James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q4 FY2019 Earnings Presentation
60 slides from James Hardie Industries's earnings presentation, May 21, 2019
Slide 1: Q4 FY19 Management Presentation
Exhibit 99.4 Q4 FY19 MANAGEMENT PRESENTATION 21 May 2019
Slide 2: Cautionary Note on Forward-Looking Statements
James Hardie Q4 FY19 Results 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 Securi
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
James Hardie Q4 FY19 Results 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”
Slide 4: Note to the Reader
James Hardie Q4 FY19 Results NOTE TO THE READER As of 30 June 2018, the Company changed its reportable operating segments. Previously, the Company reported on four operating segments: (i) North America Fiber Cement, (ii) International Fiber Cement, (iii) Other Businesses, and (iv) Research and Devel
Slide 5: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
James Hardie Q4 FY19 Results 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). The
Slide 6: Agenda
James Hardie Q4 FY19 Results AGENDA • Group Operating Review Dr Jack Truong, CEO • Financial Review Matt Marsh, EVP and CFO • Strategy Update Dr Jack Truong, CEO • Questions and Answers Page 6
Slide 7: Group Operating Review – Dr Jack Truong, CEO
• Xxx • Xxx GROUP OPERATING REVIEW – DR JACK TRUONG, CEO
Slide 8: FY19 Group Results Overview
James Hardie Q4 FY19 Results FY19 GROUP RESULTS OVERVIEW • North America delivered improved PDG, albeit below our expectations • Australia and Philippines continue to lead the way in gaining growth above market • European segment met our expectations • Input cost environment remained challenging, an
Slide 9: FY19 North America Summary
James Hardie Q4 FY19 Results FY19 NORTH AMERICA SUMMARY Q4'19 FY19 • Housing market demand was soft in 2H of the fiscal 593.3 mmsf 2,308.1 mmsf year Sales Volume 1% 3% • Exteriors business grew above market, showing improvement from prior year (volume up 4.7% in US$422.0 M US$1,676.9 M Net Sales FY1
Slide 10: FY19 APAC Summary
James Hardie Q4 FY19 Results FY19 APAC SUMMARY Q4'19 FY19 • Continued to deliver excellent top line results in a 129.9 mmsf 546.1 mmsf softening market Sales Volume 7% 10% • Particularly strong volume growth in Australia and A$143.6 M A$612.2 M Net Sales the Philippines 7% 11% • Continued gains in m
Slide 11: FY19 Europe Summary
James Hardie Q4 FY19 Results FY19 EUROPE SUMMARY • Good top line growth; up 7% in Euros • Integration on track • Good traction repositioning fiber cement for growth • EBIT Margin Excluding 2 in line with expectations 1 The unaudited pro forma information presents the results of operations of the Com
Slide 12: Financial Review – Matt Marsh, EVP and CFO
FINANCIAL REVIEW – MATT MARSH, EVP AND CFO Page 12
Slide 13: Key Financial Messages
James Hardie Q4 FY19 Results KEY FINANCIAL MESSAGES • Good and disciplined financial performance in an inflationary market • North America Fiber Cement exteriors business continued to grow above our addressable market • Market penetration and category share gains in Asia Pacific Fiber Cement segment
Slide 14: Results – 4th Quarter FY19
James Hardie Q4 FY19 Results RESULTS – 4TH QUARTER FY19 Net sales increased 19%, US$98.9 million Three Months Ended 31 March • The acquired Fermacell business in Europe US$ Millions Q4'19 Q4'18 % Change contributed net sales of US$89.9 million Net sales 624.8 525.9 19 • Higher average net sales pric
Slide 15: Results – Full Year FY19
James Hardie Q4 FY19 Results RESULTS – FULL YEAR FY19 Net sales increased 22%, US$452.1 million Full Year Ended 31 March • The acquired Fermacell business in Europe US$ Millions FY19 FY18 % Change contributed net sales of US$332.5 million Net sales 2,506.6 2,054.5 22 • Higher average net sales price
Slide 16: North America Fiber Cement Summary
James Hardie Q4 FY19 Results NORTH AMERICA FIBER CEMENT SUMMARY Q4'19 FY19 Volume Slightly positive PDG in exteriors, but below our expectations 593.3 mmsf 2,308.1 mmsf • Sales Volume 1% 3% Exteriors volumes +3.5% for Q4 and +4.7% for FY19 • Decline in interiors US$422.0 M US$1,676.9 M Interiors
Slide 17: North America Fiber Cement Quarterly EBIT and EBIT Margin
James Hardie Q4 FY19 Results NORTH AMERICA FIBER CEMENT Quarterly EBIT and EBIT Margin Excluding 1 120 30 100 25 80 20 1 US$M 60 15 1 EBIT 40 10 EBIT Margin 20 5 0 0 FY14 FY15 FY16 FY17 FY18 FY19 EBIT EBIT/Sales FY19 EBIT Margin Excluding 1 % remains within our target range, but down 110 bps to 23.1
Slide 18: North America Input Costs
James Hardie Q4 FY19 Results NORTH AMERICA INPUT COSTS Quarterly US Input Costs 1,600 10 • The price of NBSK pulp up 12% compared to pcp 9 1,400 8 1,200 • Gas prices up 5% compared to pcp 7 1,000 6 • Cement prices up 3% compared to pcp 800 5 Pulp Prices ($) 4 600 3 • Electric prices flat compared to
Slide 19: Asia Pacific Fiber Cement Summary
James Hardie Q4 FY19 Results ASIA PACIFIC FIBER CEMENT SUMMARY Q4'19 FY19 Volume 129.9 mmsf 546.1 mmsf • Strong volume growth above market index in Australia Sales Volume 7% 10% and Philippines A$143.6 M A$612.2 M • Market penetration and category share gains, despite a Net Sales 7% 11% softening ma
Slide 20: Asia Pacific Fiber Cement (Local Currency)
James Hardie Q4 FY19 Results ASIA PACIFIC FIBER CEMENT (LOCAL CURRENCY) Australia • Market penetration and category share gains • EBIT for the full year favorably impacted by higher net sales and favorable plant performance, partially offset by higher input costs New Zealand • Favorably impacted by
Slide 21: Europe Building Products Summary
James Hardie Q4 FY19 Results EUROPE BUILDING PRODUCTS SUMMARY 1 Volume • Increase driven by acquisition of Fermacell Price • Decrease due to product mix • Fiber gypsum has a lower average net sales price compared to Fiber Cement Net Sales • Net sales in Euros increased 7% for the quarter and full ye
Slide 22: Other Businesses Segment EBIT
James Hardie Q4 FY19 Results OTHER BUSINESSES SEGMENT EBIT Other Businesses • Decision made to exit Windows business (35) (30.9) • Shutdown fiberglass windows business (30) (25) • Sold our fiberglass pultrusion portion of the business in (20) the first quarter of fiscal year 2020 (15) (8.6) (10) (6.
Slide 23: Product Line Discontinuation Expenses
James Hardie Q4 FY19 Results PRODUCT LINE DISCONTINUATION EXPENSES 1 US$ Millions Q1'19 Q2'19 Q3'19 Q4'19 Full Year FY19 North America Fiber Cement segment: Discontinuation of MCT $ - $ 3.6 $ - $ - $ 3.6 Discontinuation of certain ColorPlus ® color palettes - 1.8 - - 1.8 Other Businesses segment: Di
Slide 24: Segment EBIT – 4th Quarter FY19
James Hardie Q4 FY19 Results SEGMENT EBIT – 4TH QUARTER FY19 Research and Development R&D (35) (30) (29.0) • On strategy to invest ~2-3% of net sales (25.5) (27.8) (25) (20) (15) (10) (7.3) US$ US$ Millions (7.2) (7.1) (5) 0 FY17 FY18 FY19 Q4 EBIT Full Year General Corporate Costs General Corporate
Slide 25: Income Tax
James Hardie Q4 FY19 Results INCOME TAX Three Months and Full Year Ended 31 March 14.8% adjusted effective tax rate for the full year US$ Millions Q4’19 Q4’18 FY19 FY18 • Decrease in adjusted income tax expense driven by Operating profit (loss) before taxes 9.4 (103.2) 300.6 174.3 adjustments relate
Slide 26: Cash Flows
James Hardie Q4 FY19 Results CASH FLOWS 1 Decrease in net operating cash flow • Decrease in other assets and liabilities as well as income tax payable 1 • Net cash outflow due to working capital • Increase in net income adjusted for non-cash items Higher investing activities • Acquisition of Fermace
Slide 27: Capital Expenditures
James Hardie Q4 FY19 Results CAPITAL EXPENDITURES CAPEX Spend YTD CAPEX spend of US$301.1 million increased US$97.4 million compared to pcp 90 80 • North America capacity projects 70 • Continued start-up of Tacoma greenfield expansion 60 50 • Continued construction of our Prattville facility 40 • Co
Slide 28: Financial Management Framework
James Hardie Q4 FY19 Results FINANCIAL MANAGEMENT FRAMEWORK Strong Financial Management Disciplined Capital Allocation Liquidity and Funding • Strong margins and operating cash flows • Invest in R&D and capacity expansion to • Conservative leveraging of balance sheet support organic growth at a targ
Slide 29: Liquidity Profile at March 2019
James Hardie Q4 FY19 Results LIQUIDITY PROFILE AT 31 MARCH 2019 Debt Profile Strong balance sheet Millions • US$78.7 million cash • US$1,301.6 million net debt 3 • US$340.5 million available on revolving credit facility US$250 1 US$500 US $150 Corporate debt structure €400/ €400/ • US$400 million 4.
Slide 30: Asbestos Compensation Key Points
James Hardie Q4 FY19 Results ASBESTOS COMPENSATION KEY POINTS • Updated actuarial report completed as at 31 March 2019 • Undiscounted and uninflated estimate decreased to A$1,400 million from A$1,443 million • Decrease in central estimate of A$43.1 million • Decrease due to net cash outflows of A$14
Slide 31: Asbestos Claims Data
James Hardie Q4 FY19 Results ASBESTOS CLAIMS DATA Claims Received • Full year claims received were 8% below actuarial estimates 568 576 562 • Full year claims received were 1% higher, compared to pcp Claims reporting during the full year for mesothelioma: 133 144 129 • • 4% lower than actuarial esti
Slide 32: Summary
James Hardie Q4 FY19 Results SUMMARY • Good and disciplined financial performance in an inflationary market • Higher net sales in North America Fiber Cement and Asia Pacific Fiber Cement segments • Market penetration and category share gains in our Asia Pacific Fiber Cement segment • Positive first
Slide 33: Strategy Update – Dr Jack Truong, CEO
STRATEGY UPDATE – DR JACK TRUONG, CEO Contents are confidential and subject to disclosure and insider trading considerations
Slide 34: Long Term Value Creation
James Hardie Q4 FY19 Results LONG TERM VALUE CREATION North America • 35/90 with strong returns (20-25% EBIT margin) Europe • €1 billion business with 20+% EBIT margin APAC • Deliver growth above market with strong returns (20-25% EBIT margin) Page 34
Slide 35: Strategic Priorities: FY20 – FY22
James Hardie Q4 FY19 Results STRATEGIC PRIORITIES : FY20 – FY22 North America Europe Asia Pacific 1 Accelerate Exteriors Growth 1 Gain market traction 1 Continue to drive growth • current fiber cement above market • new, for Europe, fiber cement 2 Drive Lean Transformation 2 Continue to drive fiber
Slide 36: NA: Lean Transformation - Update
James Hardie Q4 FY19 Results NA : LEAN TRANSFORMATION - UPDATE • Lean transformation is off to a strong start US$100 Million • Employee Engagement is high in Cost Out Savings Over • Standards implemented across all plants Three Years FY20 – FY22 • Hardie Manufacturing Operating System (HMOS) impleme
Slide 37: NA: Accelerate Exteriors Growth - Update
James Hardie Q4 FY19 Results NA : ACCELERATE EXTERIORS GROWTH - UPDATE Win With Color Statement & Dream Collections launched Manufacturing scaling up Partnering with channel to ensure Statement stocking positions are in place Cost optimization underway Statement Collection and Dream Collection homes
Slide 38: Europe: Top Line Growth - Update
James Hardie Q4 FY19 Results EUROPE : TOP LINE GROWTH - UPDATE Sales synergy of Fiber Cement Exteriors with Fiber Gypsum Interiors Launch of Hardie Windbreaker, our first new Fiber Cement product introduction for Europe • New Zealand – original product innovation • Europe – market development • US R
Slide 39: FY20 Key Assumptions & Market Outlook
James Hardie Q4 FY19 Results FY20 KEY ASSUMPTIONS & MARKET OUTLOOK North America Europe Asia Pacific Modest growth in the US Slight housing market growth Addressable housing market housing market in FY20 across addressable market in Australia to decrease in FY20 US Residential Housing starts Introdu
Slide 40: Questions
QUESTIONS Contents are confidential and subject to disclosure and insider trading considerations
Slide 41: Appendix
APPENDIX
Slide 42: North America Fiber Cement Volume
James Hardie Q4 FY19 Results NORTH AMERICA FIBER CEMENT VOLUME 700 10% 8% 600 6% 500 4% 2% 400 % Growth 0% -2% MMSF 300 -4% 200 -6% -8% 100 -10% 0 -12% Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Interiors Exteriors Interior Growth (%Δpcp) Exterior Growth (%Δpcp) • Volume increased 3.5% and 4.7%
Slide 43: North America Fiber Cement Top Line Growth
James Hardie Q4 FY19 Results NORTH AMERICA FIBER CEMENT Top Line Growth 1 750 Average Net Sales Price 3,000 718 $1,600 698 2,500 700 2,000 $1,200 666 669 665 1,500 650 641 $800 1,000 Revenue(US$M) US$ per MSF per US$ $400 500 600 Starts Units) (000s (mmsf), Volume JH FY14 FY15 FY16 FY17 FY18 FY19 0
Slide 44: Translation Impact on Consolidated Results
James Hardie Q4 FY19 Results TRANSLATION IMPACT ON CONSOLIDATED RESULTS 0.80 0.70 AUD/USD Rate Exchange 0.60 31 Mar 17 30 Jun 17 30 Sep 17 31 Dec 17 31 Mar 18 30 Jun 18 30 Sep 18 31 Dec 18 31 Mar 19 Excluding Translation 2 As Reported Translation Impact Impact 1 % Change Q4 FY19 FY19 Q4 FY19 FY19 Q4
Slide 45: Asia Pacific Fiber Cement Results AUD vs USD
James Hardie Q4 FY19 Results ASIA PACIFIC FIBER CEMENT RESULTS AUD vs USD Three Months and Full Year Ended 31 March Q4'19 Full Year FY19 Results in Results in Impact of Results in Results in Impact of AUD USD FX AUD USD FX Averge net sales price per unit +1% -9% -10% +1% -5% -6% (per msf) Net sales
Slide 46: Europe Building Products Pro Forma
James Hardie Q4 FY19 Results EUROPE BUILDING PRODUCTS PRO FORMA 1 Q4'19 Full Year FY19 US$98.7 M US$368.3 M Net Sales 1% 1 6% 1 US$11.2 M US$39.1 M EBIT Excluding 2 15% 35% EBIT Margin Excluding 2 11.3% 10.6% Net sales decreased 1% and increased 6% for the quarter and full year, respectively, on a p
Slide 47: Financial Summary
James Hardie Q4 FY19 Results FINANCIAL SUMMARY Three Months and Full Year Ended 31 March US$ Millions Q4’19 Q4’18 % Change FY19 FY18 % Change Net Sales North America Fiber Cement$ 422.0 $ 410.1 3$ 1,676.9 $ 1,578.1 6 Asia Pacific Fiber Cement 102.3 105.1 (3) 446.8 425.4 5 Europe Building Products 98
Slide 48: Net Post-Tax Unfunded Asbestos Liability
James Hardie Q4 FY19 Results NET POST-TAX UNFUNDED ASBESTOS LIABILITY A$ millions (except where stated) FY19 FY18 Central Estimate - Undiscounted and Uninflated$ 1,399.8 $ 1,442.9 Provision for claims handling costs of AICF 28.5 30.1 Cross claims and other 35.1 33.8 Net assets of AICF (78.2) (81.9)
Slide 49: Asbestos Cash Movements for Full Year
James Hardie Q4 FY19 Results ASBESTOS CASH MOVEMENTS FOR FULL YEAR A$ millions AICF cash and investments - 31 March 2018$ 84.6 Contributions to AFFA by James Hardie 138.4 Insurance recoveries 6.6 Interest income, net 2.7 Claims paid (147.5) Operating costs (3.7) AICF cash and investments - 31 March
Slide 50: Updated Actuarial Estimate
James Hardie Q4 FY19 Results UPDATED ACTUARIAL ESTIMATE Page 50
Slide 51: Depreciation and Amortization
James Hardie Q4 FY19 Results DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Full Year Ended 31 March Q4’19 Q4’18 FY19 FY18 Depreciation and amortization North America Fiber Cement$ 21.7 $ 18.4 $ 80.2 $ 72.5 Asia Pacific Fiber Cement 3.0 3.2 12.8 12.6 Europe Building Products 4.5 - 18.7
Slide 52: Income Taxes
James Hardie Q4 FY19 Results INCOME TAXES • How ETR is calculated under US GAAP changed in FY19 • Recorded a net deferred tax asset of US$1,160.3 million arising from all previous intragroup transfers, including an internal restructuring which took place in Q4 FY18 to align certain intangible assets
Slide 53: Non-US GAAP Financial Measures and Terms
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES AND TERMS This Management Presentation forms part of a package of information about the company’s results. It should be read in conjunction with the other parts of this package, including the Management’s Analysis of Results, Media Release
Slide 54: Non-US GAAP Financial Measures
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non-US GAAP, but are consistent with those used by Australian companies. Because the company prepares its C
Slide 55: Non-US GAAP Financial Measures – Adjusted EBIT
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months and Full Year Ended 31 March Q4'19 Q4'18 FY19 FY18 EBIT $ 22.7 $ (95.8) $ 351.6 $ 229.2 Asbestos: Asbestos adjustments 73.4 192.9 22.0 156.4 AICF SG&A expenses
Slide 56: Non-US GAAP Financial Measures – Segment Adjusted EBIT
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES North America Fiber Cement Segment Adjusted EBIT excluding product line discontinuation Three Months and Full Year Ended US$ Millions 31 March Q4'19 FY19 EBIT $ 95.1 $ 382.5 Product line discontinuation - 5.4 North America Fiber Cement Segm
Slide 57: Non-US GAAP Financial Measures – Adjusted Diluted EPS
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months and Full Year Ended 31 March Q4'19 Q4'18 FY19 FY18 Adjusted net operating profit (US$ Millions) $ 73.8 $ 81.1 $ 300.5 $ 291.3 Weighted average common shares outstanding - 443.4 443.0 443.0 44
Slide 58: Non-US GAAP Financial Measures – Adjusted EBITDA
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos US$ Millions Three Months and Full Year Ended 31 March Q4'19 Q4'18 FY19 FY18 EBIT $ 22.7 $ (95.8) $ 351.6 $ 229.2 Depreciation and amortization 30.7 23.4 119.4 92.0 Adjusted EBITDA $ 53.4 $ (72.4) $ 471.0
Slide 59: Non-US GAAP Financial Measures – Adjusted ROCE
James Hardie Q4 FY19 Results NON-US GAAP FINANCIAL MEASURES Adjusted Return on Capital Employed ("Adjusted ROCE") US$ Millions Full Year Ended 31 March 1 FY19 FY18 Numerator Adjusted EBIT $ 404.6 $ 397.5 Denominator Gross capital employed (GCE) 1,492.7 1,272.0 Adjustment to GCE (77.4) (24.3) Adjuste
Slide 60: Q4 FY19 Management Presentation
Q4 FY19 MANAGEMENT PRESENTATION 21 May 2019
James Hardie Industries — Q4 FY2019 Earnings Presentation on 6ix