Boral — FY2007 Earnings Presentation
24 slides from Boral's earnings presentation, Aug 15, 2007
Slide 1: Results for the full year to June 2007
Boral Results for the full year to June 2007 CEO & Managing Director, Rod Pearse 15 August 2007 Agenda Financial Highlights and Markets Review Financial Results Divisional Performance Perform & Grow Strategy Outlook Results for the full year to June 2007 2 1
Slide 2: Financial Highlights & Markets Review
Financial Highlights & Markets Review Waurn Ponds Midland Brick Moorebank QEU cement works Kiln #11 redevelopment Profit after tax down 18% due to cyclical market downturns, especially in US housing activity Revenue 3% to $ 4.9b EBITDA 7% to $ 762m EBIT 14% to $ 531m Net Interest 13% to $111m Profit
Slide 3: EBITDA impacted by decline in US & Australian housing related earnings
EBITDA impacted by decline in US & Australian building products housing related earnings EBITDA (A$m) FY2006 FY2007 Construction Building Materials Products USA Asia $44m (11%) $11m (7%) $90m (41%) $9m (31%) 410 454 219 162 151 129 30 21 Lift in non-dwellings Weak dwelling Severe housing Con
Slide 4: NSW dwellings remained particularly weak
NSW dwellings remained particularly weak Percentage change in dwellings approvals and non-dwellings value of work approved – FY2007 vs FY2006 Detached Multi-dwellings Non-dwellings 31.1% 11.0% 15.0% 14.0% 13.0% 12.0% 1.6% 7.5% 7.0% 0.8% 0.6% 3.6% -1.7% -3.5% -7.0% -8.6% -10.3% -25.1% Australia NSW V
Slide 5: The US housing market has experienced a rapid decline
The US housing market has experienced a rapid decline FY2005 FY2006 FY2007 Total US housing permits (‘000 building permits)1 2,200 2,000 Underlying demand 2 1,800 1,600 1,400 1,200 1,000 800 Jul-90 Jul-91 Jul-92 Jul-93 Jul-94 Jul-95 Jul-96 Jul-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-
Slide 6: Financial Results
US Bricks has been significantly impacted by the housing downturn since October 2006 % change in Dwellings Starts FY2007 vs FY2006 MI 0 to 5% IA 0 to -4% IL IN OH MD -5 to -9% KS MO WV -10 to -14% KY VA OK -15 to -19% TN NC AR -20 to -24% SC -25 to -29% TX MS GA LA AL -30 to -34% -35 to -50% Boral B
Slide 7: Profit after tax down 18% for the full year
Profit after tax down 18% for the full year Dec-06 Jun-07 A$m FY2007 FY2006 %∆ half half Revenue 2,492 2,417 4,909 4,767 3 EBITDA 383 379 762 823 (7) EBIT 267 264 531 614 (14) Net Interest 55 56 111 98 13 Profit before tax 212 208 420 516 (18) Tax 65 57 122 153 (20) Profit after tax 147 151 298 362
Slide 8: Margin pressure reflects decline in US housing activity and NSW downturn
Margin pressure reflects decline in US housing activity and continued downturn in NSW EBIT / Sales EBITDA / Sales 20% 20% 16% 15.5% 16% 12% 10.8% 12% 8% 8% 4% 4% 0% 0% FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY05 result onward has been adjusted for adoption of
Slide 9: Boral's balance sheet remains in good shape
Boral’s balance sheet remains in good shape As at June 07 June 06 A$m Net debt 1,482 1,578 Net debt / equity 50% 57% Net debt / (net debt + equity) 33% 36% Net Interest cover 4.8 x 6.3 x Funds employed 4,470 4,333 Return on funds employed 11.9% 14.2% Return on equity 10.0% 13.2% Results for the full
Slide 10: Divisional performance: Construction Materials
Divisional performance Construction of EastLink, Cement bagging plant, New LBGA plant, Melbourne Maldon Vietnam Construction Materials: EBITDA up 11% driven by stronger volumes and price gains Sales revenue EBITDA / sales A$b A$m FY07 FY06 %∆ 2H sales 3.0 24% Sales 2,549 2,410 6 1H sales 2.5 20% EBI
Slide 11: Construction Materials revenues up 6%; Building Products EBITDA down 7%
Construction Materials revenues up 6% underpinned by stronger non-dwellings volumes & solid pricing outcomes Ext. sales A$m FY2007 %∆ volume ∆ price ∆ EBITDA ∆ Cement1 477 -6 Concrete2 & 1,354 12 Quarries Asphalt 515 16 Transport 69 -33 QEU 118 7 Contracting 16 -59 Exited business during period TOTA
Slide 12: Building Product revenues up 5% driven by solid pricing
Building Product revenues up 5% driven by solid pricing outcomes despite weaker housing volumes Ext. sales A$m FY2007 %∆ volume ∆ price ∆ EBITDA ∆ Bricks 305 3 Roofing 108 4 Masonry 119 -7 Plasterboard 351 7 Timber 247 12 Windows 145 4 TOTAL 1,275 5 Results for the full year to June 2007 23 East Coa
Slide 13: USA: US$ EBITDA down 37% due to housing downturn
USA: US$ EBITDA down 37% due to housing downturn US$m FY07 FY06 %∆ Sales revenue EBITDA / sales A$b Sales1 699 714 -2 2H sales 1.0 25% 1H sales EBITDA 102 163 -37 A$m FY07 FY06 %∆ 0.8 20% Sales1 883 957 -8 0.6 15% EBITDA 129 219 -41 EBIT 95 186 -49 0.4 10% Funds employed 813 848 -4 EBITDA/sales % 14
Slide 14: With 70% of US revenues driven by dwellings, focus is to manage well
Utilisation reduced from 1H07 to 2H07 in US Bricks from 92% to 73% and Concrete Roof Tiles from 59% to 38% FY07 Capacity Planning US Bricks MonierLifetile Jul-06 Jun-07 Jul-06 Jun-07 Kiln 013 Boca Raton, FL Kiln 014 Augusta, GA Kiln 015 Denver, CO Kiln 016 Gilroy, CA Kiln 082 Henderson, NV Salisbury
Slide 15: Asia EBIT down 46% due to one-off compensation payment in prior year
Asia EBIT down 46% due to one-off compensation payment in prior year; underlying LBGA result up, construction materials down EBIT1 EBIT / Sales1,2 A$m Plasterboard JV contribution of 35.0 35% $16m (down 18% due to Shanghai land payment in prior year) 25.0 25% Growth and improved market 15.0 15%
Slide 16: We continue to deliver against our objectives
We continue to deliver against our objectives Objectives Performance 1. Exceed weighted average FY07 ROFE of 11.9% around WACC. cost of capital (WACC) Focus remains on delivery of price, PEP through the cycle & growth outcomes 2. Deliver better financial Returns from Australia, Asia and USA returns
Slide 17: Growth capex invested across Boral's portfolio
Growth capex ($226m in FY2007) has been invested across Boral’s portfolio; over time Boral’s growth portfolio is reducing earnings volatility GROWTH AND ACQUISTION BORAL GROWTH PROJECTS AND CAPITAL EXPENDITURE HERITAGE BUSINESS – EBITDA (A$ millions)1 (A$ millions) 500 900 800 400 Growth EBITDA2 700
Slide 18: Growth initiatives are well positioned for market recovery
Growth initiatives are well positioned for market recovery Growth project Current Status Asphalt Construction completed on Geelong & West Burleigh by Jul-07; Welshpool under (Australia) construction due for completion Dec-07. Two mobile plants deployed in Victoria & in Qld. Plasterboard (Qld) Co
Slide 19: Outlook: QEU sustainable earnings expected to be ~$50m pa
QEU: sustainable earnings expected to be ~$50m pa Actual timing of QEU projects will depend on government approvals and market conditions Bringelly (possible Greystanes Business residential & employment Hub – SEL1 (65 ha) lands part of South West sector release area) Moorebank (65ha, ~1,000 resident
Slide 20: Australian residential starts forecast steady in FY2008
Australian residential starts forecast to remain relatively steady in FY2008 with NSW recovery from FY2009 DWELLING STARTS—TOTAL AUSTRALIA DWELLING STARTS—BY STATE (‘000) (‘000) 200 60 Queensland 180 50 160 NSW 140 40 120 Victoria 100 30 80 20 60 Western Australia 40 10 20 0 0 FY89 FY91 FY93 FY95 FY
Slide 21: Australian markets steady in FY2008 with dwellings recovery thereafter
Overall, Australian markets forecast to remain steady in FY2008 with a dwellings recovery thereafter Australian Building Activities – Value of Work Done $97/98 billion % change 55 3.1 0.2 (1.1) 50 3.3 (0.9) (1.7) RHS&B 45 40 Non-dwelling (10.3) (4.5) 35 (2.4) 30 25 20 Dwelling 15 1.0 4.5 9.2 10 5 0
Slide 22: Dodge forecasts sharp fall in US single family housing starts
Dodge forecasts a sharp fall in US single family housing starts in CY2007 with recovery thereafter USA Boral States1 SINGLE FAMILY HOUSING STARTS NON-RESIDENTIAL VWC Thousand US$92 Value, Billions 1,400 100 1,200 90 Forecast Forecast 80 1,000 Actual Actual 70 800 60 50 600 40 400 30 20 200 10 0 0 FY
Slide 23: Outlook for FY2008
Outlook for FY2008 Australia – Expect dwelling commencements of ~145,000-150,000 – Building Products results to soften – Continued strength in non-dwelling & infrastructure activity and increased concrete & quarries prices – QEU earnings of ~$50 million, weighted heavily to second half of year – C
Slide 24: Dwellings value of work commenced in Boral USA States down 29%
Dwellings value of work commenced in “Boral USA States” was down 29% FY2007 vs FY2006 % change of Building Activities Value Work Commenced - US$92 Dwellings Non-Dwellings Total Activity 0.3% -2.8% -6.4% -6.9% -14.4% -21.4% -21.3% -24.6% -26.4% -28.8% -31.1% -33.5% Brick states1 Tile states2 Construc