James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q4 FY2010 Earnings Presentation
60 slides from James Hardie Industries's earnings presentation, May 28, 2010
Slide 1: Q4 FY10 Management Presentation
Q4 FY10 Management Presentation 27 May 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 Full year operating results reflect the benefits of lower input costs, lower warranty costs, reduced SG&A expenses and a higher average net sales price, compared to FY09 The net operating result including asbestos, ASIC expenses and tax adjustments for the full year was primarily affe
Slide 6: USA and Europe Fibre Cement 4th Quarter Result
4th Quarter Result Net Sales up 4% to US$196.8 million Sales Volume up 2% to 314.0 mmsf Average Price up 2% to US$627 per msf EBIT up 8% to US$34.8 million EBIT Margin up 0.6 pts to 17.7% USA and Europe Fibre Cement 6
Slide 7: USA and Europe Fibre Cement Full Year Result
Full Year Result Net Sales down 11% to US$828.1 million Sales Volume down 15% to 1,303.7 mmsf Average Price up 4% to US$635 per msf EBIT up 5% to US$208.5 million EBIT Margin up 3.8 pts to 25.2% USA and Europe Fibre Cement 7
Slide 8: Average Net Sales Price
Average Net Sales Price US$ per MSF USA and Europe Fibre Cement US$635 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* FY04 FY05 FY06 FY07 FY08 FY09 FY10
Slide 10: USA and Europe Fibre Cement Primary Growth Performance
USA and Europe Fibre Cement Primary Growth Performance All market and market share figures are management estimates. 10
Slide 11: Asia Pacific Fibre Cement 4th Quarter Result
4th Quarter Result Net Sales up 49% to US$78.1 million Sales Volume up 9% to 97.5 mmsf Average Price flat at A$887 per msf EBIT up 113% to US$14.3 million EBIT Margin up 5.6 pts to 18.3% Asia Pacific Fibre Cement 11
Slide 12: Asia Pacific Fibre Cement Full Year Result
Full Year Result Net Sales up 9% to US$296.5 million Sales Volume flat at 389.6 mmsf Average Price up 2% to A$894 per msf EBIT up 25% to US$58.7 million EBIT Margin up 2.6 pts to 19.8% Asia Pacific Fibre Cement 12
Slide 13: Group 4th Quarter Summary
USA and Europe Fibre Cement business results* reflected: Higher volume Higher average net sales price Improved plant performance Higher raw material input costs, primarily pulp Asia Pacific Fibre Cement business results reflected: Benefit from appreciation of Asia Pacific currencies against US dolla
Slide 14: US housing starts indicating emerging signs of recovery
14 US housing starts data indicating emerging signs of a recovery Total USA Housing Starts - US Census Bureau
Slide 15: Group Outlook - United States
United States Forecasts for residential construction market are becoming cautiously optimistic, although the outlook remains uncertain with recent data presenting mixed indications as to extent and sustainability of anticipated recovery Hopes for an accelerated recovery have been tempered by continu
Slide 16: Group Outlook - Australia, New Zealand, Philippines
Australia The residential housing market is expected to modestly improve during calendar 2010, supported by increases in housing approvals, robust employment numbers and high levels of immigration Some negatives remain, including recent rises in the cash rate and removal of the Government's first ho
Slide 17: Group Outlook
The company remains focused on: Delivering primary demand growth Continuing to shift to a higher value product mix Achieving its zero to landfill objective Building the operational strength and flexibility to deliver and sustain earnings in a low demand environment or increase output should a strong
Slide 18: Financial Review
Financial Review Russell Chenu, CFO
Slide 19: Overview
Overview Operations Results continue to be affected by weak housing construction activity, particularly in US Earnings in the quarter benefited from higher volume, higher average net sales price, improved plant performance and the strength of Asia Pacific currencies, when compared to the fourth quar
Slide 20: Consequences of changes - A$ versus US$
Consequences of changes - A$ versus US$ A$/US$ Exchange Rate Favourable impact from translation of Asia Pacific results - Q4 FY10 vs Q4 FY09 Unfavourable impact on corporate costs incurred in Australian dollars - Q4 FY10 vs Q4 FY09 Unfavourable impact from translation of asbestos liability balance -
Slide 21: Results - Q4
USS Millions Net sales Gross profit SG&A expenses Research & development expenses Asbestos adjustments EBIT Net interest expense Other income (expense) Income tax (expense) benefit Net operating loss a4'10 2749 914 (48.5) (69) (24.2) 118 (2.1) 03 (12.3) (2.3) Q4'09 241.3 692 (47.4) (6.0) (176.5) (16
Slide 22: Net operating profit excluding asbestos, ASIC and tax adjustments
USS Millions 410 a4 09 % Change Net operating loss (2.3) (129.6) 98 Asbestos: Asbestos adjustments 24.2 176.5 (86) AICF SG&A expenses 05 (0.7) - AICF interest income (0.7) (1.6) 56 (Gain) impairment on AICF investments (2.0) 14.8 - te crperse (benefit) related to asbestos ce) 48.7 7 ASIC expenses 18
Slide 23: Results - Full Year
t Results @ sames Hardie Net sales Gross profit ‘SG&A expenses Research & development expenses Asbestos adjustments EBIT Net interest expense Other income (expense) Income tax expense Net operating (loss) profit FY2010 _-FY2009 _% Chan: 1,124.6 1,202.6 6) 416.1 388.8 7 (185.8) (208.8) W (27.1) (23.8
Slide 24: Results - Full Year (continued)
Results - Full Year (continued) 24
Slide 25: Segment Net Sales - Q4
@ ames Hardie USS Millions Q4°10 Q4°09_ % Change USA and Europe Fibre Cement 196.8 188.7 4 Asia Pacific Fibre Cement 78.1 52.6 49 Total 274.9 241.3 14 25
Slide 26: Segment Net Sales - Full Year
Segment Net Sales - Full Year 26
Slide 27: Segment EBIT - Q4
1 Research & development includes "core" research & development expenses and administrative expenses, but excludes product development expenses Segment EBIT - Q4 27
Slide 28: Segment EBIT - Full Year
1 Research & development includes "core" research & development expenses and administrative expenses, but excludes product development expenses Segment EBIT - Full Year 28
Slide 29: Income Tax Expense - Q4
nome e Tax Expense — Q4 US$ Millions Operating profit (oss) before income taxes Asbestos: Asbestos adjustments AICF SG&A expenses AICF interest income (Gain) impairment on AICF investments Operating profit before income taxes excluding asbestos Income tax (expense) benefit Asbestos: Tax expense (ben
Slide 30: Income Tax Expense - Full Year
Income Tax Expense - Full Year 30
Slide 31: Cash Flow
USS Millions EBIT Non-cash items: Asbestos adjustments Other non-cash items. Net working capital movements Cash generated by trading activities Tax payments Change in asbestos-related assets & liabilities, Payment to the AICF ATO Settlement Deposit with ATO Interest paid (net) Net Operating Cash Flo
Slide 32: Debt
Debt Net debt decreased by US$146.8 million compared to net debt at 31 March 2009 In December 2009, the company refinanced US$130 m of US$150 m in facilities which previously had maturity dates in or prior to June 2010. These will expire December 2012 Weighted average remaining term of total facilit
Slide 33: Asbestos Compensation Funding Arrangements
Updated actuarial report completed as at 31 March 2010 Discounted central estimate decreased to A$1.537b from A$1.782b As per AFFA, a contribution of approximately US$63.7m will be made to the AICF in July 2010 Asbestos Compensation Funding Arrangements 33
Slide 34: Net accounting liability under AFFA
34 Net accounting liability under AFFA A$ millions (except where stated) 31-Mar-10 31-Mar-09 Central Estimate - Discounted 1,536.7 1,781.6 Discounting and inflation allowance (94.1) (257.3) Provision for claims handling costs of AICF 69.9 72.0 Other US GAAP adjustments 35.2 37.7 Net (assets) liabili
Slide 35: Updated Actuarial Estimate
35 * Source: KPMG Actuaries Updated Actuarial Estimate
Slide 36: Asbestos Fund Update
AICF holdings at 31 March 2010 A$63.1m - cash and short-term investments (A$143.1m at 31 March 2009) Net claims paid full year FY 2010: * Actuarial Estimate as at 31 March 2009 Asbestos Fund Update 36
Slide 37: Asbestos Fund Update - Number of claims
Asbestos Fund Update 37 Number of claims* * Source: KPMG Actuaries
Slide 38: 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. James Hardie is continuing to work with the NSW Government to finalise the details of the facility. ATO - 1999 Disputed Amended Asse
Slide 39: 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 In conjunction with Stage 1 of the proposal and following a review by the Dutch Tax Authority, the company incurred a US$41.2 million tax liabil
Slide 40: Key Ratios
Key Ratios 1 Excludes asbestos adjustments, AICF SG&A expenses, AICF interest income, gain or impairment on AICF investments, ASIC expenses, tax adjustments and asset impairments 2 Excludes asbestos adjustments, AICF SG&A expenses, ASIC expenses and asset impairments 3 Excludes payments under the Am
Slide 41: Summary
USA and Europe Fibre Cement full year EBIT improved 5% driven by lower material input costs, higher average net sales price and improved plant performance Asia Pacific Fibre Cement full year EBIT, in Australian dollars, increased 14% due to improved gross margin performance, lower SG&A expenses, str
Slide 42: Questions & Answers
Questions & Answers 42
Slide 43: Appendix
Appendix
Slide 44: 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 45: General Corporate Costs - Q4
General Corporate Costs - Q4 45
Slide 46: General Corporate Costs - Full Year
General Corporate Costs - Full Year 46
Slide 47: EBITDA - Q4
EBITDA Od 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 Asbest
Slide 48: EBITDA - Full Year
uss 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 adjustments AICF
Slide 49: Capital Expenditure
x a Ain e| & Capital Expenditure @ sames Hardie USS Millons FY 2010 FY.2009__% Change USA and Europe Fibre Cement 42.3 212 100 General Corporate 15 5 5 Asia Pacific Fibre Cement 67 4937 Total 50.5 2.1 93
Slide 50: Net Interest Expense
@ sames Hardie USS Millions Gross interest expense Capitalised interest Interest income Realised loss on interest rate swaps Net interest expense excluding AICF interest income AICF interest income Net interest expense Qa "10 409 FY2010___ FY 2009 (17) (3.9) (64) (11.2) o4 - 02 - o4 12 04 18 (1.3) B
Slide 51: USA Fibre Cement housing starts and volume
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) 51
Slide 52: 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 53: 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 54: 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 55: 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 56: 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 57: 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 58: 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 59: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) General corporate costs excluding ASIC expenses and domicile change related costs - General corporate costs excluding ASIC expenses and domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be
Slide 60: Q4 FY10 Management Presentation
Q4 FY10 Management Presentation 27 May 2010
James Hardie Industries — Q4 FY2010 Earnings Presentation on 6ix