James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q3 FY2017 Earnings Presentation
38 slides from James Hardie Industries's earnings presentation, Feb 3, 2017
Slide 1: Q3 FY17 Management Presentation
Q3 FY17 MANAGEMENT PRESENTATION 03 February 2017
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS 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,
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (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 i
Slide 4: Note to the Reader
NOTE TO THE READER As of 30 June 2016, the Company changed its reportable operating segments. Previously, the Company reported on three operating segments: (i) North America and Europe Fiber Cement, (ii) Asia Pacific Fiber Cement, and (iii) Research and Development. As of 30 June 2016, the Company b
Slide 5: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
USE OF NON-GAAP FINANCIAL INFORMATION; AUSTRALIAN EQUIVALENT TERMINOLOGY This Management Presentation includes financial measures that are not considered a measure of financial performance under generally accepted accounting principles in the United States (US GAAP). These financial measures are des
Slide 6: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers PAGE 6
Slide 7: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 8: Group Overview
GROUP OVERVIEW Adjusted Net Operating Profit1 Adjusted Diluted EPS1 3rd Qtr Nine Months 3rd Qtr Nine Months US$52.6M 6% US$194.0M 5% US12 cents Flat US44 cents 7% Adjusted EBIT 2 Net Operating Cash Flow 3rd Qtr Nine Months Nine Months US$73.5M 10% US$277.2M 4% US$265.8M 33% Adjusted EBIT Margin % 2
Slide 9: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY 9 Months Volume Q3'17 FY17 • Steady growth in R&R and new construction markets Net Sales US$350.9M US$1,105.7M • Market penetration momentum continues to improve 10% 12% • Volume growth constrained by manufacturing capacity Sales Volume 516.7 mmsf 1,636.8 mmsf 10%
Slide 10: North America Fiber Cement Quarterly EBIT and EBIT Margin
NORTH AMERICA FIBER CEMENT Quarterly EBIT and EBIT Margin1 100 30 90 25 80 70 20 EBIT Margin 60 EBIT US$M 50 15 40 10 30 20 5 10 0 0 FY12 FY13 FY14 FY15 FY16 FY17 EBIT EBIT/Sales YTD EBIT Margin % in target range, but down 280 bps to 24.2% compared to pcp 1 Excludes asset impairment charges of US$14
Slide 11: North America Fiber Cement Price and Top Line Growth
NORTH AMERICA FIBER CEMENT 710 Average Net Sales Price Top Line Growth1 3,000 $1,600 2,800 $1,500 JH Volume (mmsf), Starts (000s Units) 666 669 666 2,600 $1,400 670 2,400 $1,300 2,200 $1,200 641 $1,100 Revenue (US$M) 2,000 638 $1,000 630 1,800 US$ per MSF 625 $900 1,600 630 616 $800 1,400 $700 1,200
Slide 12: International Fiber Cement Summary
INTERNATIONAL FIBER CEMENT SUMMARY 9 Months Volume Q3'17 FY17 • YTD volume increased 1%, excluding the Pipes business Net Sales US$99.5M US$309.0M 7% 6% •Volume growth in Australia, New Zealand and Europe Sales Volume 115.4 mmsf 361.3 mmsf •Volume declined in Philippines 1% 2% Sales Volume Price 115
Slide 13: International Fiber Cement (USD)
INTERNATIONAL FIBER CEMENT (USD) Q3'17 9 Months FY17 Australia Australia Australia 1 Volume Net Sales EBIT Volume Net Sales EBIT • Solid EBIT growth for quarter and YTD • Non-recurring start-up costs at Carole Park in FY16 Q3'17 9 Months FY17 New Zealand New Zealand New Zealand Volume Net Sales EBIT
Slide 14: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 15: Results – 3rd Quarter FY17
RESULTS – 3rd QUARTER FY17 Three Months Ended 31 December Net sales increased 10% • Higher volume in North America Fiber Cement segment US$ Millions Q3'17 Q3'16 % Change • Higher average net sales price in International Fiber Net sales 453.8 413.9 10 Cement segment Gross profit 155.0 149.5 4 SG&A ex
Slide 16: Results – Nine Months FY17
RESULTS – NINE MONTHS FY17 Nine Months Ended 31 December Net sales increased 10% • Higher volume in North America Fiber Cement segment 9 Months 9 Months US$ Millions % Change FY17 FY16 • Higher average net sales price in International Fiber Net sales 1,427.3 1,292.4 10 Cement segment Gross profit 51
Slide 17: Changes in AUD vs. USD
CHANGES IN AUD vs. USD 1.00 0.90 AUD/USD Exchange Rate 0.80 0.70 0.60 31 Dec 14 31 Mar 15 30 Jun 15 30 Sep 15 31 Dec 15 31 Mar 16 30 Jun 16 30 Sep 16 31 Dec 16 1 As Reported 9 Months FY17 figures converted using 9 Months FY16 weighted average exchange rates 2 Reflects the difference between 9 Months
Slide 18: North America Input Costs
NORTH AMERICA INPUT COSTS Quarterly US Input Costs 1,200 10 • The price of NBSK pulp increased 9 6% compared to pcp 1,000 Cement, Gas, Electric and Freight Prices 8 7 800 • Cement prices continue to rise, up 6 Pulp Prices 600 5 5% compared to pcp 4 400 3 • Gas prices are up 9% compared to 2 200 pcp
Slide 19: Segment EBIT – 3rd Quarter and Nine Months FY17
SEGMENT EBIT – 3rd QUARTER and NINE MONTHS FY17 North America Fiber Cement EBIT summary North America Fiber Cement 300 • Q3 FY17 EBIT decreased 11% and YTD EBIT 266.8 267.8 250 remained flat compared to pcp 207.2 US$ Millions 200 • Driven by unfavorable plant performance, increased 150 Q3 EBIT 100 8
Slide 20: Segment EBIT – Other Businesses, R&D, Corporate
SEGMENT EBIT – 3rd QUARTER and NINE MONTHS FY17 Other Businesses (7) (6) (6.2) Other Businesses US$ Millions (5) (4.7) • Q3 FY17 EBIT remained flat and YTD EBIT loss (4) (3.2) (3) (2.1) (2.1) Q3 EBIT improved by 24% compared to pcp (2) (1.4) 9 months (1) • Driven by improving performance of Windows
Slide 21: Income Tax
INCOME TAX Three Months and Nine Months Ended 31 December 25.1% estimated adjusted effective tax rate for 9 Months 9 Months the year US$ Millions Q3’17 Q3’16 FY17 FY16 Operating profit before taxes 102.9 47.3 295.9 282.5 • Adjusted income tax expense for the quarter and 1 (35.0) 29.6 (37.0) (31.1) n
Slide 22: Cashflow
CASHFLOW 9 Months 9 Months US$ Millions Change (%) FY17 FY16 Increase in net operating cash flow Net Income 232.0 215.6 8 Increase in net income adjusted for non-cash 1 Adjustment for non-cash items 50.5 36.8 37 items Annual AICF contribution (91.1) (62.8) (45) Favorable changes in working capit
Slide 23: Capital Expenditures
CAPITAL EXPENDITURES • YTD CAPEX of US$58.5 million up by 12% compared to pcp CAPEX Spend • North America capacity projects: 25 • Commissioned 3rd sheet machine at Cleburne; 20 • Continued start-up of the 3rd sheet machine and began recommissioning a 4th sheet machine at Plant City facility; US$ Mil
Slide 24: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital Liquidity and Funding Management Allocation • Invest in R&D and capacity • Conservative leveraging of • Strong margins and operating balance sheet within 1-2 times cash flows expansion to support organic growth adjusted EBIT
Slide 25: Liquidity Profile
LIQUIDITY PROFILE Debt Profile Strong balance sheet US$ Millions US$88.1 million cash 1 US$410.9 million net debt3 at Q3 FY17 $250 78% liquidity on bank debt at Q3 FY17 $500 Corporate debt structure $110 US$110m bank facilities drawn at Q3 FY17; US$88.1m held in cash US$500 million unsecured
Slide 26: FY2017 Guidance
FY2017 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2017 is between US$252 million and US$269 million • Management expects full year Adjusted net operating profit to be between US$245 million and US$255 million
Slide 27: Questions
(@)) James Hardie QUESTIONS
Slide 28: Appendix
(@)) James Hardie APPENDIX
Slide 29: Financial Summary
FINANCIAL SUMMARY Three Months and Nine Months Ended 31 December 9 Months 9 Months US$ Millions Q3'17 Q3'16 % Change % Change FY17 FY16 Net Sales North America Fiber Cement $ 350.9 $ 317.9 10 $ 1,105.7 $ 989.2 12 International Fiber Cement 99.5 92.9 7 309.0 292.5 6 Other Businesses 3.4 3.1 10 12.6 1
Slide 30: Asbestos Claims Data
ASBESTOS CLAIMS DATA Claims Received • Quarter and nine months claims received 469 455 428 decreased by 10% and 6%, respectively, compared to pcp 143 156 159 • Quarter and nine months claims received were 8% and 9%, below actuarial estimates, respectively Q3'17 Q3'17 Q3'16 9 Months 9 Months 9 Months
Slide 31: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Nine Months Ended 31 December 9 Months 9 Months Q3'17 Q3'16 FY17 FY16 Depreciation and amortization North America Fiber Cement $ 17.8 $ 15.4 $ 48.0 $ 45.4 International Fiber Cement 3.0 2.8 8.9 6.4 Other Businesses 0.6 0.5 1.7 1.5 Research
Slide 32: 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 Condensed Consolidated Financial State
Slide 33: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES 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 Condensed Consolidated Financi
Slide 34: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES EBIT – Earnings before interest and taxes EBIT margin – EBIT margin is defined as EBIT as a percentage of net sales Sales Volumes mmsf – million square feet, where a square foot is defined as a standard square foot of 5/16” thickness msf – thousand square feet, where a
Slide 35: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months and Nine Months Ended 31 December 9 Months 9 Months Q3'17 Q3'16 FY17 FY16 EBIT $ 108.7 $ 52.1 $ 315.0 $ 297.7 Asbestos: Asbestos adjustments (35.6) 29.0 (39.0) (32.5) AICF SG&A expenses 0.
Slide 36: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months and Nine Months Ended 31 December 9 Months 9 Months Q3'17 Q3'16 FY17 FY16 Adjusted net operating profit (US$ Millions) $ 52.6 $ 55.8 $ 194.0 $ 184.5 Weighted average common shares outstanding - 441.6 447.1 444.8 447.3 Di
Slide 37: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA US$ Millions Three Months and Nine Months Ended 31 December 9 Months 9 Months Q3'17 Q3'16 FY17 FY16 EBIT $ 108.7 $ 52.1 $ 315.0 $ 297.7 Depreciation and amortization 22.6 19.3 62.5 55.1 Adjusted EBITDA $ 131.3 $ 71.4 $ 377.5 $ 352.8 Adjusted selling, ge
Slide 38: Q3 FY17 Management Presentation
Q3 FY17 MANAGEMENT PRESENTATION 03 February 2017
James Hardie Industries — Q3 FY2017 Earnings Presentation on 6ix