James Hardie Industries plc. · NYSE:JHX
James Hardie Industries — Q4 FY2016 Earnings Presentation
40 slides from James Hardie Industries's earnings presentation, May 19, 2016
Slide 1: Q4 FY16 Management Presentation
Q4 FY16 MANAGEMENT PRESENTATION 19 May 2016
Slide 2: Disclaimer
DISCLAIMER This Management Presentation contains forward-looking statements. James Hardie Industries plc (the “company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange Commission, on Forms 20-F and 6-K, in its annu
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 and Executive VP - Corporate • Questions and Answers In this Management Presentation, James Hardie may present financial measures, sales volume terms, and Non-US GAAP financial measures included in the Def
Slide 5: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 6: Group Overview
GROUP OVERVIEW Adjusted Net Operating Profit1 Adjusted Diluted EPS 1 4th Qtr Full Year 4th Qtr Full Year US$57.9M 1% US$242.9M 10% US13 cents FLAT US54 cents 8% Adjusted EBIT 2 Net Operating Cash Flow 4th Qtr Full Year Full Year US$83.7M 4% US$350.7M 15% US$260.4M 45% Adjusted EBIT Margin % 2 4th Qt
Slide 7: North America and Europe Fiber Cement Summary
NORTH AMERICA AND EUROPE FIBER CEMENT SUMMARY Q4'16 Full Year Volume • Modest R&R and new construction market growth Net Sales US$356.9M US$1,386.3M 10% 9% • US volume grew above market index, however Sales Volume 525.5 mmsf 2,000.5 mmsf PDG continues to track below our targeted level 11% 8% EBIT Av
Slide 8: North America and Europe Fiber Cement EBIT Margin
NORTH AMERICA AND EUROPE FIBER CEMENT Quarterly EBIT and EBIT Margin1 100 30 90 25 80 70 20 EBIT Margin 60 EBIT US$M 50 15 40 10 30 20 5 10 0 0 FY11 FY12 FY13 FY14 FY15 FY16 EBIT EBIT/Sales Full Year EBIT Margin up 220 bps to 24.6% 1 Excludes asset impairment charges of US$14.3 million in 4th quarte
Slide 9: North America and Europe Fiber Cement Revenue and Price
NORTH AMERICA AND EUROPE FIBER CEMENT 710 Average Net Sales Price Top Line Growth1 675 676 3,000 $1,600 2,800 $1,500 JH Volume (mmsf), Starts (000s Units) 670 652 2,600 $1,400 2,400 $1,300 648 642 2,200 $1,200 632 $1,100 Revenue (US$M) 2,000 US$ per MSF 626 $1,000 630 1,800 $900 1,600 $800 1,400 $70
Slide 10: Asia Pacific Fiber Cement Summary
ASIA PACIFIC FIBER CEMENT SUMMARY Volume Q4'16 Full Year • Favorable conditions in addressable markets Net Sales A$109.4M A$464.2M FLAT 7% • Excluding the Australian Pipes business, volume increased Sales Volume 105.4 mmsf 449.6 mmsf for both the quarter and full year 8% 1% Price Sales Volume 105.4
Slide 11: Financial Review
FINANCIAL REVIEW Matt Marsh, CFO and Executive VP – Corporate
Slide 12: Results – 4th Quarter FY16
RESULTS – 4th QUARTER FY16 Net sales increased 6% Three Months Ended 31 March • Higher volume in both operating segments3 US$ Millions Q4'16 Q4'15 % Change • Higher average net sales price in APAC segment Net sales 435.8 411.3 6 • Adversely impacted by stronger USD Gross profit 160.1 152.5 5 Gross p
Slide 13: Results – Full Year 2016
RESULTS – FULL YEAR 2016 Net sales increased Full Year Ended 31 March • Higher volume in both operating segments3 US$ Millions FY16 FY15 % Change • Higher average net sales prices in local currencies Net sales 1,728.2 1,656.9 4 Gross profit margin increased 170 bps Gross profit 632.2 578.8 9 • Lower
Slide 14: Changes in AUD vs. USD
CHANGES IN AUD vs. USD As Reported Excluding Translation Impact 1 12 Months 12 Months 12 Months US$ Millions % Change % Change FY16 FY15 FY16 Net Sales $ 1,728.2 1,656.9 t 4% $ 1,791.2 t 8% Gross Profit 632.2 578.8 t 9% 653.5 t 13% Adjusted EBIT 350.7 304.0 t 15% 364.0 t 20% Adjusted net operating p
Slide 15: US Input Costs
US INPUT COSTS Quarterly US Input Costs 1,200 10 • The price of NBSK pulp decreased by 7% 9 1,000 compared to pcp1 Cement, Gas, Electric and Freight Prices 8 7 800 6 • Cement prices continue to rise, up 3% compared Pulp Prices 600 5 to pcp1 4 400 3 • Gas prices are down 27% compared to pcp1 2 200 1
Slide 16: Segment EBIT – 4th Quarter and Full Year FY16
SEGMENT EBIT – 4th QUARTER and FULL YEAR FY16 North America and Europe Fiber North America and Europe Fiber Cement EBIT summary Cement 400 • Quarter and full year EBIT increased by 4% and 19%, 350 340.6 300 285.9 respectively when compared to pcp US$ Millions 250 237.0 • Favorable freight, improved
Slide 17: Segment EBIT – R&D and General Corporate Costs
SEGMENT EBIT – 4TH QUARTER and FULL YEAR FY16 Research and Development R&D summary (30) (26.0) (25) (24.4) (23.9) • On strategy to invest between 2%-3% of sales US$ Millions (20) • Decrease impacted by strengthening US dollar (15) Q4 EBIT (10) (6.4) (6.3) (6.4) • Fluctuations reflect normal variatio
Slide 18: Income Tax
INCOME TAX Three Months and Full Year Ended 31 March 25.8% adjusted effective tax rate (ETR) for the year US$ Millions Q4’16 Q4’15 FY16 FY15 • Adjusted income tax expense and adjusted ETR for the Operating profit before taxes 48.0 7.6 330.5 322.6 full year increased due to changes in geographical mi
Slide 19: Cashflow
CASHFLOW 1 US$ Millions FY16 FY15 Change (%) • 45% increase in cash flow from operations Net Income 244.4 291.3 Increase in net income adjusted for non-cash Adjustment for non-cash items 1 98.9 7.9 items Annual AICF contribution (62.8) (113.0) 44 Difference in annual contribution to AICF 2 Opera
Slide 20: Capital Expenditure
CAPITAL EXPENDITURE • Full year FY16 CAPEX spend of US$73.2 million CAPEX Spend decreased US$203.0 million compared to pcp 40 35 • Maintenance CAPEX continues 30 US$ Millions 25 • US capacity projects substantially complete 20 15 • Commissioning of new sheet machines at our Plant 10 City and Cleburn
Slide 21: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital Liquidity and Funding Management Allocation • Conservative leveraging of • Strong margins and operating • Invest in R&D and capacity balance sheet within 1-2 times cash flows expansion to support organic adjusted EBITDA targ
Slide 22: Liquidity Profile
LIQUIDITY PROFILE • Corporate debt structure Debt Profile US$ Millions US$500 million revolving credit facility, with a December 2020 maturity 1 $250 US$325 million 8 year senior unsecured notes2,3 $500 • Strong balance sheet $190m bank facilities $190 drawn at Q4 FY16; US$107.1 million cash $
Slide 23: Asbestos Compensation
ASBESTOS COMPENSATION KEY POINTS • Updated actuarial report completed as at 31 March 2016 • Undiscounted and uninflated central estimate decreased to A$1.434 billion from A$1.566 billion • Change in estimate: NPV is now A$1,904 million Decreased from A$2,143 million at 31 March 2015 A$239 millio
Slide 24: Funding Arrangements
FUNDING ARRANGEMENTS Claims Received 577 665 658 610 • FY16 claims received were 12% below actuarial estimates and 13% lower than pcp • Claims reporting for mesothelioma: 4% lower than previous year 1% lower than actuarial estimates Claims Received Actuarial Estimate • Claims reporting for non-m
Slide 25: FY2017 Key Planning Assumptions
FY2017 KEY PLANNING ASSUMPTIONS • The Company expects to see moderate growth in the US housing market in fiscal year 2017 • US Residential Starts forecasted to be between 1.2 and 1.3 million starts • North America and Europe Fiber Cement Segment EBIT expected to grow EBIT margins expected to remai
Slide 26: Summary
SUMMARY Adjusted Net Operating Profit1 Adjusted Diluted EPS 1 4th Qtr Full Year 4th Qtr Full Year US$57.9M 1% US$242.9M 10% US13cents FLAT US54cents 8% Adjusted EBIT 2 Net Operating Cash Flow 4th Qtr Full Year Full Year US$83.7M 4% US$350.7M 15% US$260.4M 45% • Overall strong financial performance f
Slide 27: Questions
(@)) ames Hardie QUESTIONS
Slide 28: Appendix
(@)) ames Hardie APPENDIX
Slide 29: Financial Summary
FINANCIAL SUMMARY Three Months and Full Year Ended Ended 31 March US$ Millions Q4'16 Q4'15 % Change FY16 FY15 % Change Net Sales North America and Europe Fiber Cement $ 356.9 $ 325.1 10 $ 1,386.3 $ 1,276.5 9 Asia Pacific Fiber Cement 78.9 86.2 (8) 341.9 380.4 (10) Total Net Sales $ 435.8 $ 411.3 6 $
Slide 30: Net Post-Tax Unfunded Asbestos Liability
NET POST-TAX UNFUNDED ASBESTOS LIABILITY A$ millions (except where stated) FY16 FY15 Central Estimate – Undiscounted and Uninflated 1,433.8 1,565.9 Provision for claims handling costs of AICF 32.2 33.7 Other US GAAP adjustments 87.4 28.3 Net assets of AICF (24.2) (11.1) Contributions for asbestos re
Slide 31: Asbestos Cash Movements for Full Year Ended March
ASBESTOS CASH MOVEMENTS FOR FULL YEAR ENDED 31 MARCH A$ millions AICF cash and investments - 31 March 2015 28.9 Contributions to AFFA by James Hardie 81.1 Insurance recoveries 23.4 Loan Drawdowns 84.0 Loan Repayments (35.5) Interest income, net (0.5) Claims paid (154.7) Operating costs (4.0) Other (
Slide 32: Updated Actuarial Estimate
UPDATED ACTUARIAL ESTIMATE 7,000 6,000 5,000 A$ million 4,000 3,586 3,604 3,131 3,079 3,169 3,027 3,124 2,811 2,906 2,805 2,661 2,743 3,000 2,525 2,513 2,427 2,000 2,143 1,782 1,870 1,904 1,685 1,568 1,555 1,580 1,694 1,000 1,536 1,517 1,426 1,537 1,478 1,355 0 30 Jun 31 Mar 30 June 31 Mar 30 Sept 3
Slide 33: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Full Year Ended 31 March Q4'16 Q4'15 FY16 FY15 Depreciation and amortization North America and Europe Fiber Cement $ 20.5 $ 15.7 $ 69.2 $ 60.9 Asia Pacific Fiber Cement 4.2 3.2 10.6 10.0 Total depreciation and amortization $ 24.7 $ 18.9 $ 7
Slide 34: 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 35: 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 Consolidated Financial Statements
Slide 36: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES This Management Presentation includes certain financial information to supplement the Company’s Consolidated Financial Statements which are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). These financial measures a
Slide 37: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES US$ Millions Three Months and Full Year Ended 31 March Q4'16 Q4'15 FY16 FY15 EBIT $ 56.3 $ 12.6 $ 354.0 $ 335.0 Asbestos: Asbestos adjustments 27.0 63.5 (5.5) (33.4) AICF SG&A expenses 0.4 0.6 1.7 2.5 New Zealand weathertightness claims - (0.1) 0.5 (4.3) Non-recurring
Slide 38: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES US$ Millions Three Months and Full Year Ended 31 March Q4'16 Q4'15 FY16 FY15 EBIT $ 56.3 $ 12.6 $ 354.0 $ 335.0 Depreciation and amortization 24.7 18.9 79.8 70.9 Adjusted EBITDA $ 81.0 $ 31.5 $ 433.8 $ 405.9 Three Months and Full Year Ended 31 March Q4'16 Q4'15 FY16 FY
Slide 39: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES US$ Millions Three Months and Full Year Ended 31 March Q4'16 Q4'15 FY16 FY15 Operating profit before income taxes $ 48.0 $ 7.6 $ 330.5 $ 322.6 Asbestos: Asbestos adjustments 27.0 63.5 (5.5) (33.4) AICF SG&A expenses 0.4 0.6 1.7 2.5 AICF interest expense (income), net 0
Slide 40: Q4 FY16 Management Presentation
Q4 FY16 MANAGEMENT PRESENTATION 19 May 2016
James Hardie Industries — Q4 FY2016 Earnings Presentation on 6ix