James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q3 FY2011 Earnings Presentation
56 slides from James Hardie Industries's earnings presentation, Feb 18, 2011
Slide 1: Q3 FY11 Management Presentation
Q3 FY11 Management Presentation 18 February 2011
Slide 2: Disclaimer
Disclaimer This Management's Analysis of Results 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 United States Securities and Exchange Commission on Forms 20-F and 6-K, in the annual report
Slide 3: Agenda
Agenda Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers 3 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 sec
Slide 4: Operating Review
Operating Review Louis Gries, CEO
Slide 5: Group Overview
Group Overview The net operating result excluding asbestos, ASIC expenses and tax adjustments for the 3rd quarter ended December 2010 decreased 30% to US$21.0 million The 3rd quarter operating result reflects the seasonal slowdown and continuing difficult conditions in the US housing market and a st
Slide 6: 3rd Quarter Result - USA and Europe Fibre Cement
3rd Quarter Result * Net Sales up 2% to US$182.6 million Sales Volume up 1% to 277.9 mmsf Average Price up 1% to US$657 per msf EBIT down 34% to US$26.3 million EBIT Margin down 7.7 pts to 14.4% 6 USA and Europe Fibre Cement *Comparisons are of the 3rd quarter of the current fiscal year versus the 3
Slide 7: Nine Months Result - USA and Europe Fibre Cement
Nine Months Result * Net Sales down 2% to US$616.3 million Sales Volume down 5% to 939.2 mmsf Average Price up 3% to US$656 per msf EBIT down 30% to US$121.8 million EBIT Margin down 7.7 pts to 19.8% 7 USA and Europe Fibre Cement *Comparisons are of nine months of the current fiscal year versus nine
Slide 8: Average Net Sales Price
Average Net Sales Price US$ per MSF USA and Europe Fibre Cement US$656 8 (CHART)
Slide 9: EBIT and EBIT Margin
(CHART) USA and Europe Fibre Cement * Excludes impairment charges of US$45.6 million in Q4 FY08 9 EBIT and EBIT Margin* EBIT EBIT Margin
Slide 10: USA Fibre Cement housing starts
USA Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau 10
Slide 11: Primary Growth Performance
USA and Europe Fibre Cement Primary Growth Performance All market and market share figures are management estimates. 11
Slide 12: 3rd Quarter Result - Asia Pacific Fibre Cement
3rd Quarter Result * Net Sales up 10% to US$90.0 million Sales Volume down 1% to 99.6 mmsf Average Price up 2% to A$911 per msf EBIT up 16% to US$20.0 million EBIT Margin up 1.1 pts to 22.2% 12 Asia Pacific Fibre Cement *Comparisons are of the 3rd quarter of the current fiscal year versus the 3rd qu
Slide 13: Nine Months Result - Asia Pacific Fibre Cement
Nine Months Result * Net Sales up 20% to US$262.3 million Sales Volume up 5% to 305.7 mmsf Average Price up 3% to A$928 per msf EBIT up 35% to US$60.0 million EBIT Margin up 2.6 pts to 22.9% 13 Asia Pacific Fibre Cement *Comparisons are of nine months of the current fiscal year versus nine months of
Slide 14: Group 3rd Quarter Summary
14 Group 3rd Quarter Summary* *Comparisons are of the 3rd quarter of the current fiscal year versus the 3rd quarter of the prior fiscal year USA and Europe Fibre Cement results reflected: The seasonal slowdown and ongoing adverse US market environment Higher input costs - primarily pulp and freight
Slide 15: US housing starts data provide little evidence of recovery
15 US housing starts data provide little evidence that a recovery is underway Total USA Housing Starts - US Census Bureau
Slide 16: Pulp Price Forecast
Pulp Price Forecast 16 Market commentators increasingly bearish in their forecasts for pulp costs (CHART)
Slide 17: Group Outlook
Group Outlook 17 United States Market environment likely to remain challenging No evidence that a recovery in the residential housing construction market is underway Pressure on input costs - particularly pulp While unemployment remains high and consumer confidence low, the company remains wary abou
Slide 18: Group Outlook - Group Strategy
18 Group Outlook Group Strategy The company's key medium term priorities in the US are: Growing primary demand and exterior cladding market share - with focus on repair and remodel and non-metro markets Increasing market penetration of our ColorPlus(r) products Overall Group Strategy The company rem
Slide 19: Financial Review
Financial Review Russell Chenu, CFO
Slide 20: Overview
Overview* 20 *Comparisons are of 3rd quarter of the current fiscal year versus the 3rd quarter of the prior fiscal year Operations US earnings this quarter were adversely affected by: Lower new housing starts Weakened repair and remodel market High input costs - particularly pulp and freight Unfavou
Slide 21: Consequences of changes - A$ versus US$
Consequences of changes - A$ versus US$ A$/US$ Exchange Rate Favourable impact from translation of Asia Pacific results - Q3 FY11 vs Q3 FY10 Unfavourable impact from corporate costs incurred in Australian dollars - Q3 FY11 vs Q3 FY10 Unfavourable impact from translation of asbestos liability balance
Slide 22: Results - Q3
wal Results - Q3 USS Millions a3" 310 — % Change Net sales 2726 261.0 4 Gross profit 84.8 967 (12) SG&A expenses (49.4) (46.9) ©) Research & development expenses (6.9) 7.2) 18 Asbestos adjustments (46.4) (17.5) 5 EBIT (16.9) 25.4 Net interest expense (1.3) (0.8) (63) Other expense 27 22 23 Income ta
Slide 23: Results - Q3 (continued)
Results - Q3 (continued) 23 * Includes AICF SG&A, interest income and gain on investments
Slide 24: Results - Nine Months
mag Results - Nine Months USS Millions 9Months 9 Months FY2011___FY2010__% Change Net sales 878.6 849.7 3 Gross profit 295.0 3247 @) SG&A expenses (130.4) (187.3) 5 Research & development expenses (19.6) (20.2) 3 Asbestos adjustments 1.1) (200.0) 54 EBIT 53.9 32.8) - Net interest expense 3.3) (1.9)
Slide 25: Results - Nine Months (continued)
Results - Nine Months (continued) 25 * Includes AICF SG&A, interest income and gain on investments
Slide 26: Segment Net Sales - Q3
wal Segment Net Sales - Q3 US$ Millions Q3'11Q3"10 = % Change USA and Europe Fibre Cement 182.6 179.1 2 Asia Pacific Fibre Cement 90.0 81.9 10 Total 272.6 261.0 4 26
Slide 27: Segment Net Sales - Nine Months
Segment Net Sales - Nine Months 27
Slide 28: Segment EBIT - Q3
1 Research & development includes "core" research & development expenses and administrative expenses, but excludes product development expenses Segment EBIT - Q3 28
Slide 29: Segment EBIT - Nine Months
1 Research & development includes "core" research & development expenses and administrative expenses, but excludes product development expenses Segment EBIT - Nine Months 29
Slide 30: Income Tax Expense - Q3
Income Tax Expense - Q3 30 * Includes AICF SG&A, interest income and gain on investments
Slide 31: Income Tax Expense - Nine Months
Income Tax Expense - Nine Months 31 * Includes AICF SG&A, interest income and gain on investments
Slide 32: Cash Flow
wal Cash Flow USS Millions 9Months 9 Months FY 2011__ FY 2010 EBIT 53.9 (82.8) Non-cash items: Asbestos adjustments ont 200.0 Other non-cash items 30.4 96.5 Net working capital movements 33.9 (64.6) Cash Generated By Trading Activities 209.3 199.1 Tax payments (83.0) (40.9) Change in asbestos-relate
Slide 33: Debt
Debt Net debt decreased by US$77.0 million compared to net debt at 31 March 2010 Net debt decreased by US$81.6 million compared to net debt at 30 September 2010 Weighted average remaining term of total facilities of US$265.0 million was 1.7 years at 31 December 2010 down from 1.9 years at 31 Decembe
Slide 34: Legacy Issues Update
Legacy Issues Update 34 ATO - 1999 Disputed Amended Assessment James Hardie's initial appeal dismissed in September 2010 Appeal to full bench of the Federal Court expected to be heard in 2011 Charge of US$345.2 million effective 1 September 2010 (no impact to net operating cash flow for the nine mon
Slide 35: Asbestos Fund Update
Asbestos Fund Update - Pro forma at 31 December 2010 (unaudited) 35 *In accordance with the Amended and Restated Final Funding Agreement
Slide 36: Key Ratios
Key Ratios 1 Excludes asbestos adjustments, AICF SG&A expenses, AICF interest income, gain or impairment on AICF investments, tax benefits related to asbestos adjustments, ASIC expenses and tax adjustments 2 Excludes asbestos adjustments, AICF SG&A expenses and ASIC expenses 3 EPS, Dividend Paid per
Slide 37: Summary
37 Summary USA and Europe Fibre Cement 3rd quarter EBIT decreased by 34% to US$26.3 million due mainly to unfavourable cost absorption and higher input costs partially offset by a higher net sales price and a reduction in SG&A expenses. For the nine months, EBIT fell 30% to US$121.8 million Asia Pac
Slide 38: Guidance
38 Guidance Management anticipates FY11 full year earnings excluding asbestos, ASIC expenses and tax adjustments to be in the range of US$105 million to US$115 million Management cautions the outlook remains uncertain with US operating environment remaining challenging, Australian conditions moderat
Slide 39: Questions and Answers
@sames Hardie Questions and Answers
Slide 40: Appendix
@sames Hardie Appendix
Slide 41: Global Strategy
Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors Introduce differentiated products to deliver a sustainable competitive advantage
Slide 42: General Corporate Costs - Q3
General Corporate Costs - Q3 42
Slide 43: General Corporate Costs - Nine Months
General Corporate Costs - Nine Months 43
Slide 44: EBITDA - Q3
wa EBITDA-Q3 USS Millions a3" Q3'10 % Change EBIT USA and Europe Fibre Cement 26.3 39.6 (34) Asia Pacific Fibre Cement 20.0 173 16 Research & development (4.0) 6.1) 34 General corporate excluding asbestos and ASIC expenses (12.1) (70) (73) Depreciation and Amortisation USA and Europe Fibre Cement 13
Slide 45: EBITDA - Nine Months
mag EBITDA — Nine Months 9Months 9 Months USS Milions. FY 2011 FY2010__@ Change EBIT USA and Europe Fibre Cement 121.8 1737 (30) Asia Pacific Fibre Cement 60.0 444 35 Research & development (14.0) (14.9) 6 General corporate excluding asbestos and ASIC expenses (30.6) (32.8) 7 Depreciation and Amorti
Slide 46: Capital Expenditure
mal Capital Expenditure 9Months 9 Months USS Millions. FY2011___ FY 2010 _% Change USA and Europe Fibre Cement 31.4 29.5 6 Asia Pacific Fibre Cement 5.9 5.7 4 Total 37.3 35.2 7 46
Slide 47: Net Interest Expense
mad Net Interest Expense USS Milone 8Months 8 Months ast as4o FY. 2011 FY 2010 Gross interest expense (10) a7) @2) 67) Capitaised interest : - o4 Interest income 2 oa 03 03 Realised loss on interest rate swaps (10) 1) 28) (12) Net interest expense excluding AICF interestincome (2.0) “7 (67) (45) AIC
Slide 48: Endnotes
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 the Management's Analysis of Results, Media Release and Condensed Consolidated Financial Statements. Definitions
Slide 49: Financial Ratios
Financial Ratios Gearing Ratio - Net debt (cash) divided by net debt (cash) plus shareholders' equity. Net interest expense cover - EBIT divided by net interest expense. Net interest paid cover - EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payback -
Slide 50: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos and ASIC expenses - EBIT and EBIT margin excluding asbestos and ASIC expenses are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has
Slide 51: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, ASIC expenses and tax adjustments - Net operating profit excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningfu
Slide 52: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments - Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be mo
Slide 53: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos and tax adjustments - Effective tax rate excluding asbestos and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The com
Slide 54: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) 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 liq
Slide 55: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) General corporate costs excluding ASIC expenses and domicile change related costs - General corporate costs excluding ASIC expenses and domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be
Slide 56: Q3 FY11 Management Presentation
Q3 FY11 Management Presentation 18 February 2011
James Hardie Industries — Q3 FY2011 Earnings Presentation on 6ix