Boral — FY2005 Earnings Presentation
28 slides from Boral's earnings presentation, Aug 16, 2005
Slide 1: Full Year Results 2005
Boral Full Year Results 2005 Managing Director, Rod Pearse 16 August 2005 Agenda Financial Highlights and Markets Review Financial Results Divisional Performance Perform & Grow Strategy Outlook Full Year Results 2005 2 1
Slide 2: Financial Highlights & Markets Review
Financial Highlights & Markets Review Full Year Results 2005 3 Financial highlights Sales 4% to $4.3bn Underlying EBIT1 1% to $604m EBIT1 margin from 14.4% to 14.1% Net profit after tax 2% to $377m EPS 1% to 65 cents Final dividend fully franked 6% to 17 cents Return on equity from 15.7% to 15.3% 1.
Slide 3: Performance highlights
Performance highlights Profits steady despite slowdown in Australian & Korean housing markets Australian EBIT down 2%; USA strength more than offset Asian weakness Construction Materials – EBIT down 3%, prices and margins held well despite softer NSW volumes and higher input costs Building P
Slide 4: Dwelling Approvals
Whilst there has been a soft landing in Australian dwellings Dwelling Approvals - Australia (Moving Annual Total) 200,000 180,000 160,000 Dwelling Approvals (MAT) 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 19 19 19 19 19 19 1
Slide 5: Impact on building products and NSW construction materials
Which has impacted on our building product businesses House Approval by State Monthly, Seasonally Adjusted 4,000 3,500 3,000 VIC 2,500 QLD 2,000 WA 1,500 NSW 1,000 SA 500 0 Jun-05 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Jan-00 Jul-00 Oct-00 Jan-01 Jul-01 Oct-01 Jan-02 Jul-02 Oct-02 Jan-03 Jul-03 O
Slide 6: Financial Results
Financial Results Full Year Results 2005 11 Earnings stronger in FY2005 Dec-04 Jun-05 FY2005 FY2004 yoy A$m Half Half %∆ Sales revenue 2,157 2,140 4,297 4,150 4 EBITDA1 412 407 819 794 3 EBIT1 307 297 604 600 1 Net interest 33 38 71 66 8 Profit before tax1 274 259 533 534 - Tax1 83 76 159 164 -3 Und
Slide 7: Sales & EBIT remain at high levels
Sales & EBIT remain at high levels Sales revenue EBIT1 A$m A$m 5,000 700 4,297 604 4,500 600 4,000 3,500 500 3,000 400 2,500 300 2,000 1,500 200 1,000 100 500 0 0 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY99 FY00 FY01 FY02 FY03 FY04 FY05 1. Before one-off cost associated with Adelaide Brighton bid & one-
Slide 8: Key drivers of EBIT growth; growth/buyback spend
Growth initiatives, operational improvements and solid pricing outcomes were key drivers 600 604 A$m 478 360 343 262 Acquisition Growth 2 Volume PEP QEU Other EBIT EBIT EBIT EBIT EBIT Price Cost Turnarounds/ FX EBIT1 FY00 FY01 FY02 FY03 FY04 Escalation Contracting FY05 1. Before one-off cost associa
Slide 9: Balance sheet remains strong
Balance sheet remains strong As at Jun-05 Jun-04 A$m Net debt 1,394 938 Net debt/ equity 56% 40% Net debt/ (net debt + equity) 36% 28% Net interest cover1 8.5x 9.1x Funds employed 3,866 3,298 EBIT1 return on funds employed 15.6% 18.2% EBITDA1 margin on sales 19.1% 19.1% 1. Before one-off cost associ
Slide 10: Earnings per share and dividends; safety performance
Earnings per share/ dividends have grown strongly since demerger Cents / share 64 65 Dividend Gross DPS EPS 49 49 43 34 30 32 26 27 24 21 18 18 34 30 23 18 18 18 19 FY99 FY00 FY01 FY02 FY03 FY04 FY05 Full Year Results 2005 19 Safety performance continues to improve LTIFR1 Hours Lost % 9 9 0.25 0.24
Slide 11: Divisional Performance
Divisional Performance Full Year Results 2005 21 Australian EBIT remained steady in a softer housing market; USA improved; Asia weaker A$m 3% FY2004 FY2005 307 299 2% 22% 159 156 136 112 37% 29 18 Construction Materials, Building Products, USA Asia Australia Australia Full Year Results 2005 22 11
Slide 12: Construction Materials: revenue & EBITDA up
Construction Materials: revenue & EBITDA up; effective price management FY05 FY04 %∆ $bn 2.4 1H Sales EBIT2H&Sales ROFE EBIT/ Sales 16% 13.8% A$m 14% 2.0 Sales 2,164 2,099 3 12% EBITDA 416 412 1 1.6 10% EBIT 299 307 -3 1.2 8% Funds Empl. 2,067 1,775 16 6% % 0.8 4% EBITDA/ Sales 19.2 19.6 0.4 2% EBIT
Slide 13: Construction Materials: EBIT down 3%
Construction Materials: EBIT down 3%; prices & margins held well despite softer NSW volumes & higher input costs Quarries and concrete: revenues up 5%; price increases despite flat concrete volumes reflecting exposure to NSW; profits down due to unrecovered fuel increases Asphalt: revenues sligh
Slide 14: Building Products: volumes down, prices up
Building Products: volumes down in all businesses but prices up in most products External sales yoy ∆ FY05 FY04 %∆ A$m prices / volume Bricks 295 298 -1 Roofing 110 122 -10 Masonry 138 138 - Plasterboard 321 318 1 Timber 189 207 -9 Windows 134 134 - TOTAL 1,187 1,217 -3 Full Year Results 2005 27 Bui
Slide 15: USA: record EBIT up 29% in US$
USA: record EBIT up 29% in US$ (A$ EBIT up 22%) on US$ revenues up 13% FY05 FY04 %∆ A$m 1,000 18% 1H Sales 2H Sales EBIT/ Sales US$m 16.8% 16% Sales 611 539 13 800 14% EBIT 103 80 29 12% 600 A$m 10% Sales 810 755 7 8% 400 EBIT 136 112 22 6% Funds Empl. 735 646 14 4% 200 % 2% EBIT/ Sales 16.8 14.8 0
Slide 16: USA performance; Asia EBIT down 37%
USA: improved performance from strong demand, increased prices & cost efficiency Continued strong housing market has driven demand for all products A$ EBIT impacted by around A$7m adverse currency movement Bricks: Earnings up through stronger selling prices, despite lower volumes due to capaci
Slide 17: Perform & Grow Strategy
Asia: EBIT down 37% reflecting difficult markets in South Korea & Thailand Plasterboard JV contribution of $10m, down 57%. Overall, volumes and revenues flat but prices down significantly in South Korea & Thailand – South Korean residential market weak – Thailand volumes up; prices well below impo
Slide 18: We continue to deliver against objectives
We continue to deliver against objectives Objectives Performance 1. Exceed WACC through Underlying ROFE of 15.6% the cycle comfortably exceeds WACC 2. Deliver better financial Improved returns from Building returns than the Products; Construction Materials, competition in Asia and USA compare well a
Slide 19: Perform: margins remain strong
Perform: margins remain strong due to sound price & cost management Construction Materials, Building Products, 13.2% Australia 13.8% Australia • Sound pricing – focus on cost recovery, IPP and entry limit pricing • Capacity management to match demand levels FY97 FY99 FY01 FY03 FY05 FY97 FY99 FY01 FY
Slide 20: Grow: A$1.6bn spent on growth since demerger
Grow: since Demerger, A$1.6bn spent on growth in Australia & increasingly offshore Growth expenditure from demerger to 30 June 2005 36% 39% 25% Australian organic growth Australian acquisition growth Offshore growth Full Year Results 2005 39 Grow – of A$1.6bn spent on growth since demerger, ~50% inv
Slide 21: Growth initiatives undertaken during FY2005
Growth initiatives undertaken during FY2005 Acquisitions Organic Hanson’s Thailand quarry & concrete Waurn Ponds cement plant upgrade business Galong vertical shaft lime kiln Owen Bros & Ready Mixed Concrete Berrima cement mill upgrade Company in Denver Maldon bagging plant upgrade Gir
Slide 22: Perform & Grow in Australia and Asia
Our strategy is to Perform & Grow in Australia Davis & Herbert Herons Creek Engineered Flooring Oberon Softwood Mill Full Year Results 2005 43 Our strategy is to Perform & Grow - increasingly offshore (in Asia) LBGA China Concrete & Quarries Thailand LBGA Korea Full Year Results 2005 44 22
Slide 23: Perform & Grow offshore; earnings growth expected
Our strategy is to Perform & Grow - increasingly offshore (in USA) Denver Construction Materials Trinidad JV Union City Full Year Results 2005 45 We expect significant earnings growth over the next 5 years (particularly offshore) Construction Materials, Australia EBIT Building Products, Australia Of
Slide 24: Outlook: Australian construction activity
Waurn Ponds Maldon Bagging Plant Berrima Kiln 6 Outlook Lime - Galong Full Year Results 2005 47 BIS Shrapnel expect Australian construction activity to remain robust for some years Australia – Value of Work Done A$97/98 billion. Seasonally adjusted 55 % change Dwelling (incl A&A) 50 Roads, Highways,
Slide 25: US residential activity and Asian construction demand
US residential activity remains robust USA Boral States1 – Value of Work Commenced US$92 billions % change 300 Dwelling Non-dwelling 0.8 (3.1) 0.4 0.6 250 15.1 0.6 2.1 (2.9) 200 150 100 (4.8) (4.9) (0.4) 2.4 50 0 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05e FY06f FY07f FY08f FY09f Source: FW D
Slide 26: Growth: benefits still to come from organic initiatives
Growth: benefits still to come through from previously announced organic growth initiatives Expected Growth project Benefits benefits from: Engineered flooring Produce 1.0m m2 of engineered flooring annually; Mar-05 Q (Hardwood Timber, NSW) 0.5m m2 initially Waurn Ponds Stage 2 Additional 300K
Slide 27: Outlook for FY2006
Outlook for FY2006 Anticipate Australian dwelling commencements of around140,000-145,000 starts Uplift in Australian non-dwelling activity to continue/ major road & infrastructure activity to strengthen Australian building and construction material prices increased by 3-4% in FY2005 and compar
Slide 28: Impact of A-IFRS
Impact of A-IFRS Boral will prepare financial statements that comply with Australian equivalents to International Reporting Standards (A-IFRS) for the half year ending 31 December 2005 and the full year ending June 2006 Interpretation of new accounting standards is ongoing Key impacts on compa