hardie Manufacturing Excellence People = Continue to build a true performance based culture in US Operations = Performance driven =» Results Oriented =» Lean s Emphasis in Operations is given to four HR elements ® Recruiting ® Training = Development = Performance Management = Program under
Slide 80: Manufacturing Excellence: Costs
@) James Hardie Manufacturing Excellence Costs * Operations run cost programs consisting of: = Product inefficiency = Process inefficiency = Zero-based manning = Overtime management spending ® Yield * Maintenance =» Compressible * Cost programs supported by global purchasing manager
Slide 81: Manufacturing Excellence: Output
Slide 82: Engineering Innovations
Slide 83: Capacity Construction
Slide 84: Questions?
Slide 85: Disclaimer
Slide 86: Global Manufacturing December 2003
Slide 87: Artisan Roofing
Slide 88: History
Slide 89: Market Strategy
Slide 90: Market Strategy
Slide 91: Market Opportunity
Slide 92: Target Market
Slide 93: Operations
Slide 94: Questions?
Slide 95: Disclaimer
Slide 96: Artisan Roofing
Slide 97: Hardie Pipe
Slide 98: Brief History: 2000 - 2003
Slide 99: The Opportunity
Slide 100: Business Case
Slide 101: Cost Advantaged vs. RCP
Slide 102: Current State: Market
Slide 103: Current State: Market
Slide 104: Go Forward: Market
Slide 105: Regulatory Approvals
Slide 106: Current State: Operations
Slide 107: Questions?
Slide 108: Disclaimer
Slide 109: Hardie Pipe
Slide 110: USA - Exterior Products
Slide 111: Overview: Strategy
Slide 112: Overview: Top-Line Growth
Slide 113: Overview: Selling Price
Slide 114: Overview: US Exterior Products Market
Slide 115: Overview: Products/Segments
Slide 116: Overview: Markets
Slide 117: Segments: New Construction
Slide 118: Segments: Repair & Remodel
Slide 119: Segments: Repair & Remodel
Slide 120: Segments: Factory Built
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James Hardie Industries — Investor Day (December 2003) on 6ix