James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2009)
73 slides from James Hardie Industries's investor presentation, Sep 30, 2009
Slide 1: James Hardie 2009 USA Investor/Analyst Tour
For personal use only James Hardie 2009 USA Investor/Analyst Tour 29 September – 1 October 2009 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 S
Slide 2: US Manufacturing: Role of Manufacturing
For personal use only US Manufacturing Dave Kessner, VP Manufacturing 30 September 2009 Role of Manufacturing Manufacturing is a key enabler in achieving James Hardie’s business strategy, through: Meeting market reliability standards in regards to quality and service Continuing to fund growth in
Slide 3: Manufacturing Approach to Downturn
Manufacturing Model For personal use only 3 Manufacturing Approach to Downturn Manufactured cost equation: $ spent / volume produced High focus on numerator in equation above since denominator (volume) is out of our control Focus on treating all costs (except depreciation, tax and insurance) a
Slide 4: Manufacturing Approach to Downturn (continued)
Manufacturing Approach to Downturn (continued) For personal use only Key Areas of Success: 1. Direct labor per unit remains relatively flat 2. Compressible spend per unit remains relatively flat 3. Negotiated reductions in key raw material prices 4. Opportunities for savings in energy usage 5. Exper
Slide 5: Controllable Spend and Capacity
Controllable Spend For personal use only Improved focus on getting more value for every $ of maintenance spend Controllable Spend - $/unit FY04 FY05 FY06 FY07 FY08 FY09 Q1 FY10 7 Capacity Currently operating at approximately 35% of capacity Model enables ability to flex up or down relatively qui
Slide 6: USA – Capital Expenditures
USA – Capital Expenditures For personal use only US$ Millions $160 $149 $143 $140 $120 $100 $80 $75 $60 $42 $43 $35 $40 $31 $31 $21 $20 $20 $0 FY05 FY06 FY07 FY08 FY09 Capex 9 Depreciation Zero to Landfill Zero to Landfill program launched in FY08 Goal has been to reduce waste at the sheet machi
Slide 7: Raw Materials
Raw Materials For personal use only Pulp: NBSK at unsustainable low levels in past 3 quarters but currently trending up Continue to blend different types of pulp Cement: Have had success in negotiating lower prices in several markets Demand remains low and probably will stay low in the short
Slide 8: Safety
Safety For personal use only Goal = 2 and 20 Key Safety Initiatives: 90% of injuries behavioral based. Programs focused on impacting behaviors Pre-shift stretching program to reduce risk of strain to employees Increased focus on plant housekeeping to reduce trip/slip hazards 13 Plant Labor Tur
Slide 9: Expectations Going Forward
Expectations Going Forward For personal use only Raw materials expected to slowly increase as macro-economic conditions improve Unit cost of goods sold expected to benefit from higher volume as market comes back Will leverage lessons from the downturn to keep compressible spend low as volume i
Slide 10: Salt Lake City Market Tour: Wasatch Front Metro Facts
For personal use only Salt Lake City Market Tour Brian Holte, VP General Manager – Western Division 1 October 2009 Wasatch Front Metro Facts Population: 1.95 million 36th largest metro area in US Includes 5 counties West of Wasatch range and is home to 76.1% of Utah’s population Home ownersh
Slide 11: Wasatch Residential Builders
Wasatch Residential Builders For personal use only Location: Midvale, UT Start Date: September, 2008 Total Opportunity: 2+ mmsf ColorPlus® Siding and Trim over 3 sites Build Out: ~ 3 years Project Story: Primed fiber cement was incumbent ColorPlus® value proposition aligned well with “
Slide 12: Woodside Homes: Hunter's Creek
Woodside Homes: Hunter’s Creek For personal use only Builder: Woodside Homes Third largest builder in UT Priced from, $252,000 to $365,000 Location: Farmington, UT Developer: Woodside Project Scope: 25 additional homes in this development Project Story: 4 year old project that began
Slide 13: HardieZone System
For personal use only HardieZone™ System John Dybsky Product Brand Manager 1 October 2009 2nd Generation vs 7th Generation The HardieZoneTM System represents a logical extension of Hardie technology: “one size does not fit all” 2
Slide 14: HardieZone Positioning Strategy
HardieZone™ Positioning Strategy For personal use only Drive homeowners’ preference for James Hardie branded products by positioning HardieZone™ as the complete siding solution for region specific climatic challenges 3 No matter where you live, now you can own a home with an exterior that's ideally
Slide 15: Research Conclusions
Research Conclusions For personal use only Homebuyers: Understand and embrace the HardieZone™ System Are excited about the pre-painted concept and 15-year warranty Identified wood trim, soffit and fascia as a point of ongoing maintenance frustration Are willing to pay extra for the HardieZon
Slide 16: The HardieZones
The HardieZones For personal use only 7 Two Product Lines Emerged 8
Slide 17: HZ5 Climates
HZ5 Climates For personal use only Extreme seasonal temperature variation Freezing temperatures Snow and ice 9 HZ5 Substrate engineered for performance Resists damage from snow and ice Resists damage from excessive moisture Resists damage from freezing temperatures Maintains dimensiona
Slide 18: HZ5 (continued)
HZ5 (continued) For personal use only Paintable surface engineered for performance Superior paint adhesion Moisture resistant surface 11 HZ5 (continued) 12
Slide 19: HZ10 Climates
HZ10 Climates For personal use only HZ10 Climates: High humidity Dry heat High precipitation 13 HZ10 (continued) Substrate engineered for performance Resistant to damage from moisture Resistant to cracking, splitting, rotting and swelling Dimensional stability Broadest industry coverag
Slide 20: HZ10 (continued)
HZ10 (continued) For personal use only Paintable surface engineered for performance Superior paint adhesion Moisture resistant surface 15 HZ10 16
Slide 21: ColorPlus factory controlled finish
For personal use only 17 Takes to an even higher level Factory controlled finish for maximum consistency and durability Resists peeling, chipping, cracking or marring Color retention and fade resistance with high levels of UV exposure experienced in zones 6-10 18
Slide 22: Engineered for Climate
For personal use only 19 Engineered for Climate High UV markets High moisture markets 20
Slide 23: Engineered for Climate (continued)
Engineered for Climate (continued) For personal use only Coastal climates Extreme climates 21 Co-Branded Ad Southern Living- Georgia Living section Nov 09 8/25/09 Dec 09 9/24/09 Feb 09 11/24/09 Apr 09 1/26/10 22
Slide 24: HardieZone on our Website
HardieZone™ on our Website For personal use only Entering a zip code into this search box… Æ 23 Hardie Zone™ Content Pages 24
Slide 25: USA Trim
For personal use only USA Trim Sean Gadd, General Manager – Trim 1 October 2009 Agenda Strategy Trim US market size and split Why Trim is important Value proposition Manufacturing Current business performance Product development Technology development 2
Slide 26: HardieTrim Strategy, Objectives, Initiatives
HardieTrim® Strategy, Objectives, Initiatives For personal use only Strategy Establish HardieTrim® as the dominant trim of choice on James Hardie sided homes Strategic objectives 90% Category share on James Hardie sided homes 100% Trim on the home Strategic Initiatives Full wrap Trim solution
Slide 27: Regional Market Differences; Why Trim?
7 Regional Market Differences For personal use only Based on weather condition, such as humidity, UV, temperature fluctuation 5 Why Trim? Trim can make up to 25% of a home in terms of SQFT Trim enables Hardie to fulfill the low maintenance value proposition of a full fiber cement exterior home
Slide 28: Current Trim Performance
Current Trim Performance For personal use only Trim Volume & Attachment Rate FY08-Q3 FY08-Q4 FY09-Q1 FY09-Q2 FY09-Q3 FY09-Q4 FY10-Q1 Volume Attachment Rate 7 Value Proposition Value proposition against wood and wood composites Full wrap fiber cement exterior Common maintenance cycles Common
Slide 29: Trim Manufacturing
Trim Manufacturing For personal use only Three Technology Trims to match climactic requirements of the US Competing against very expensive PVC solutions and inexpensive wood solutions which are driven by strong discounting Manufactured in three plants: ME MT ND VT Cleburne OR MN NH ID SD NY
Slide 30: Trim Technology Development
Trim Technology Development For personal use only Trim Technology enables JH to move down the innovation path that we are on due to the technology that we have It’s important for us to continue to innovate to grow our product opportunity and help it deliver the market opportunity We believe we
Slide 31: ColorPlus
For personal use only ColorPlus® Ian Rogers Operations Manager – ColorPlus 1 October 2009 ColorPlus Agenda C+ game plan in vinyl markets C+ growth update Market development model in primed markets C+ operating model to deliver world class manufactured costs C+ supply chain 2
Slide 32: ColorPlus Strategy
ColorPlus Strategy For personal use only “Establish James Hardie with C+ Technology as the Market Standard for fiber cement” 3 C+ Penetration in Vinyl Markets Penetrate Vinyl Markets by optimizing the supply chain closing the installed cost to vinyl to an affordable gap Eliminate the site painter
Slide 33: OTW Cost Progress
OTW Cost Progress For personal use only Continued closing the gap to vinyl through more efficient installation practices, creating visibility within installer turn-key, leveraging locally trained and operated sub contractors Increasing affordability allows us to “move left” into lower price poin
Slide 34: Differentiated Front Side Architecture; ColorPlus Growth
Differentiated Front Side Architecture For personal use only 7 ColorPlus Growth Continued C+ penetration growth, with volume holding, through the down market FY06 FY07 FY08 FY09 FY10 (mmsf) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 North C+ Volum e South C+ West C+ Export C+ MH/Other C+ %No
Slide 35: C+ Penetration in Primed to Color Markets
C+ Penetration in Primed to Color Markets For personal use only Provide a complete, affordable, James Hardie C+ full wrap exterior that delivers on the consumer need for an affordable low maintenance exterior HardieZone™ + ColorPlus + Job Pack quantities = The ultimate affordable siding solution
Slide 36: Meeting the Challenge
Meeting the Challenge For personal use only Convert target builders with market influence in target market geographies Enabled by: Material efficiency through accurate take off capability controlled by James Hardie and “Pick to Piece” quantities to job site In market inventory, aggregated to
Slide 37: External Execution and Success Stories
External Execution For personal use only Distribution partners carry pre-defined SKU list based on converted builders Pick to piece capability across all Standard SKUs Product mix pricing 48 hour availability to enable R&R customers Gaps Take off accuracy, order consistency Channel curre
Slide 38: ColorPlus Manufacturing Strategy
ColorPlus Manufacturing Strategy For personal use only Provide best in class pre-finishing of James Hardie products Industry leading quality Quality management system Technology development Joint Technology Development Agreement Made to order – high service level delivery Hybrid model, c
Slide 39: Operating Model and Summary
Operating Model For personal use only Progress in 2009 New coater design from design concept to operating line WMS Quality management system Supply Chain Efficiency Easy to do business with What can I order, How do I order, Where is my material? Multiple supply chain strategies Texas Cap
Slide 40: Repair & Remodel
For personal use only Repair & Remodel Jeff Chastain, Sales Manager – Rocky Mountain Region 1 October 2009 Outline 1. Market Overview 2. James Hardie Repair and Remodel Progress Update 3. Summary/Go Forward 2
Slide 41: The Market: R&R Opportunity Exceeds New Construction
The Market For personal use only Repair and Remodel Market Overview 3 R&R Opportunity Exceeds New Construction New Construction 37% R&R 63% NAHB Data 2007 As measured in square feet 4
Slide 42: Overall R&R Market Opportunity
Overall R&R Market Opportunity For personal use only James Stone Stucco Hardie 4% 8% Fiber Cement 10% Hardboard 1% Vinyl 49% OSB 1% Wood 15% Other Brick 9% 3% NAHB Data 2007 5 Contractor Landscape The core 200,000+ remodeling firms: 41% general contractors, 59% specialty contractors 200,100 firms wi
Slide 43: Contractor Landscape
Contractor Landscape For personal use only 22,000 of the 117,200 specialty contractors are exterior replacement specialists – roofing, siding, windows James Hardie targets a relationship with the top 15 - 20% of these specialty contractors via Website Contractor Program and other means – require
Slide 44: Opportunity in Every Market
Opportunity in Every Market For personal use only Penetration Curve Mix Shift in High Penetration Markets Portland Houston Atlanta San Antonio Seattle Minneapolis Denver St. Louis New Jersey Charlotte Chicago Large PDG Opportunity DC Raleigh Detroit Austin in Early S Curve Markets 9 James Hardie Rep
Slide 45: R&R Segment Strategy, Objectives, Initiatives
R&R Segment Strategy, Objectives, Initiatives For personal use only Business Strategy - Switch the preference from vinyl to fiber cement by directly communicating the benefits and affordability of James Hardie to the consumer Strategic Objectives Get into the home via education, contractor and
Slide 46: R&R Progress Update
R&R Progress Update For personal use only James Hardie Organization Website Contractors Program Consumer Awareness James Hardie Siding Center 13 R&R Progress – James Hardie Organization Build staff and organizational knowledge in Segment Full staff of Regional R&R Segment Managers Fiel
Slide 47: R&R Progress – Website Contractors
R&R Progress – Website Contractors For personal use only Re-launched program in December 2008 Set program requirements around goals and measures aligned with James Hardie strategies Contractor “attachment rates” for C+, Trim and Wrap and Job Tracker Reporting 15 R&R Progress – Website Contract
Slide 48: Website Contractor Partners
R&R Progress – Website Contractors (continued) For personal use only 250 Website Contractor Partners – quality and strategy of Contractor Partner is key – expanding monthly Website leads are up – provide qualified consumer leads for Contractor Partners Tools to assist Contractor 1) Get into th
Slide 49: Website Contractors; Consumers
R&R Progress – Website Contractors (continued) For personal use only To help the contractor sell effectively in the home... In-Home Presentation Book Consumer Brochure Cost vs. Value Hardie vs. Vinyl / Wood C+ vs. Sell Sheets Product Bi-Fold ColorPlus Quad Fold Samples 19 R&R Progress - Consumers
Slide 50: James Hardie Siding Centers
R&R Progress – James Hardie Siding Centers For personal use only Infrastructure continues to provide headwind Positive marketing carryover – ColorPlus® and New Construction Bringing in larger, more sophisticated R&R contractors Able to compete across all price strata – vinyl fighter Lead g
Slide 51: Summary and Go Forward
Summary and Go Forward For personal use only R&R Segment opportunity is largest opportunity for JH and growing R&R is harder to get, harder to lose Early assumptions and positions have been proven out James Hardie organizational ability greatly improved Website program and consumer influen
Slide 52: USA Interior Products: Performance Trend
For personal use only USA Interior Products John Strickland, Sales and Marketing Manager - Interiors 1 October 2009 James Hardie Interiors: Performance Trend Decade of growth Continue to target share growth in the down market mmsf FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Slide 53: Growth by Product
Growth by Product For personal use only Primary product (¼”) EZ Grid® is the category leader ½” HardieBacker® has grown the fastest in its category in recent years ½" Volume Growth Product Life Cycle 98 99 00 01 02 03 04 05 06 07 08 09 FY FY FY FY FY FY FY FY FY FY FY FY ¼" Volume Growth FY98 FY
Slide 54: R&R Same Store Comps
R&R Same Store Comps For personal use only Big Box same store sales as an index for R&R continues to slide; albeit less than Housing Starts Comparable same store sales decline in “underlayment” category was between 7-10% in Q2 Quarterly Same Store Sales Growth 10.0% 7.8% 6.5% 6.2% 5.7% 5.5% 5.0%
Slide 55: Share Driver: Competitive Advantages
Share Driver (continued) For personal use only Advantages vs. Competitive Products The market prefers cement backerboard • “All Other” is primarily gypsum-based product • Market prefers cement over gypsum for wet area use Cement competition is primarily glass mesh HardieBacker® more user friendly
Slide 56: Strategic Direction
Strategic Direction For personal use only Aligned our Big Box and Pro Interiors sales forces under united regional management 3 regional Interiors Segment Managers collaborating with regional RSMs to drive overall execution JHBP Sales Channels Sales coverage focused on large volume metro areas
Slide 57: Research and Development: Safety in Fontana
For personal use only Research and Development Ryan Sullivan, Director – R&D 1 October 2009 Safety in Fontana Focus on Safety to achieve goal of: Incident rate of 2 Severity rate of 20 We focus not only on safety within our building or team – but also how we can impact safety across the business
Slide 58: Safety Rules
Safety Rules For personal use only Do not enter any area which is bound by red or yellow caution tape Do not touch any moving equipment or ovens No food or drinks in laboratories PPE Hard hat Safety glasses with side shields Steel-toed safety shoes (may be waived for tours) Long pant
Slide 59: Agenda; R&D Mission
Agenda For personal use only Overview of R&D – US and AUS Recent accomplishments Focus going forward Tour summary 5 Research & Development Mission Enable James Hardie Product Leadership Strategy Advancement of Fiber Cement – Job 1 Developing technology to advance industry leading manufac
Slide 60: R&D Centers
R&D Centers For personal use only Two research and Development Centers – US and Australia Both capable of end to end R&D Service local businesses plus global development efforts Head count US – 77 AUS – 38 Resources Diverse organization of 115 scientist and engineers formed into multifun
Slide 61: Delivering the entire solution
James Hardie – Delivering the entire solution For personal use only Best Practices Accessories FC Product Install Tools Packaging Market Delivery Service Time Install Specialists Support Technical Support 9 Recent Accomplishments – Advancement of Fiber Cement Coating System Improvements through ne
Slide 62: Recent Accomplishments – New Products
Recent Accomplishments – New Products For personal use only HardieZone™ System HardieWrap™ Weather Barrier Increased trim portfolio Textures and length Crown moldings Blocks Fascia Reveal Panel 11 Recent Accomplishments – New Products New Product Growth since FY07 $12,000 2.0% 1.8% %
Slide 63: Focus going forward; Tour Summary
Focus going forward For personal use only Continue product development focus with well-executed launches Manufacturing optimization to enable cost reduction and capacity maximization 13 Tour Summary Tour consists of 12 stations addressing some of the key areas of R&D: Hardie innovation Har
Slide 64: USA Business: Business Goals
For personal use only USA Business Scott Barnett, US Divisional CFO 1 October 2009 Business Goals Job 1: Drive towards terminal market share while maintaining value pricing Primary Demand Growth Product Mix Shift Zero to the Landfill Job 2: Extend the US fiber cement business model New p
Slide 65: Key Principles of the James Hardie Business Model
Key Principles of the James Hardie Business Model For personal use only Product Leadership Strategy Value Pricing – driven by Product Differentiation Low Fixed Cost/High Capital Efficiency R&D investment Flat management structure Minimize non-strategic costs Manage all costs as variabl
Slide 66: Primary Demand Growth – USA FC
Primary Demand Growth – USA FC For personal use only 30% 20% 10% 0% Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 -10% -20% -30% -40% %JHBP Growth (sdft) NC/R&R Growth Ro ling 4Qtr - JHBP Growth (sdft) Rolling 4Qtr - NC/R
Slide 67: Product Mix Shift; Approach to Housing Downturn
Product Mix Shift For personal use only 1. Artisan® market development 2. C+ house packs in primed fiber cement markets 3. Gain back and maintain big builder share 4. Implement dual multi-family approach 5. Develop commercial market position 7 JH Approach to the Housing Downturn Up until mid 2006, U
Slide 68: Approach to the Housing Downturn (continued)
JH Approach to the Housing Downturn (continued) For personal use only Changes made in late 2006 to address the market decline We developed 3 overarching goals for the business: Increase market share in R&R Maintain or grow contribution margin per unit Reduce organizational cost by at least 10%
Slide 69: Contribution Illustration; USA Average Selling Price
Contribution Illustration For personal use only EBIT $ 11 USA – Average Selling Price Price continues to trend upward even as volume and revenue have been decreasing 12 6
Slide 70: C+ Penetration; Cemplank Penetration
C+ Penetration For personal use only ColorPlus® penetration continues to ramp-up, increasing by 3 percentage points each year since FY06, and was up 2 points in Q1 this year 13 Cemplank Penetration Cemplank penetration plateaued in FY08 14 7
Slide 71: USA Headcount; Organizational Costs
USA - Headcount For personal use only 2,500 2,000 USA Headcount 1,500 1,000 500 0 8 9 07 08 0 1 2 3 4 5 6 09 10 9 9 0 0 0 0 0 0 0 FY FY FY FY FY FY FY FY FY FY FY FY 1 Q Q1 FY10 increase driven by additions in the plants due to higher than expected production requirements 15 Organizational Costs (
Slide 72: FY Outlook and Go Forward
For personal use only FY 10 Outlook and Go Forward 17 Total Housing Starts Slide – NAHB NAHB’s Housing Starts forecast was steadily eroding with each release until August 2009 NAHB forecast of 2009 Housing Starts is down 36% from 2008 to 572k (incl. MF-high) NAHB - U.S. Housing Starts Forecasts
Slide 73: R&R Same Store Comps; Looking Forward
R&R Same Store Comps For personal use only Big Box same store sales as an index for R&R continues to slide; albeit less than Housing Starts Comparable same store sales decline in “underlayment” category was between 7-10% in Q2 Quarterly Same Store Sales Growth 10.0% 7 8% 6 5% 6 2% 5 7% 5 5% 5.0%
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