Boral — FY2003 Earnings Presentation
48 slides from Boral's earnings presentation, Aug 19, 2003
Slide 1: Boral's profit increases by 47% to $283 million
Boral’s profit increases by 47% to $283 million FY2003 RESULTS PRESENTATION by Rod Pearse 19 August 2003
Slide 2: Overview of results presentation
Overview of results presentation • Financial highlights • Markets review • Financial results • Segment overview ž Building Products, Australia ž Construction Materials, Australia ž USA ž Asia • Perform & Grow strategy • Outlook Delivering a Perform & Grow Strategy Full Year Results FY2003
Slide 3: Financial highlights: profit up 47% to $283m
Financial highlights: profit up 47% to $283m • PAT up 47% to $283m, driven by: • strong performance in Australia • good results in USA and Asia • strong price improvements in construction materials • turnarounds/growth • Sales revenue up 10% to $3.8b • EBIT up 39% to $478m • EBIT/Sales margins up fr
Slide 4: Financial highlights
Financial highlights • Earnings per share up 46% to 49.1 cents • Fully franked 12.0 cent final dividend declared (compared with 10.0 cents/ 75% franked 2H02) • 34% increase in grossed up full year dividend compared with FY2002 • Payout ratio of 47% • Share price up 35% to $5.06 for 12 months to Jun-
Slide 5: Markets Review
Markets Review
Slide 6: Earnings driven by a range of geographies and markets
Earnings driven by a range of geographies and markets EBIT by segment Revenue* by market Construction Australian Building Australian Materials, Engineering & Products, Non-Dwellings Australia Construction Australia 15% 48% 18% 24% USA Dwellings Australian 18% Dwellings 33% USA Non- USA 23% Dwellings
Slide 7: Strong Australian activity levels continued in the second half
Strong Australian activity levels continued in the second half of the year AUSTRALIA - VALUE OF WORK DONE $97/98 (Billions), Half Years, Seasonally Adjusted 25 Roads, Highways, 20 Subs & Bridges 15 Non Dwelling 10 5 Dwelling (incl A&A) 0 Dec-96 Jun-97 Dec-97 Jun-98 Jun-99 Dec-99 Jun-00 Jun-01 Dec-01
Slide 8: Australian dwelling value of work done has been strong
Australian dwelling value of work done has been strong AUSTRALIA DWELLING ACTIVITY Quarterly. Seasonally Adjusted. FY2001 FY2002 FY2003 Value of Work Done (A$97/98 Billion) 50,000 10 Dwelling Approvals 40,000 8 Number of Dwellings Dwelling Starts 30,000 6 20,000 Residential VWD* 4 10,000 0 2 Jun-96
Slide 9: Australian non-dwelling value of work done has increased from a low base
Australian non-dwelling value of work done has increased from a low base AUSTRALIA - NON DWELLING VALUE OF WORK DONE $97/98 (Billions), Half Year, Original. 9 8 FY03 7 Other Business Premises 6 Factories 5 Hotels 4 Shops 3 Offices 2 Social & Institutional 1 0 Jun-89 Jun-03e Jun-85 Jun-86 Jun-87 Jun-
Slide 10: US Residential activity in the Brick States remains strong
US Residential activity in the Brick States* remains strong USA BRICK STATES* - VALUE OF WORK COMMENCED US$92 (Billions), Half Years, Seasonally Adjusted 90 80 70 Non- 60 residential 50 40 30 Residential 20 10 0 Jun-97 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Jun-02 Dec-02 Jun-98 Jun-99 Jun-00 Jun-01 Jun-
Slide 11: Financial Results
Financial Results
Slide 12: Second half performance in line with first half
Second half performance in line with first half to deliver full year profit of $283m, up 47% A$m Dec-02 Jun-03 FY2003 FY2002 % YoY Half Half change Sales revenue 1,931 1,900 3,831 3,489 10 EBITDA 337 335 672 531 26 EBIT 240 238 478 343 39 Interest 35 33 68 63 7 Profit before tax 205 205 410 280 46 T
Slide 13: Boral's balance sheet continues to strengthen
Boral’s balance sheet continues to strengthen A$m FY2003 FY2002 % YoY change Net debt 764 881 (13) Interest 68 63 7 Debt / (Debt + Equity), % 26 31 Debt / Equity, % 36 45 Interest cover, times 7.1 5.4 31 Funds employed, $m 2,904 2,831 3 ROFE, % 16.4 12.1 36 NTA/share, $ 3.27 3.02 8 Delivering a Perf
Slide 14: Sales have returned to stronger levels; EBIT has strengthened
Sales have returned to stronger levels; EBIT has strengthened substantially Sales revenue, A$m EBIT, A$m 1H 2H 4500 500 4000 450 3500 400 350 3000 300 2500 250 2000 200 1500 150 1000 100 500 50 0 0 FY03 FY96 FY02 FY03 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY97 FY98 FY01 FY99 FY00 Results for reported b
Slide 15: Margins have continued to improve
Margins have continued to improve EBIT / Sales EBITDA / Sales 14% 18% 16% 12% 14% 10% 12% 8% 10% 6% 8% 6% 4% 4% 2% 2% 0% 0% FY98 FY99 FY00 FY01 FY02 FY03 FY97 FY97 FY98 FY00 FY01 FY02 FY03 FY99 Results for reported building and construction materials businesses each year Delivering a Perform & Grow
Slide 16: Returns have significantly improved
Returns have significantly improved ROFE, % ROE, % 18 14 16 12 14 10 12 10 8 8 6 6 4 4 2 2 0 0 FY00 FY01 FY99 FY00 FY03 FY99 FY02 FY03 FY01 FY02 Delivering a Perform & Grow Strategy Full Year Results FY2003
Slide 17: Stronger volumes & prices underpin the improved EBIT result
Stronger volumes & prices together with underlying improvements underpin the improved EBIT result $478m $343m Cost Asia/ Volume Escalation Growth Other EBIT Price Operational FX EBIT FY2002 Improvement FY2003 Delivering a Perform & Grow Strategy Full Year Results FY2003
Slide 18: Segment Overview
Segment Overview
Slide 19: Strong lift in Australian returns
Strong lift in Australian returns Revenue A$m FY2003 FY2002 % change Building Products, Australia 1,146 999 15 Construction Materials, Australia 1,846 1,640 13 USA 761 793 (4) Asia 77 53 46 Discontinued 1 4 Total 3,831 3,489 10 EBIT A$m FY2003 FY2002 % change Building Products, Australia 118 85 39 C
Slide 20: Stronger results from Building Products, Australia
Stronger results from Building Products, Australia • Sales up 15% to $1.1b EBIT / Revenue ROFE • EBIT up 39% to $118m 12% 16% • EBIT/Sales margin up 10% 14% from 8.5% to 10.3% 12% 8% • EBITDA/Sales margin 10% up from 12.8% to 14.3% 6% 8% • Funds employed down 4% 6% 1% to $803m 4% 2% • ROFE up from 1
Slide 21: Building Products, Australia benefited from 18% uplift in housing
Building Products, Australia benefited from 18% uplift in housing • Strong uplift in Australian housing Australian activity (VWD +18% incl A&A) Plasterboard Bricks • Significant gains in Bricks; East Coast still unsatisfactory • Roofing result down; poor manufacturing performance • Improved Masonry
Slide 22: Construction Materials, Australia returns are back to strong levels
Construction Materials, Australia returns are back to strong levels • Sales up 13% to $1,846m EBIT / Revenue ROFE • EBIT up 67% to $238m 14% 18% 16% • EBIT/Sales margin up 12% from 8.7% to 12.9% 14% 10% 12% • EBITDA/Sales margin up 8% 10% from 14.4% to 18.2% 6% 8% • Funds employed up 9% to 4% 6% $1,
Slide 23: Improved pricing and volume uplifts benefited Construction Materials
Improved pricing and volume uplifts benefited Construction Materials, Australia Quarries • Concrete, Quarry and Cement Cement volumes up division* • Concrete, Quarry and Cement prices up Contracting • Good contribution from concrete Transport bolt-ons QEU • Asphalt revenues/margins up • Lime volumes
Slide 24: Stronger pre-mixed concrete prices
Stronger pre-mixed concrete prices AUSTRALIAN PRE-MIXED CONCRETE PRICING QUARTERLY (nominal prices) 120 100 Price Index* (100=1990) 80 60 40 Jun-87 Jun-88 Jun-89 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-01 Jun-02 Jun-03 Jun-81 Jun-82 Jun-83 Jun-84 Jun-85 Jun-86 Jun-97 Jun-98 Jun-99 Jun-0
Slide 25: QEU continues to deliver a strong earnings stream
QEU continues to deliver a strong earnings stream, currently mainly from our 334ha Greystanes site Retail Development NEL*: sales completed in FY03 • Sale of land in FY2003 “Greystanes BusinessHub” • To become a district centre SEL* Residential Development “Greystanes BusinessHub” • “Nelson’s Ridge”
Slide 26: Other QEU activities are progressing well
Other QEU activities are progressing well MOOREBANK • 103ha site in SW Sydney • Currently landfill activities; planning well advanced; awaiting rezoning approvals • Anticipate >1000 residential lots with sales from 2005 PENRITH LAKES (40% SHARE) • Rezoning continues of ~400 ha site OTHER SITES UNDER
Slide 27: Strong US results maintained in US$
Strong US results maintained in US$; A$13m negative exchange rate impact on translation • Sales up 8% to US$448m EBIT / Revenue ROFE (US$) (exc. MonierLifetile) 16% 20% • EBIT up 14% to US$66m 18% 14% • EBIT/Sales margin up 16% 12% from 13.8% to 14.6% 14% 10% 12% • EBITDA/Sales margin up 8% 10% from
Slide 28: Robust market conditions underpin strong contribution from United States
Robust market conditions underpin strong contribution from United States Bricks • Housing market remains robust; commercial volumes lower • Bricks earnings down: price softening, manufacturing costs up • Positive Q4 Franklin impact Clay • Strengthening BMTI business; rooftiles divestment of Admixtur
Slide 29: Leading position in construction materials in Indonesia and plasterboard in Asia
Boral has a leading position in construction materials in Indonesia & through LBGA, the leading plasterboard position in Asia Lafarge Boral Gypsum Asia (LBGA) plants - 270m m2 of capacity LBGA plaster/accessories plants Korea: Dangjin, Ulsan, Yosu Seoul LBGA sales Offices 105m m2 PT Jaya Readymix Co
Slide 30: Steady improvement from Asian operations
Steady improvement from Asian operations • EBIT up 24% to A$24.5m • Underlying Plasterboard market growth of around 10% • South Korea slow in 1Q but regained momentum in 2Q • Good delivery of synergies in Plasterboard joint venture • Good contribution from plasterboard growth: Siam Gypsum, Korean Pl
Slide 31: Strong turnaround sustained in Asia
Strong turnaround sustained in Asia ASIA EBIT* A$ million EBIT / Revenue** 25.0 15% 10% 15.0 5% 5.0 0% FY97 FY98 FY99 FY00 FY01 FY02 FY03 -5% FY00 FY02 FY03 FY98 FY99 FY01 FY97 -5.0 -10% -15.0 -15% -20% -25.0 -25% -35.0 -30% ** FY01, FY02 & FY03 revenues include * Includes Plasterboard and Construct
Slide 32: Perform & Grow
Perform & Grow
Slide 33: Boral's Strategic Intent
Boral’s Strategic Intent Boral intends to be a value(s) and market driven, focused building and construction materials supplier operating in Australia and increasingly offshore Value(s) driven = Value for our shareholders Market driven = increased importance & driven by our Values of Leadership, we
Slide 34: We will grow around our leading reserve and market positions
“We will grow around our leading reserve and market positions” CEO Elect, Oct-99 8 Countries; 12,620 people 543 total operating sites (excludes distribution) 41ASIA Plasterboard* Indonesia #1 Malaysia #1 The Philippines #1 China (east) #1 Korea #1 Thailand #1 62 USA Indonesia Concrete #1 Fly ash #2
Slide 35: Continued delivery on the Grow side of our strategy
We have continued to deliver on the Grow side of our strategy over the past year GROWTH ACTIVITY ACQUISITIONS in 2002/03 $155m EXPANSION / UPGRADES $160m • 50% of Go-Crete Concrete (WA) • Cement program – NSW & Vic • Stud & Track plasterboard distribution (NSW) • Vertical shaft lime kiln in NSW • Al
Slide 36: $53m investment in Kiln #11 in WA
$53m investment in Kiln #11 to secure and grow leading position in bricks in WA • 50m SBE capacity for broad range of decorative clay products • Replaces aging Kiln #4 (40m SBEs) • $14m avoidance of SIB capital; substantial cost reductions; reduced emissions and energy utilisation • Strengthens lowe
Slide 37: $19m investment in Engineered Flooring
$19m investment in Engineered Flooring • $19m innovative “engineered flooring” plant in NSW • New generation flooring product • Long-term Wood Supply Agreement provides resource security • Highly value-added use of scarce native hardwood • New business - more consumer product and distribution focus
Slide 38: Growth/acquisition capital has averaged $200m pa since demerger
Growth/acquisition capital has averaged $200m pa since demerger CAPITAL EXPENDITURE A$m Growth & Acquisition Stay-in-business 450 Budgeted SIB; Growth capital 400 already announced 350 300 250 200 150 100 50 0 FY2000 FY2001 FY2002 FY2003 FY2004 Delivering a Perform & Grow Strategy Full Year Results
Slide 39: Approximately $870m of capital allocated to growth since demerger
Approximately $870m of capital allocated to growth in Australia and offshore since demerger Completed / Planned Growth Expenditure Australia • Growing around our core activities • Growing increasingly offshore Asia USA Delivering a Perform & Grow Strategy Full Year Results FY2003
Slide 40: We are delivering on our Objectives
We are delivering on our Objectives Objectives: • Beat the weighted average cost of capital (WACC) on a sustainable basis through the building cycle; • Beat the competition’s financial performance in comparable markets; • Achieve superior Total Shareholder Returns (TSR); and • Achieve superior retur
Slide 41: Boral's share price up 35% in FY2003
Boral’s share price up 35% in FY2003 $5.50 FY2001 FY2002 FY2003 275 + 35% $5.00 250 $4.50 225 + 27% ASX100 Index – Indexed $4.00 200 Boral Share Price Boral performance ($ per share) $3.50 175 + 32% $3.00 150 $2.50 ASX 100 125 $2.00 100 $1.50 75 Oct-00 Nov-00 Jan-01 Mar-02 Nov-02 Jan-03 May-03 Jun-0
Slide 42: Boral continues to perform in the top TSR quartile since demerger
Against the ASX100, Boral has continued to perform in the top TSR quartile since demerger TSR PERFORMANCE OF ASX100 – 21 Feb 2000 to 30 Jun 2003 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile 31% BORAL *Opening Price (21 Feb 00): $2.43, closing Price (30 Jun 03): $5.06; Calculation: End Price x
Slide 43: FY2004 Outlook
FY2004 Outlook
Slide 44: Overall Australian VWD in FY2004 expected to be relatively flat
Overall Australian VWD in FY2004 is expected to be relatively flat AUSTRALIA - VALUE OF WORK DONE (BUILDING & CONSTRUCTION) $97/98 (Billion). Seasonally Adjusted. Forecast 50 45 Roads, Highways, Subdivisions & 40 Bridges 35 Non-Dwelling 30 25 20 15 Dwelling 10 5 0 2008f 1992 1997 2002 1988 1989 1990
Slide 45: US dwelling activity expected to remain strong
US dwelling activity expected to remain strong USA BRICK STATES - VALUE OF WORK COMMENCED US$92, (Billions), Half Years, Seasonally Adjusted Forecast 180 160 140 120 Non-residential 100 80 60 40 Residential 20 0 98/99 99/00 03/04f 04/05f 05/06f 06/07f 97/98 00/01 01/02 02/03e 94/95 95/96 96/97 88/89
Slide 46: Asian construction demand continues to grow
Asian construction demand continues to grow Korea Thailand Indonesia China - Shanghai Value of construction orders Gross fixed capital Value of completion. Value of construction received. Trillion Won formation. Billion bhat Trillion Rp work done by public 600 40 70 sector. Billion yuan 50 40 30 400
Slide 47: Outlook for FY2004
Outlook for FY2004 • Softening of Australian dwelling approvals and VWD • Stronger demand from Australian non-dwelling & R/H/S • Full year impact of stronger construction materials prices • Continued strong PEP improvement • Steady USA US$ earnings • Stronger AUD • Continued improvement in Asia • Su
Slide 48: Boral 2003 Full Year Results
Boral 2003 Full Year Results