James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q1 FY2010 Earnings Presentation
46 slides from James Hardie Industries's earnings presentation, Aug 19, 2009
Slide 1: Q1 FY10 Results
18 August 2009 Q1 FY10 Results
Slide 2: Disclaimer
2 Disclaimer This Management Presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders
Slide 3: Agenda
3 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 sec
Slide 4: Overview
4 Overview Operating results continue to reflect weakness in the US housing construction activity and general economic conditions Net operating profit for the quarter primarily affected by unfavourable asbestos adjustments US$ Millions Q1 FY10 Q1 FY09 % Change Net operating (loss) profit (77.9) 1.4
Slide 5: Operating Review
Louis Gries Operating Review
Slide 6: Global Strategy
6 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 reduce direct price competition Global Str
Slide 7: USA Fibre Cement: 1st Quarter Result
7 1st Quarter Result * Net Sales down 21% to US$219.1 million Sales Volume down 24% to 353.7 mmsf Average Price up 4% to US$619 per msf EBIT up 5% to US$68.6 million EBIT Margin up 7.4 pts to 31.3% USA Fibre Cement *Comparison is of the 1st quarter of the current fiscal year versus the 1st quarter o
Slide 8: 1st Quarter Market Conditions
8 1st Quarter Market Conditions Ongoing weakness in the US housing market - both new construction and repair and remodel June 2009 housing starts were 582,000* down 46% from the June 2008 rate Housing starts are 26% of their January 2006 peak of 2.265 million Housing starts appear to be "nearing the
Slide 9: USA Fibre Cement: 1st Quarter Key Points
9 1st Quarter Key Points Sales down due to weaker market Sales volumes were lower across all regions ColorPlus(r) again increased as a percentage of our product mix Earnings benefitted from lower costs, particularly for pulp, energy and freight Lower SG&A costs, higher average selling price and lowe
Slide 10: Total Housing Starts - NAHB
10 Total Housing Starts - NAHB NAHB latest forecast of 2009 Housing Starts is 561k (including MF-high) Source: NAHB Executive Level Forecasts - Total US Housing Starts (incl. SF, MF-low and MF-high) May 2009 estimate Jul 2009 estimate
Slide 11: Outlook
11 Outlook While the US residential construction market appears to be "nearing the bottom", it remains too early to ascertain the timing, rate or extent of any recovery The market is facing continuing challenges, including: excess supply of existing housing stock; restricted access to credit for pot
Slide 12: USA Fibre Cement: Top Line Growth
12 USA Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau Top Line Growth '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 Q1FY10 Volume (mmsf) / Starts (000s Units) $0 Revenue (US$M) JH Volume JH Revenue Housing Sta
Slide 13: USA Fibre Cement: Primary Growth Performance
13 USA 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 • 2008 R&R = avg. published Home Depot & Lowe's same store sales less CPI
Slide 14: Average Net Selling Price
14 Average Net Selling Price US$ per MSF USA Fibre Cement 380 420 460 500 540 580 620 FY04 FY05 FY06 FY07 FY08 FY09 Q1 FY10 US$625
Slide 15: EBIT and EBIT Margin
15 USA Fibre Cement 0 20 40 60 80 100 120 140 FY04 Q1 FY05 Q1 FY06 Q1 FY07 Q1 FY08 Q1 FY09 Q1 FY10 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales EBIT and EBIT Margin* * Excludes impairment charges of US$45.6 million in Q4 FY08
Slide 16: Asia Pacific Fibre Cement: 1st Quarter Result
16 1st Quarter Result * Net Sales down 26% to US$61.3 million Sales Volume down 13% to 88.9 mmsf Average Price up 5% to A$909 per msf EBIT down 31% to US$10.9 million EBIT Margin down 1.2 pts to 17.8% Asia Pacific Fibre Cement *Comparison is of the 1st quarter of the current fiscal year versus the 1
Slide 17: Asia Pacific: 1st Quarter Key Points
17 1st Quarter Key Points Business performed well in a difficult operating environment In Australian dollars, Asia Pacific net sales down 8% due to 13% decrease in sales volume, partially offset by a 5% increase in average net sales price In Australian dollars, Asia Pacific Fibre Cement EBIT for the
Slide 18: Outlook
18 Outlook Market forecasts are for further declines in Australian addressable housing starts New Zealand residential construction to remain at current historic low levels Continued growth in sales of differentiated products in New Zealand and Australia Asia Pacific Fibre Cement
Slide 19: Financial Review
Russell Chenu Financial Review
Slide 20: Overview
20 Overview Results continue to be affected by weak housing construction activity in all markets Net operating profit affected by asbestos, ASIC expenses and tax adjustments Significant decreases in SG&A spending Significant depreciation of A$ : US$ exchange rate affecting results
Slide 21: Consequences of changes A$ versus US$
Consequences of changes A$ versus US$ Unfavourable impact from translation of Asia Pacific results - Q1 FY10 s Q1 FY09 Favourable impact on corporate costs incurred in Australian dollars (and euro) - Q1 FY10 vs Q1 FY09 Unfavourable impact from translation of asbestos liability balance - 30 June 2009
Slide 22: Results - Q1
22 Results - Q1 US$ Millions Q1'10 Q1'09 % Change Net sales 284.5 365.0 (22) Gross profit 110.4 124.0 (11) SG&A expenses (41.4) (54.2) 24 Research & development expenses (6.3) (6.4) 2 Asbestos adjustments (119.8) (40.5) - EBIT (57.1) 22.9 - Net interest expense (0.7) (1.1) 36 Other income 4.8 - - In
Slide 23: Results - Q1 (continued)
23 Results - Q1 (continued) US$ Millions Q1'10 Q1'09 % Change Net operating (loss) profit (77.9) 1.4 - Asbestos: Asbestos adjustments 119.8 40.5 - AICF SG&A expenses 0.5 0.6 (17) AICF interest income (0.7) (0.9) 22 Gain on AICF investments (0.4) - - ASIC expenses 0.6 1.5 (60) Tax adjustments (0.3) (
Slide 24: Segment Net Sales - Q1
24 US$ Millions Q1'10 Q1'09 % Change USA and Europe Fibre Cement 223.2 281.7 (21) Asia Pacific Fibre Cement 61.3 83.3 (26) Total 284.5 365.0 (22) Segment Net Sales - Q1
Slide 25: Segment EBIT - Q1
25 US$ Millions Q1'10 Q1'09 % Change USA and Europe Fibre Cement 68.8 65.6 5 Asia Pacific Fibre Cement 10.9 15.8 (31) Research & development1 (4.0) (5.0) 20 Total segment EBIT 75.7 76.4 (1) General Corporate excluding ASIC expenses (11.9) (10.9) (9) Total EBIT excluding asbestos and ASIC expenses 63
Slide 26: Net Interest Expense
26 US$ Millions Q1' 10 Q1' 09 Gross interest expense (1.1) (2.6) Interest income 0.1 0.6 Net interest expense excluding AICF net interest income and interest rate swaps (1.0) (2.0) AICF net interest income 0.7 0.9 Realised loss on interest rate swaps (0.4) - Net interest expense (0.7) (1.1) Net Inte
Slide 27: Interest Rate Swaps
27 At 30 June 2009: Total principal of interest rate swap contracts of US$250.0 million weighted average fixed interest rate of 2.49% per annum weighted average remaining life is 3.6 years Unrealised gain of US$4.4 million recorded in Consolidated Statement of Operations in Other Income Realised los
Slide 28: Income Tax Expense - Q1
28 Income Tax Expense - Q1 US$ Millions Q1'10 Q1'09 Operating (loss) profit before income taxes (53.0) 21.8 Asbestos: Asbestos adjustments 119.8 40.5 AICF SG&A expenses 0.5 0.6 AICF interest income (0.7) (0.9) Gain on AICF investments (0.4) - Operating profit before income taxes excluding asbestos 6
Slide 29: Corporate Costs - Q1
29 US$ Millions Q1'10 Q1'09 % Change Stock compensation expense 2.0 2.0 - ASIC expenses 0.6 1.5 60 Other costs 5.4 8.7 38 General corporate costs excluding domicile change related costs 8.0 12.2 34 Domicile change related costs 4.5 0.2 - Total corporate costs 12.5 12.4 (1) Corporate Costs - Q1
Slide 30: EBITDA - Q1
30 US$ Millions Q1'10 Q1'09 % Change EBIT USA and Europe Fibre Cement 68.8 65.6 5 Asia Pacific Fibre Cement 10.9 15.8 (31) Research & development (4.0) (5.0) 20 General Corporate excluding ASIC expenses (11.9) (10.9) (9) Depreciation and Amortisation USA and Europe Fibre Cement 12.4 11.4 9 Asia Paci
Slide 31: Cash Flow
31 Cash Flow US$ Millions Q1'10 Q1'09 % Change EBIT (57.1) 22.9 - Non-cash items - Asbestos adjustments 119.8 40.5 - - Other non-cash items 40.9 9.1 - - Change in restricted cash - asbestos 17.2 22.3 (23) Net working capital movements (33.7) 24.6 - Cash generated by trading activities 87.1 119.4 (27
Slide 32: Capital Expenditure
32 US$ Millions Q1'10 Q1'09 % Change USA and Europe Fibre Cement 7.0 3.5 - Asia Pacific Fibre Cement 2.7 0.3 - Total 9.7 3.8 - Capital Expenditure
Slide 33: Debt
33 Debt Net debt decreased US$53.3 million compared to net debt at 31 March 2009 Weighted average remaining term of the total facilities was 1.5 years at 30 June 2009 James Hardie remains well within its debt covenants US$ Millions Total facilities 446.7 Gross Debt 271.0 Cash 42.7 Net debt 228.3 Unu
Slide 34: Key Ratios
34 Key Ratios Q1' FY10 FY09 FY08 EPS (Diluted)1 9.6c 22.3c 38.1c Dividend Paid per share N/A 8.0c 27.0c Return on Shareholders' Funds1 17.8% 11.2% 17.7% Return on Capital Employed2 23.6% 16.7% 24.2% EBIT/ Sales (EBIT margin)2 22.4% 14.2% 19.2% Gearing Ratio1 19.0% 24.0% 21.5% Net Interest Expense Co
Slide 35: Summary
35 Improved US and Europe EBIT, reflecting lower average unit manufacturing costs, lower freight costs, decreased SG&A spending, improved plant performance and an increase in average net sales price In Australian dollars, Asia Pacific Fibre Cement EBIT for the quarter decreased 13% due to a lower gr
Slide 36: Legacy Issues Update
36 Legacy Issues Update Domicile Proposal announced on 24 June 2009 Stage 1 vote by shareholders on 21 August 2009 ASIC Proceedings Findings and reasons for judgement announced April 2009 Decisions in relation to exoneration, costs and penalties pending ATO - 1999 Disputed Amended Assessment Court h
Slide 37: Questions & Answers
Questions & Answers
Slide 38: Endnotes: Definitions
38 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
Slide 39: Endnotes: Financial Ratios
39 Endnotes 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 de
Slide 40: Non-US GAAP Financial Measures
40 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 h
Slide 41: Non-US GAAP Financial Measures (continued)
41 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 meanin
Slide 42: Non-US GAAP Financial Measures (continued)
42 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
Slide 43: Non-US GAAP Financial Measures (continued)
43 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
Slide 44: Non-US GAAP Financial Measures (continued)
44 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
Slide 45: Non-US GAAP Financial Measures (continued)
45 Non-US GAAP Financial Measures (continued) General corporate costs excluding domicile change related costs - General corporate costs excluding domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than general corp
Slide 46: Q1 FY10 Results
18 August 2009 Q1 FY10 Results
James Hardie Industries — Q1 FY2010 Earnings Presentation on 6ix