James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q3 FY2010 Earnings Presentation
57 slides from James Hardie Industries's earnings presentation, Feb 12, 2010
Slide 1: Q3 FY10 Management Presentation
Q3 FY10 Management Presentation 11 February 2010
Slide 2: Disclaimer
Disclaimer This Management Presentation 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 reports to shar
Slide 3: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda 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 secti
Slide 4: Operating Review
Operating Review Louis Gries, CEO
Slide 5: Group Overview
Group Overview Operating results reflect the benefits of lower input and freight costs, improved plant performance, a higher average net sales price, and lower SG&A expenses compared to FY09 The net operating result including asbestos, ASIC expenses and tax adjustments for nine months was primarily
Slide 6: 3rd Quarter Result - USA and Europe Fibre Cement
3rd Quarter Result Net Sales down 9% to US$179.1 million Sales Volume down 14% to 275.7 mmsf Average Price up 6% to US$650 per msf EBIT down 2% to US$39.6 million EBIT Margin up 1.5 pts to 22.1% USA and Europe Fibre Cement 6
Slide 7: Nine Month Result - USA and Europe Fibre Cement
Nine Month Result Net Sales down 15% to US$631.3 million Sales Volume down 19% to 989.7 mmsf Average Price up 5% to US$638 per msf EBIT up 4% to US$173.7 million EBIT Margin up 5.0 pts to 27.5% USA and Europe Fibre Cement 7
Slide 8: Average Net Selling Price - USA and Europe Fibre Cement
Average Net Selling Price US$ per MSF USA and Europe Fibre Cement US$650 8
Slide 9: USA and Europe Fibre Cement EBIT and EBIT Margin
USA and Europe Fibre Cement * Excludes impairment charges of US$45.6 million in Q4 FY08 9 EBIT and EBIT Margin* Q3
Slide 10: USA and Europe Fibre Cement Primary Growth Performance
USA and Europe Fibre Cement Primary Growth Performance Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $ expenditures less CPI Note: • US Census discontinued their R&R $ expenditures report in 2007 • After 2007 R&R = avg. published Home Depot & Lowe's same store sales less CPI 10
Slide 11: Management Restructure
11 Nigel Rigby is now responsible for the US business Mark Fisher is now responsible for research and development, engineering, manufacturing, logistics and product management, as well as the company's non-US businesses The restructure is designed to better position the company for the recovery in t
Slide 12: 3rd Quarter Result - Asia Pacific Fibre Cement
3nd Quarter Result Net Sales up 40% to US$81.9 million Sales Volume up 3% to 100.8 mmsf Average Price flat at A$897 per msf EBIT up 65% to US$17.3 million EBIT Margin up 3.2 pts to 21.1% Asia Pacific Fibre Cement 12
Slide 13: Nine Month Result - Asia Pacific Fibre Cement
Nine Month Result Net Sales down 1% to US$218.4 million Sales Volume down 3% to 292.1 mmsf Average Price up 2% to A$897 per msf EBIT up 10% to US$44.4 million EBIT Margin up 2 pts to 20.3% Asia Pacific Fibre Cement 13
Slide 14: Group 3rd Quarter Summary
USA and Europe Fibre Cement business results benefited from: Lower input costs, primarily pulp, energy and freight Higher average net sales price Improved plant performance Product mix shift and primary demand growth Asia Pacific Fibre Cement business results reflected: Appreciation of Asia Pacific
Slide 15: Total USA Housing Starts - NAHB
Total USA Housing Starts - NAHB NAHB forecast of 2010 Housing Starts has declined slightly since October's release. Source: NAHB Executive Level Forecasts - Total US Housing Starts (incl. SF, MF-low and MF-high) 15
Slide 16: Group Outlook - United States
United States The outlook for residential construction remains uncertain with recent data presenting mixed indications as to the extent and sustainability of the anticipated recovery Challenges remain, including: Restricted access to credit for prospective home owners Weak and deteriorating employme
Slide 17: Group Outlook - Australia, New Zealand, Philippines
Australia The residential housing market is expected to improve modestly during calendar 2010, supported by increases in housing approvals, robust employment numbers, high levels of immigration and heightened competition amongst mortgage lenders Some negatives have emerged, including recent rises in
Slide 18: Group Outlook
The company remains focused on: Delivering primary demand growth Increasing the rate of product mix shift Achieving its zero to landfill objective Building the operational strength and flexibility to deliver a superior performance All business segments are expected to continue to perform strongly, d
Slide 19: Financial Review
Financial Review Russell Chenu, CFO
Slide 20: Overview
Overview Results continue to be affected by weak housing construction activity, particularly in the US Earnings in the quarter benefited from lower input costs, higher average net selling prices, lower SG&A and the strength of Asia Pacific currencies, when compared to the third quarter of FY09 Stron
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 FY10 vs Q3 FY09 Unfavourable impact on corporate costs incurred in Australian dollars - Q3 FY10 vs Q3 FY09 Unfavourable impact from translation of asbestos liability balance -
Slide 22: Results - Q3
USS Millions Net sales Gross profit SG&A expenses Research & development expenses Asbestos adjustments EBIT Net interest expense Other income Income tax expense Net operating profit 96.7 (48.9) (7.2) (17.5) 25.4 (0.8) 22 (11.6) 14.9 Q3 '09 254.4 824 (1.9) (6.2) 93.6 118.9 % Change 3 17 10 (79) 2
Slide 23: Results - Q3 (continued)
d continued) @ sames Hardie USS Millions Q3"10 Q3'09 —-% Change Net operating profit 149 111.0 (87) Asbestos Asbestos adjustments 175 (93.6) 2 AICF SG&A expenses 06 05 = 20 AICF interest income (0.9) (1.6) 44 Gain on AICF investments (2.4) c - ASIC expenses. 06 5.8 (90) Tax adjustments (0.5) (4.1) 8
Slide 24: Results - Nine Months
ate} oe Results = Nine Months @ sames Hardie USS Millions 9Months 9 Months FY10 FY09 % Change Net sales 849.7 9613 © (12) Gross profit 324.7 319.6 2 SG&A expenses (137.3) (161.7) 15 Research & development expenses (20.2) (17.8) (13) Asbestos adjustments (200.0) 193.9 = EBIT 2.8) 334.0 : Net interest
Slide 25: Results - Nine Months (continued)
Results - Nine Months (continued) 25
Slide 26: Segment Net Sales - Q3
Segment Net Sales - Q3 26 US$ Millions Q3 '10 Q3 '09 % Change USA and Europe Fibre Cement 179.1 195.9 (9) Asia Pacific Fibre Cement 81.9 58.5 40 Total 261.0 254.4 3
Slide 27: Segment Net Sales - Nine Months
Segment Net Sales - Nine Months 27 US$ Millions 9 Months FY10 9 Months FY09 % Change USA and Europe Fibre Cement 631.3 740.6 (15) Asia Pacific Fibre Cement 218.4 220.7 (1) Total 849.7 961.3 (12)
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
US$ Millions Operating profit before income taxes Asbestos: Asbestos adjustments AICF SG&A expenses. AICF interest income Gain on AICF investments Operating profit before income taxes excluding asbestos Income tax expense Tax adjustments Income tax expense excluding tax adjustments Effective tax rat
Slide 31: Income Tax Expense - Nine Months
Income Tax Expense - Nine Months 31
Slide 32: General Corporate Costs - Q3
General Corporate Costs - Q3 32 US$ Millions % Change Stock compensation expense 1.6 1.6 - - Legal provision write back (7.6) - - - Other costs 11.8 10.7 (10) General corporate costs excluding ASIC and domicile change related costs 5.8 12.3 53 ASIC expenses 0.6 5.8 90 Domicile change related costs 1
Slide 33: General Corporate Costs - Nine Months
General Corporate Costs - Nine Months 33 US$ Millions % Change Stock compensation expense 5.6 5.2 (8) Legal provision write back (7.6) - - - Other costs 26.4 31.2 15 General corporate costs excluding ASIC and domicile change related costs 24.4 36.4 33 ASIC expenses 1.6 12.3 87 Domicile change relate
Slide 34: EBITDA - Q3
USS Millions EBIT USA and Europe Fibre Cement Asia Pacific Fibre Cement Research & development General corporate excluding asbestos and ASIC expenses Depreciation and Amortisation USA and Europe Fibre Cement Asia Pacific Fibre Cement Total EBITDA excluding asbestos and ASIC expenses Asbestos adjustm
Slide 35: EBITDA - Nine Months
9Months 9 Months USS Miions, Frio Fyog "Change | EBIT USA and Europe Fibre Cement 173.7 167.0 4 Asia Pacific Fibre Cement 444 40.4 10 Research & development (14.9) (14.7) (1) General corporate excluding asbestos and ASIC expenses (32.8) (38.9) 16 Depreciation and Amortisation - USA and Europe Fibre
Slide 36: Cash Flow
Cash Flow 36 US$ Millions 9 Months FY10 9 Months FY09 % Change EBIT (32.8) 334.0 - Non-cash items: Asbestos adjustments 200.0 (193.9) - Other non-cash items 96.5 20.9 - Change in restricted cash - asbestos 14.6 60.4 (76) Change in restricted short-term investment - asbestos 42.6 (4.5) - Net working
Slide 37: Capital Expenditure
Cane ssi ure 9Months 9 Months USS Millions FY10 FY09 __% Change USA and Europe Fibre Cement 29.5 13.2 123 Asia Pacific Fibre Cement 5.7 36 58 Total 35.2 16.8 110 37
Slide 38: Debt
Debt Net debt decreased US$140.8 million compared to net debt at 31 March 2009 In December 2009, the company refinanced US$130 million of US$150 million in facilities which previously had maturity dates in or prior to June 2010. These expire December 2012 Weighted average remaining term of total fac
Slide 39: Asbestos Fund Update
AICF holdings at 31 December 2009 A$78.5m - cash and short-term investments (A$105.6m at 31 December 2008) Net claims paid nine months FY10: * Updated actuarial estimate as at 31 March 2009 Asbestos Fund Update 39
Slide 40: Legacy Issues Update
Legacy Issues Update Asbestos On 7 November 2009, the Australian and NSW Governments announced an A$320m standby loan facility for Asbestos Injuries Compensation Fund ATO - 1999 Disputed Amended Assessment Federal Court hearing completed September 2009 Judgement expected early to mid 2010 ATO deposi
Slide 41: Legacy Issues Update - continued
Legacy Issues Update - continued Domicile Stage one of the two stage proposal to move domicile to Ireland approved by 99.3% of votes cast on 21 August 2009 Last outstanding item before completion of Stage 1 was an EU law requirement to negotiate with EU employees. These negotiations concluded in Feb
Slide 42: Key Ratios
Key Ratios 1 Excludes asbestos adjustments, AICF SG&A expenses, AICF interest income, gain on AICF investments, ASIC expenses and tax adjustments 2 Excludes asbestos adjustments, AICF SG&A expenses and ASIC expenses 3 Excludes payments under the Amended FFA 42 9 Months FY10 FY09 FY08 EPS (Diluted)1
Slide 43: Summary
USA and Europe Fibre Cement nine month EBIT improved 4% driven by improved plant performance, lower input costs, higher average net sales price and lower SG&A spending Asia Pacific Fibre Cement nine month EBIT, in Australian dollars, increased 9% due to improved gross margin performance and lower SG
Slide 44: Questions & Answers
Questions & Answers 44
Slide 45: Appendix
Appendix
Slide 46: Global Strategy
Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors Introduce differentiated products to deliver a sustainable competitive advantage
Slide 47: USA Fibre Cement
USA Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau JH Volume (mmsf), Starts (000s Units) Revenue (US$M) 47
Slide 48: Net Interest Expense
@ sames Hardie USS Millions. Gross interest expense Capitalised interest Interest income Net interest expense excluding AICF interest income and interest rate swaps AICF interest income Realised loss on interest rate swaps Net interest expense 9Months 9 Months 0310 a3 '09 FY10 FYO9 (1.7) (2.4) (3.7)
Slide 49: Endnotes and Definitions
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 Management's Analysis of Results, a Media Release and a Financial Report. Definitions Financial Measures - US GAA
Slide 50: 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 51: 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 52: 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 53: 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 54: 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 55: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) 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 liquidity. N
Slide 56: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) General corporate costs excluding ASIC and domicile change related costs - General corporate costs excluding ASIC and domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be more meaningful th
Slide 57: Q3 FY10 Management Presentation
Q3 FY10 Management Presentation 11 February 2010
James Hardie Industries — Q3 FY2010 Earnings Presentation on 6ix