James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Q3 FY2004 Earnings Presentation
49 slides from James Hardie Industries's earnings presentation, Feb 17, 2004
Slide 1: FY04 3rd Quarter Results
FY04 3rd Quarter Results 12 February 2004 Unless otherwise stated, results are for continuing operations only and comparisons are of the 3rd quarter of the current fiscal year versus the 3rd quarter of the prior fiscal year.
Slide 2: Agenda
Overview - Peter Macdonald, CEO Financial Review - Phillip Morley, CFO Operating Review - Peter Macdonald, CEO Questions and Answers Agenda
Slide 3: Strong Performance 3rd Quarter and Year to Date
* Includes discontinued operations and profit on sale of Gypsum land in YTD'03 Strong Performance 3rd Quarter and Year to Date Q3'04 % YTD'04 % Net Sales up 23 up 24 Gross Profit up 22 up 26 EBIT2 up 36 up 36 Operating Profit5 up 89 up 56 Net Operating Profit*,6 up 94 down (16)
Slide 4: Highlights 3rd Quarter
Highlights 3rd Quarter USA Fibre Cement EBIT2 up 31% (a) Australia and New Zealand Fibre Cement EBIT2 up 43% - - up 12% in A$ Philippines - small profit Chile - small profit (a) Before a US$3.8 million rebate add-back included in prior year revenue
Slide 5: Management Change
Management Change CFO Phillip Morley will retire as planned in May 2004 Peter Shafron, SVP Finance and Legal appointed CFO, effective May 2004
Slide 6: Financial Review
Financial Review Phillip Morley, CFO
Slide 7: Results - Q3
US$ Million Q3 '04 Q3 '03 % Change Net Sales 237.5 192.6 23 Gross Profit 87.5 71.6 22 SG&A (40.6) (37.6) 8 Research & Development (5.7) (4.8) 19 Restructure & Other Operating Expenses - 1.0 (100) EBIT2 41.2 30.2 36 Net Interest Expense (2.8) (12.4) (77) Other Expense, Net (0.1) - - Income Tax Expens
Slide 8: Results - Year To Date
Results - Year To Date US$ Million YTD '04 YTD '03 % Change Net Sales 730.6 589.3 24 Gross Profit 269.2 213.7 26 SG&A (115.7) (101.2) 14 Research & Development (16.1) (12.6) 28 Restructuring and Other Operating Expenses - 1.0 - EBIT2 137.4 100.9 36 Net Interest Expense (7.5) (17.8) (58) Other (Expen
Slide 9: Segment Net Sales - Q3
Segment Net Sales - Q3 US$ Million Q3 '04 Q3 '03 % Change USA Fibre Cement 175.3 146.3 20(a) Asia Pacific Fibre Cement 55.9 44.4 26 Other Fibre Cement 6.3 1.9 232 Total 237.5 192.6 23 (a) USA Fibre Cement net sales increased 23% excluding a US$3.8 million rebate add-back in prior year revenue.
Slide 10: Segment Net Sales - Year To Date
Segment Net Sales - Year To Date US$ Million YTD '04 YTD '03 % Change USA Fibre Cement 553.5 453.5 22 Asia Pacific Fibre Cement 160.8 130.0 24 Other Fibre Cement 16.3 5.8 181 Total 730.6 589.3 24
Slide 11: Segment EBIT - Q3
Segment EBIT2 - Q3 US$ Million Q3 '04 Q3'03 % Change USA Fibre Cement 44.6 37.8 18 Asia Pacific Fibre Cement 11.3 7.3 55 Other Fibre Cement (3.8) (3.1) (23) R & D (4.6) (3.5) (31) Total Segment EBIT 47.5 38.5 23 Corporate Costs (6.3) (8.3) (24) Total EBIT 41.2 30.2 36 Note: R&D includes "core" R&D e
Slide 12: Segment EBIT - Year To Date
Segment EBIT2 - Year To Date US$ Million YTD '04 YTD'03 % Change USA Fibre Cement 152.4 117.3 30 Asia Pacific Fibre Cement 29.3 22.9 28 Other Fibre Cement (11.8) (8.2) (44) R & D (12.0) (8.9) (35) Total Segment EBIT 157.9 123.1 28 Corporate Costs (20.5) (22.2) (8) Total EBIT 137.4 100.9 36 Note: R&D
Slide 13: Corporate Costs
Corporate Costs US$ Million Q3'04 Q3'03 YTD'04 YTD'03 Economic Profit Compensation Expense 0.6 1.6 1.9 4.4 Fixed Stock Option Expense 0.8 0.8 1.9 1.1 Employee Share Plan and Other Variables 0.6 0.2 2.7 1.8 Corporate Costs 4.3 5.8 14.0 15.0 Total 6.3 8.4 20.5 22.3
Slide 14: Net Interest Expense
Net Interest Expense US$ Million Q3'04 Q3'03 % Change Net Interest Expense (2.8) (12.4) (a) (77) YTD'04 YTD'03 % Change Net Interest Expense (7.5) (17.8) (a) (58) (a) Includes US$9.9 million long-term debt prepayment penalty
Slide 15: Income Tax Expense
Income Tax Expense US$ Million Q3'04 Q3'03 % Change Income Tax Expense (10.0) (2.8) (257) Rate 26.1% 15.7% YTD'04 YTD'03 % Change Income Tax Expense (32.5) (22.8) 43 Rate 25.7% 27.4%
Slide 16: EBITDA - Q3
EBITDA3 - Q3 Q3'04 Q3'03 % Change EBIT2 USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R & D Corporate 44.6 11.3 (3.8) (4.6) (6.3) 37.8 7.3 (3.0) (3.5) (8.3) 18 55 (27) (31) 24 Depreciation and Amortisation USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement 7.1 2.5 0.4 4.5
Slide 17: EBITDA - Year To Date
EBITDA3 - Year To Date YTD'04 YTD'03 % Change EBIT2 USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R & D Corporate 152.4 29.3 (11.8) (12.0) (20.5) 117.3 22.9 (8.2) (8.9) (22.2) 30 28 (44) (35) (8) Depreciation and Amortisation USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cem
Slide 18: Capital Expenditure - Year To Date
Capital Expenditure - Year To Date Capital Expenditure Capital Expenditure Depreciation Depreciation US$ Million YTD '04 YTD '03 YTD '04 YTD '03 USA Fibre Cement 41.8 53.3 17.8 13.6 Asia Pacific Fibre Cement 6.3 6.1 7.1 6.0 Other Segments 8.4 0.8 0.8 1.3 Total Segments 56.5 60.2 25.7 20.9 Note: Capi
Slide 19: Key Ratios
Key Ratios YTD '04 FY '03 FY '02 EPS (Basic) 21.0c 18.7c 6.4c Return on Shareholders Funds* 28.7% 42.3% 8.9% Return on Capital Employed* 26.2% 21.2% 8.6% EBIT2/Sales 18.8% 16.4% 8.0% Gearing 22.9% 21.4% 44.7% Net Interest Cover 18.3x 6.6x 3.0x *Annualised
Slide 20: Operating Review
Operating Review Peter Macdonald, CEO
Slide 21: USA Fibre Cement
USA Fibre Cement
Slide 22: USA Fibre Cement: Strong 3rd Quarter Result
Strong 3rd Quarter Result Net Sales(a) up 23% to US$175.3 million Sales Volume up 20% to 358.3 mmsf Average Price (a) up 2% to US$489 per msf EBIT2 (a) up 31% to US$44.6 million EBIT Margin2 up 2.2 pts to 25.4% USA Fibre Cement (a) Excludes a US$3.8 million rebate add-back in prior year revenue.
Slide 23: USA Fibre Cement 3rd Quarter Trading Conditions
USA Fibre Cement 3rd Quarter Trading Conditions Housing construction activity remained solid Low interest rates Strong house prices Low housing inventory levels Recovering domestic economy Consumer confidence Strong repair and remodel activity
Slide 24: USA Fibre Cement Key Points
USA Fibre Cement Key Points Continued strong demand for fibre cement Strong growth in emerging and established markets Further penetration of external and interior product markets Growth in sales of higher-priced differentiated products Increased investment in infrastructure to support future growth
Slide 25: USA Fibre Cement Revenue Growth Outstripping Volume Growth
USA Fibre Cement Revenue Growth Continuing to Outstrip Volume Growth 0 200 400 600 800 1000 1200 1400 1600 1800 90 91 92 93 94 95 96 97 98 99 00 01 02 03 VOLUME (MMSF) and Starts (ooo's units) 0 125 250 375 500 625 750 REVENUE (US$M) Volume Revenue Housing Starts
Slide 26: USA Fibre Cement Average Selling Price
USA Fibre Cement Average Selling Price US$ per MSF
Slide 27: USA Fibre Cement EBIT and EBIT Margin
USA Fibre Cement *Excludes restructuring and other operating expenses 0 10 20 30 40 50 60 FY99 FY00 FY01 FY02 FY03 YTD FY04 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales EBIT and EBIT Margin*,4
Slide 28: USA Fibre Cement Strategy
USA Fibre Cement Strategy Aggressively grow market for fibre cement Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors, introducing differentiated products to reduce direct price competition
Slide 29: USA Fibre Cement Outlook
USA Fibre Cement Outlook Continued strong demand for fibre cement Housing construction to remain buoyant over short to medium term Low interest rates, house prices strong, recovering domestic economy, Approvals strong, low inventories, large order backlogs Continued investment in market development
Slide 30: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement
Slide 31: Asia Pacific Fibre Cement 3rd Quarter Result
Asia Pacific Fibre Cement 3rd Quarter Result Net Sales up 26% to US$55.9 million Sales Volume up 5% to 98.3 million EBIT2 up 55% to US$11.3 million EBIT Margin2 up 3.8 pts to 20.2%
Slide 32: Asia Pacific Fibre Cement Strategy
Strategy Grow primary demand for fibre cement Vigorously protect and grow category share in existing market segments Leverage our superior technology to offer differentiated products and systems with superior value to those of competitors Ongoing manufacturing improvements to further lower cost of p
Slide 33: Australia and New Zealand - Key Points
Australia and New Zealand - Key Points Significant positive exchange rate impact Australian new housing and commercial segments weaker - renovations buoyant New Zealand housing healthy Net sales up 26%, but down 1% in A$ Volumes up 1% - stronger domestic demand - weaker exports Average selling price
Slide 34: Australia and New Zealand - Outlook
Asia Pacific Fibre Cement Australia and New Zealand - Outlook Positive exchange rate impacts may not continue Softer new housing in Australia, renovations to remain buoyant New housing and renovations in New Zealand to remain healthy Share gains for differentiated products More manufacturing costs s
Slide 35: Philippines - Key Points
Asia Pacific Fibre Cement Philippines - Key Points Net sales up 27% in local currency Sales volume up 26% Stronger export sales Average price up slightly due to sales mix Another operating profit
Slide 36: Philippines - Outlook
Asia Pacific Fibre Cement Philippines - Outlook Increased building and construction activity Stronger demand for fibre cement Further share gains against plywood Stronger export sales
Slide 37: Chile Fibre Cement - Key Points
Other Fibre Cement Chile Fibre Cement - Key Points Net sales up 282% in local currency Improved domestic construction activity Further penetration of domestic market Growth in sales of higher-priced, differentiated products Increased export sales Higher average selling prices
Slide 38: Chile Fibre Cement - Outlook
Other Fibre Cement Chile Fibre Cement - Outlook Stronger domestic construction activity Further market penetration and share growth Increased domestic sales of higher-priced, differentiated products Domestic competition to remain intense
Slide 39: USA Hardie Pipe - Key Points
Other Fibre Cement USA Hardie(r) Pipe - Key Points Increased penetration of SE market lifted sales 82% Lower costs and improved manufacturing performance - but costs still above target Higher average prices, but still low due to competition
Slide 40: USA Hardie Pipe - Outlook
Other Fibre Cement USA Hardie(r) Pipe - Outlook Continued market penetration and share growth Further manufacturing improvements and cost savings Competitive pressure remains intense - Florida prices still well below national averages
Slide 41: Europe
Europe Continued to build awareness and sales among distributors, builders and contractors More distribution outlets added - UK / France Rate of penetration in line with expectations
Slide 42: Artisan Roofing
Artisan Roofing Production trials and commissioning work continuing First commercial sales of new shake product Strong interest from targeted market
Slide 43: Research and Development
Research and Development Key driver of growth Core projects engineered raw materials product formulations engineering and process technologies lightweight and durable products for all climates Sustainable competitive advantage continuing to be built
Slide 44: Foundation Update
Foundation Update No change to our stated position Further activity by others can't be ruled out legal options government / unions / media
Slide 45: Outlook
Outlook Growth momentum continuing into 4th quarter No threat to satisfactory full year result Continued strong cash flow
Slide 46: Disclaimer
Disclaimer This presentation contains forward-looking statements. Words such as "believe,'' "anticipate,'' "plan,'' "expect,'' "intend,'' "target,'' "estimate,'' "project,'' "predict,'' "forecast,'' "guideline,'' "should,'' "aim'' and similar expressions are intended to identify forward-looking stat
Slide 47: Notes
Notes 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 Discussion and Analysis (MD&A), a Media Release, a Financial Report and Results at a Glance document. E
Slide 48: Notes cont...
Notes cont... 3. EBITDA is not a measure of financial performance under US GAAP and should not be considered as 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 our profitability or liquidity. All companies do not c
Slide 49: FY04 3rd Quarter Results
FY04 3rd Quarter Results 12 February 2004 Unless otherwise stated, results are for continuing operations only and comparisons are of the 3rd quarter of the current fiscal year versus the 3rd quarter of the prior fiscal year. James Hardie Industries N.V. and Subsidiaries Financial Report 31 December
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