James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — FY2008 Earnings Presentation
66 slides from James Hardie Industries's earnings presentation, May 23, 2008
Slide 1: James Hardie FY08 4th Quarter and Full Year Results
Exhibit 99.2-4 James Hardie FY08 4th Quarter and Full Year Results 22 May 2008 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 section of this document starting on page
Slide 2: Agenda
Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers Agenda
Slide 3: Overview
Major businesses performed relatively well over the full year in challenging market conditions, particularly in the US Net operating line for the quarter and full year affected by material asbestos adjustments, asset impairments and tax adjustments Overview US$ Millions Q4 Q4 % % FY 2008 FY 2007 Cha
Slide 4: Overview: 4th Quarter
4th Quarter USA Fibre Cement The housing market deteriorated further during the quarter Sales and EBIT were much lower than the same quarter last year Asia Pacific Fibre Cement EBIT was up, primarily due to favourable currency movements and improved operating performance in Australia and New Zealand
Slide 5: Overview: Full Year
Full Year USA Fibre Cement - Price growth and market penetration helped partly buffer the unfavourable impact of significantly weaker housing construction activity and deliver a good EBIT performance, considering the conditions Asia Pacific Fibre Cement - Strong sales and EBIT performance Operating
Slide 6: Overview: Dividend and USA Hardie Pipe closure
Announced final dividend of US 8 cents a share. Total dividend for year consistent at US 20 cents Announced closure of USA Hardie Pipe business Overview
Slide 7: Operating Review
Operating Review Louis Gries, CEO
Slide 8: USA Fibre Cement
USA Fibre Cement James Hardie lap and shingle siding with ColorPlus(r) Technology featured in MidWest Homes' Minnesota Top Homes Volume 2. The home was built by Mark Anthony Homes in Hudson, Wisconsin.
Slide 9: USA Fibre Cement: 4th Quarter Result
4th Quarter Result Net Sales down 20% to US$232.5 million Sales Volume down 19% to 393.9 mmsf Average Price down 1% to US$590 per msf EBIT down 41% to US$50.3 million EBIT Margin down 7.6 pts to 21.6% USA Fibre Cement
Slide 10: USA Fibre Cement: Full Year Result
Full Year Result Net Sales down 9% to US$1,144.8 million Sales Volume down 11% to 1,916.6 mmsf Average Price up 2% to US$597 per msf EBIT down 13% to US$313.6 million EBIT Margin down 1.3 pt to 27.4% USA Fibre Cement
Slide 11: USA Fibre Cement: 4th Quarter Market Conditions
4th Quarter Market Conditions Further deterioration in new housing construction activity Starts down 26% and 30% for the December and March quarters, respectively Market demand affected by weaker economic conditions, tighter lending standards and falling house prices Inventory levels of new homes re
Slide 12: USA Fibre Cement: 4th Quarter Key Points
4th Quarter Key Points Sales down due to further deterioration in US housing construction activity Normal seasonal pickup in demand not evident in March orders Inventory build higher than required due to lower than forecasted Q4 shipments Market penetration did not buffer the market decline as it ha
Slide 13: USA Fibre Cement: Outlook
Outlook Further weakness in housing construction activity Softer repair and remodelling activity expected in short to medium-term Increased focus in FY09 on initiatives that build EBIT performance. Further market penetration against alternative materials USA Fibre Cement
Slide 14: USA Fibre Cement: Top Line Growth
Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau. USA Fibre Cement Top Line Growth 0 400 800 1,200 1,600 2,000 2,400 2,800 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 JH Volume (mmsf), Starts (000s Units) $0 $200 $400 $600 $800 $1,000 $1,200 Re
Slide 15: USA Fibre Cement: Primary Growth Performance
USA Fibre Cement Primary Growth Performance Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $expenditures less CPI Note: R&R growth for Q408 assumed to be flat Note: R&R growth for Q408 assumed to be flat Note: R&R growth for Q408 assumed to be flat
Slide 16: USA Fibre Cement: Average Net Selling Price
USA Fibre Cement Average Net Selling Price US$ per MSF 380 420 460 500 540 580 620 FY02 FY03 FY04 FY05 FY06 FY07 FY08
Slide 17: USA Fibre Cement: Strategy
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 reduce direct price competition USA
Slide 18: USA Fibre Cement: EBIT and EBIT Margin
*Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02 and impairment charges of US$45.6 million in Q4 FY08 USA Fibre Cement EBIT and EBIT Margin* 0 20 40 60 80 100 120 140 FY02 FY03 FY04 FY05 FY06 FY07 FY08 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales
Slide 19: USA Fibre Cement: Managing through the housing downturn - Update
USA Fibre Cement Managing through the housing downturn - Update Reset business in February 2008 based on housing starts of 1 million per annum Continued market deterioration resulted in a further business reset in April based on housing starts of 800,000 per annum Reset included manufacturing and SG
Slide 20: USA Fibre Cement: Managing through the housing downturn (continued)
USA Fibre Cement Managing through the housing downturn - Update (continued) SG&A adjustments Reviewed activities and projects across the organisation Changes made to SG&A cost base considering: Ability to make a significant impact during FY09 Impact on ability to enable business to compete and grow
Slide 21: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement James Hardie ExoTec(r) Facade Panel and fixing system has been used on the Queensland University of Technology. Architect: Conrad & Gargett.
Slide 22: Asia Pacific Fibre Cement: 4th Quarter Result
4th Quarter Result Net Sales up 14% to US$73.5 million Sales Volume down 3% to 95.3 mmsf Average Price up 2% to A$848 per msf EBIT up 22% to US$10.7 million EBIT Margin up 0.9 pts to 14.6% Asia Pacific Fibre Cement
Slide 23: Asia Pacific Fibre Cement: Full Year Result
Full Year Result Net Sales up 19% to US$298.3 million Sales Volume up 2% to 398.2 mmsf Average Price up 2% to A$862 per msf EBIT* up 28% to US$50.3 million EBIT* Margin up 1.2 pts to 16.9% Asia Pacific Fibre Cement * EBIT includes US$2.7m lease cost adjustment related to prior periods
Slide 24: Asia Pacific Fibre Cement: Strategy
Strategy Grow primary demand for our products Leverage our superior technology to offer differentiated products and systems with superior value to those of competitors Promote a smarter way to build composite construction houses using our products Vigorously defend our position in existing market se
Slide 25: Asia Pacific Fibre Cement: Key Points
Key Points Residential construction activity was slightly weaker in both Australia and New Zealand US$ financial results again assisted by appreciation of Asia Pacific currencies Q4 net sales down 1% in A$ due to 3% decrease in sales volume, partly offset by a 2% increase in the average Australian d
Slide 26: Asia Pacific Fibre Cement: Outlook
Outlook Residential construction activity is expected to be flat in Australia and slightly weaker in New Zealand Further primary demand growth for fibre cement in Australia and New Zealand Growth in differentiated products Non-differentiated products in Australia are expected to remain subject to st
Slide 27: USA Hardie Pipe, Europe Fibre Cement and Other
USA Hardie Pipe Q4 net sales lower due to weaker residential and non-residential construction activity in Florida EBIT loss for both the quarter and full year Announced closure of business today EBIT losses mainly incurred since commencement in 2001 Significant deterioration in market conditions in
Slide 28: Financial Review
Financial Review Russell Chenu, CFO
Slide 29: Overview: Asbestos adjustments, impairments and tax
Solid operating performance for the year considering further significant decline in US housing construction activity Net operating line affected by asbestos, asset impairments and tax adjustments: Asbestos adjustments : US$182.3m in Q4 and US$240.1m in full year - change in KPMG Actuaries' estimate
Slide 30: Overview: Inventory, cash generation and dividend
Overview Increase in inventory levels - normal seasonal pickup in demand did not occur in Q4 Strong cash generation for the year - US$319.3 million Final dividend of US8 cents a share declared Payable 11 July 2008 Record date 4 June 2008 Total dividend consistent at US20 cents a share
Slide 31: Share Buy-Back
Share Buy-Back Announced share buy-back of up to 10% of issued capital (up to approximately 46.8 million shares) on 15 August 2007 Purchased 7.6% of issued capital between 18 September 2007 and 31 March 2008 at average price of A$6.62/ US$5.83 35.7 million shares purchased as at 31 March 2007 - tota
Slide 32: Results - Q4
Results - Q4 US$ Millions Q4'08 Q4'07 % Change Net sales 312.9 360.9 (13) Gross profit 107.2 133.8 (20) SG&A expenses (60.3) (52.3) (15) Research & development expenses (7.5) (5.6) (34) Impairment charges (38.6) - - SCI and other related expenses - (5.4) - Asbestos adjustments (182.3) (286.3) 36 EBI
Slide 33: Results - Q4 (continued)
Results - Q4 US$ Millions Q4'08 Q4'07 % Change Net operating (loss) profit (146.9) 103.1 - Asbestos: Asbestos adjustments 182.3 286.3 (36) AICF SG&A expenses 1.3 - - AICF interest income (2.4) - - Tax benefit related to asbestos adjustments (46.2) (335.0) (86) Asset impairments: Impairment charges (
Slide 34: Results - Full Year
Results - Full Year US$ Millions FY '08 FY '07 % Change Net sales 1,468.8 1,542.9 (5) Gross profit 530.0 573.0 (8) SG&A expenses (228.2) (214.6) (6) Research & development expenses (27.3) (25.9) (5) Impairment charges (71.0) - - SCI and other related expenses - (13.6) - Asbestos adjustments (240.1)
Slide 35: Results - Full Year (continued)
Results - Full Year US$ Millions FY '08 FY '07 % Change Net operating (loss) profit (71.6) 151.7 - Asbestos: Asbestos adjustments 240.1 405.5 (41) AICF SG&A expenses 4.0 - - AICF interest income (9.4) - - Tax benefit related to asbestos adjustments (45.8) (335.0) (86) Asset impairments: Impairment c
Slide 36: Segment Net Sales - Q4
US$ Millions Q4'08 Q4'07 % Change USA Fibre Cement 232.5 289.9 (20) Asia Pacific Fibre Cement 73.5 64.3 14 Other 6.9 6.7 3 Total 312.9 360.9 (13) Segment Net Sales - Q4
Slide 37: Segment Net Sales - Full Year
US$ Millions FY '08 FY '07 % Change USA Fibre Cement 1,144.8 1,262.3 (9) Asia Pacific Fibre Cement 298.3 251.7 19 Other 25.7 28.9 (11) Total 1,468.8 1,542.9 (5) Segment Net Sales - Full Year
Slide 38: Segment EBIT - Q4
US$ Millions Q4'08 Q4'07 % Change USA Fibre Cement 50.3 84.6 (41) Asia Pacific Fibre Cement 10.7 8.8 22 Other (2.8) (2.7) (4) R & D1 (5.0) (3.5) (43) Total segment EBIT excluding impairment charges 53.2 87.2 (39) General Corporate (12.5) (16.7) 25 Total EBIT excluding asbestos and impairment charges
Slide 39: Segment EBIT - Full Year
US$ Millions FY '08 FY '07 % Change USA Fibre Cement 313.6 362.4 (13) Asia Pacific Fibre Cement 50.3 39.4 28 Other (7.3) (9.3) 22 R & D1 (18.1) (17.1) (6) Total segment EBIT excluding impairment charges 338.5 375.4 (10) General Corporate (60.0) (56.5) (6) Total EBIT excluding asbestos and impairment
Slide 40: Corporate Costs - Q4
US$ Millions Q4'08 Q4'07 % Change Stock compensation expenses 2.7 1.7 (59) SCI and other related expenses - 5.4 - ASIC proceedings 1.1 - - Australian pension plan 1.2 0.5 - Other costs 7.5 9.1 18 Total 12.5 16.7 25 Corporate Costs - Q4
Slide 41: Corporate Costs - Full Year
US$ Millions FY '08 FY '07 % Change Stock compensation expenses 7.7 5.8 (33) SCI and other related expenses - 13.6 - Non-US warranty provision 4.0 - - ASIC proceedings 5.5 - - Australian pension plan 3.2 2.8 (14) Other costs 39.6 34.3 (15) Total 60.0 56.5 (6) Corporate Costs - Full Year
Slide 42: Net Interest Income (Expense)
Net Interest Income (Expense) US$ Millions Q4'08 Q4'07 FY '08 FY '07 Gross interest expense (4.6) (4.7) (11.7) (12.1) Make-whole payment - - - (6.0) Capitalised interest - - 0.6 6.1 Interest (expense) income - 0.5 2.8 5.5 Net interest expense excluding AICF net interest income (4.6) (4.2) (8.3) (6.5
Slide 43: Income Tax Expense - Q4
Income Tax Expense - Q4 US$ Millions Q4'08 Q4'07 Operating loss before income taxes $(183.7) $(220.0) Asbestos: Asbestos adjustments 182.3 286.3 AICF SG&A expenses 1.3 - AICF interest income (2.4) - Asset impairments: Impairment charges 38.6 - Impairment related costs 2.5 - Operating profit before i
Slide 44: Income Tax Expense - Full Year
Income Tax Expense - Full Year US$ Millions FY '08 FY '07 Operating loss before income taxes $(35.5) $(93.1) Asbestos: Asbestos adjustments 240.1 405.5 AICF SG&A expenses 4.0 - AICF interest income (9.4) - Asset impairments: Impairment charges 71.0 - Impairment related costs 3.2 - Operating profit b
Slide 45: EBITDA - Q4
US$ Millions Q4'08 Q4'07 % Change EBIT USA Fibre Cement 50.3 84.6 (41) Asia Pacific Fibre Cement 10.7 8.8 22 Other (2.8) (2.7) (4) R & D (5.0) (3.5) (43) General Corporate (12.5) (16.7) 25 Depreciation and Amortisation USA Fibre Cement 10.2 10.2 - Asia Pacific Fibre Cement 3.9 2.6 50 Other 0.3 0.8 (
Slide 46: EBITDA - Full Year
US$ Millions FY '08 FY '07 % Change EBIT USA Fibre Cement 313.6 362.4 (13) Asia Pacific Fibre Cement 50.3 39.4 28 Other (7.3) (9.3) 22 R & D (18.1) (17.1) (6) General Corporate (60.0) (56.5) (6) Depreciation and Amortisation USA Fibre Cement 42.8 37.8 13 Asia Pacific Fibre Cement 10.3 10.1 2 Other 3
Slide 47: Cash Flow - Full Year
Cash Flow - Full Year US$ Millions FY '08 FY '07 % Change EBIT (36.6) (86.6) 58 Non-cash items - Asbestos adjustments 240.1 405.5 (41) - Asset impairments 71.0 - - - Other non-cash items 7.8 54.8 (86) Net working capital movements 115.0 (52.6) - Cash generated by trading activities 397.3 321.1 24 Ta
Slide 48: Capital Expenditure - Full Year
US$ Millions FY '08 FY '07 % Change USA Fibre Cement 31.3 78.8 60 Asia Pacific Fibre Cement 5.6 10.5 47 Other 1.6 3.3 52 Total 38.5 92.6 58 Capital Expenditure - Full Year
Slide 49: Key Ratios
FY08 FY07 FY06 EPS (Diluted)1 36.9c 49.3c 45.7c Dividend Paid per share 27.0c 9.0c 10.0c Return on Shareholders' Funds1 17.7% 24.0% 28.7% Return on Capital Employed2 24.2% 27.7% 32.0% EBIT/ Sales (EBIT margin)2 19.2% 21.6% 20.9% Gearing Ratio1 21.5% 12.5% (1.5)% Net Interest Expense Cover3 33.9x 51.
Slide 50: Summary
Solid overall operating performance for the year considering business environment Strong cash generation Net operating line affected by asbestos adjustments, impairments and tax adjustments The company's financial position remains strong Results remain subject to fluctuation in A$ : US$ exchange rat
Slide 51: Asbestos Compensation Funding Arrangement
Updated actuarial report completed as at 31 March 2008 Discounted central estimate increased to A$1,426.3 million Annual contribution to AICF will be approximately US$100 - US$110.0 million dependent on the A$/US$ exchange rate Payment in A$ due 1 July 2008 or in quarterly installments through FY200
Slide 52: Updated Actuarial Estimate
Updated Actuarial Estimate A$ Millions KPMG Actuaries expected estimate for 31 March 2008, based on 31 March 2007 estimate (allowing for cost savings in NSW only) A$1,375.0 Change in discount rate 40.4 1,334.6 Reduced by: Reduction in average claims cost and legal costs (72.2) Increase in claim numb
Slide 53: Updated Actuarial Estimate: Net accounting liability under Amended FFA
Updated Actuarial Estimate Net accounting liability under Amended FFA A$ millions (except where stated) 31 March 2007 31 March 2008 Central Estimate - Discounted 1,355.1 1,426.3 Discounting and inflation allowance (82.1) (40.1) Provision for claims handling costs of AICF 69.2 73.5 Other US GAAP adju
Slide 54: Updated Actuarial Estimate: Comparison
Comparison A$ Billions 30 Jun 04 31 Mar 05 30 Jun 05 31 Mar 06 30 Sept 06 31 Mar 07 31 Mar 08 Central Estimate - Discounted 1.536 1.685 1.568 1.517 1.555 1.355 1.426 Central Estimate - Undiscounted 3.586 3.604 3.131 3.079 3.169 2.811 3.027 Range - Undiscounted 2.0-5.7 2.0-5.9 1.5-5.5 1.7-5.3 1.8-5.7
Slide 55: Asbestos Fund Update
Asbestos Fund Update AICF holdings at 31 March 2008 A$123.4m - cash and short-term investments Net claims paid FY08: A$ millions AICF FY08* KPMG Actuarial Estimate MRCF/AICF FY07 Claims Paid 67.2 70.6 67.5 Legal Costs 7.1 5.6 7.6 Insurance and cross claim recoveries (19.2) (11.9) (17.7) Total net cl
Slide 56: Questions and Answers
Questions & Answers 56
Slide 57: Disclaimer
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 58: Endnotes: 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 59: Endnotes: Financial Ratios
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 debt
Slide 60: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos and asset impairments - EBIT and EBIT margin excluding asbestos and asset impairments are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Har
Slide 61: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, asset impairments and tax adjustments - Net operating profit excluding asbestos, asset impairments and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more m
Slide 62: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, asset impairments and tax adjustments - Diluted earnings per share excluding asbestos, asset impairments and tax adjustments is not a measure of financial performance under US GAAP and should not be considered
Slide 63: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos, asset impairments and tax adjustments - Effective tax rate excluding asbestos, asset impairments and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meani
Slide 64: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) US$ Millions Q4 FY08 Q4 FY07 FY '08 FY' 07 Operating loss before income taxes $ (183.7) $ (220.0) $ (35.5) $ (93.1) Asbestos: Asbestos adjustments 182.3 286.3 240.1 405.5 AICF SG&A expenses 1.3 - 4.0 - AICF interest income (2.4) - (9.4) - Asset impairments:
Slide 65: Non-US GAAP Financial Measures (continued): EBITDA
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 66: James Hardie FY08 4th Quarter and Full Year Results
James Hardie FY08 4th Quarter and Full Year Results 22 May 2008 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 section of this document starting on page 59. The company
Hardie James Industries — FY2008 Earnings Presentation on 6ix