Boral — H1 FY2016 Earnings Presentation
48 slides from Boral's earnings presentation, Feb 10, 2016
Slide 1: Results: half year to 31 December 2015
RESULTS For the half year to 31 December 2015 10 February 2016
Slide 2: Agenda
Agenda • Results Overview Mike Kane, CEO • Financial Results Ros Ng, CFO • Strategic Priorities & Outlook Mike Kane, CEO Right: USG Boral Sheetrock® products were used in the Prima Pearl multi-residential development in Southbank, Melbourne, Victoria Front cover photos: (left) Boral USA supplied con
Slide 3: Boral today – well positioned for growth
Boral today – well positioned for growth 1. Strengthened position in Australia while market transitions • Significant pick-up in major roads and infrastructure expected over next 5-6 years, while slowdown in resource-based projects is working through 2. Demonstrated margin expansion ability, includi
Slide 4: Half year results highlights
Half year results highlights Profitability continues to strengthen 1H FY2016 vs 1H FY2015 Reported revenue Gearing, Net D/(Net D+E) $2.2 billion 4% 23% up from 20% EBIT1 EPS1 $200 million 19% 18.2cents 28% Profit after tax1 Half year dividend $137 million 23% 11.0cents 29% Net profit after tax ROFE1
Slide 5: Employee & contractor safety performance
Employee & contractor safety performance Striving to achieve ZERO HARM today Employee and Contractor LTIFR1,2 • Substantial improvement in LTIFR, down -29% 29% to 1.2 in 1H FY2016 2.0 1.9 1.9 • Improvement trend continued in RIFR, 1.8 1.8 1.7 down 26% to 8.6 in 1H FY2016, 1.2 demonstrating continuin
Slide 6: Solid earnings performance
Solid earnings performance Improvements across all divisions with strong focus on cost management EBIT1 variance, A$m 1H FY2016 vs 1H FY2015 16 3 8 3 9 200 167 1H FY2015 Construction Building Boral Boral Unallocated 1H FY2016 EBIT1 Materials Products Gypsum3 USA EBIT1 & Cement2 1. Excluding signific
Slide 7: Key markets poised for growth
Key markets poised for growth Record Australian housing activity continues, further improvements in US housing and slower growth in some Asia markets 1H FY2016f vs 1H FY2015 Asia4 Korea Indonesia Thailand China Australia RHS&B1 (VWD) Other engineering1 (VWD) USA Non-residential (VWD)2 5% Total housi
Slide 8: Construction Materials & Cement
Construction Materials & Cement Strong returns and increasing profitability despite lower major project activity and reduced contribution from Landfill divestment Revenue EBIT A$m 1H FY2016 1H FY2015 Var, % Revenue 1,489 1,626 (8) $1.49b 8% $159m 6% EBITDA1 251 241 4 • Margin expansion from operatio
Slide 9: Building Products
Building Products Increase in profitability driven by continued strength in housing market and portfolio realignment, including success of Boral CSR Bricks JV A$m 1H FY2016 1H FY2015 Var, % Revenue EBIT Reported result Revenue 192 263 (27) $192m 27% $17m 15% EBITDA1 21 25 (16) • Earnings up due to g
Slide 10: Boral Gypsum (USG Boral joint venture)
Boral Gypsum (50%-owned USG Boral joint venture) Significant profit growth through new product penetration, strong cost management and continued strength in Australian market A$m 1H FY2016 1H FY2015 Var, % Underlying Revenue Underlying EBIT Reported Gypsum business result1 $718m 13% $91m 30% Equity
Slide 11: Boral USA
Boral USA Earnings expansion leveraged to continuing housing market recovery A$m 1H FY2016 1H FY2015 Var, % Revenue EBIT Revenue 512 396 29 A $512m 29% A $8m up from (A$8m) EBITDA1 33 12 • Positive EBIT of US$6m; margins improved EBIT1 8 (8) with operational cost leverage, easing of EBIT ROS, % 1.6
Slide 12: Focus on improving ROFE in the long term
Focus on improving ROFE in the long term Progressing towards returns that exceed the cost of capital EBIT to funds employed (ROFE1) % 18.2 15.9 14.2 11.9 10.1 8.2 8.6 7.6 7.2 6.5 6.6 6.7 4.7 4.1 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY2015 FY2016 1H 1H Focused on ongoing discip
Slide 13: Financial Results
Financial Results Ros Ng – Chief Financial Officer
Slide 14: Group financial performance
Group financial performance Cost and productivity improvements strengthen profitability A$m 1H FY2016 1H FY2015 Var, % Revenue 2,194 2,285 (4) EBITDA1 322 290 11 Depreciation and amortisation (122) (123) - EBIT1 200 167 19 Net interest1 (31) (31) (3) Tax1 (32) (25) 25 Non-controlling interests 0 0 P
Slide 15: Cash flow
Cash flow Maintaining similar levels of operating cash flow Cash flow, A$m 1H FY2016 1H FY2015 • Operating cash flow broadly steady at $113m EBITDA1 322 290 – Increase in working capital due to Change in working capital and 1H seasonality as well as: (69) (42) other o cash receipts from major custom
Slide 16: Continued capital expenditure discipline
Continued capital expenditure discipline Focus on stay-in-business capital expenditure continues Total capital expenditure • Total capex of $115m, up on $94m capex A$m in 1H FY2015 SIB Growth Depreciation and amortisation • Stay-in-business (SIB) capex of $103m, up from $76m in 1H FY2015 – SIB capex
Slide 17: Balance sheet
Balance sheet Gearing remains at lower end of historical range Gearing1 • Net debt of $1.03b increased by $208m % since 30 June 2015, largely due to on- 31 30 market share buy-back and translation of 23 US$ denominated debt 19 20 18 14 • Principal debt gearing covenant at 31%; well within threshold
Slide 18: Strategic Priorities & Outlook
Strategic Priorities & Outlook Mike Kane – CEO & Managing Director
Slide 19: Boral's Fix, Execute, Transform program
Boral’s Fix, Execute, Transform program FIX EXECUTE TRANSFORM 2 years FY2013 4 years Since 6 years + Fixing things that were Improving the way we Transforming Boral for holding us back operate to be more performance excellence efficient, disciplined and sustainable growth Streamlined organisation
Slide 20: Execute and Transform
Execute and Transform Improving the way we operate and transforming Boral for performance excellence Boral Construction Boral Building Boral Gypsum Boral USA Materials & Cement Products Benefits from Boral CSR Bricks JV Sheetrock® technology US$4m expansion of restructuring initiatives comme
Slide 21: Outlook for FY2016
Outlook for FY2016 • Expect continued strong results with underlying FY2016 EBIT to be marginally above FY2015 (excluding Property in both years) Boral • Expect 2H underlying earnings to be lower than 1H FY2016 due to continuing Construction conditions and fewer working days in 2H Materials & • Rest
Slide 22: Boral today – well positioned for growth
Boral today – well positioned for growth 1. Strengthened position in Australia while market transitions • Significant pick-up in major roads and infrastructure expected over next 5-6 years, while slowdown in resource-based projects is working through 2. Demonstrated margin expansion ability, includi
Slide 23: Questions
BORAL} Questions
Slide 24: Supplementary slides
BORAL} Supplementary slides
Slide 25: Boral overview
Boral overview 1H FY2016 external revenue3 • Boral is an international building by division, % and construction materials group USA with operations in Australia, the 20 USA and Asia Construction Materials Gypsum4 14 58 & Cement • ~A$4.0 billion market capitalisation1 8 Building Products • S&P/ASX 10
Slide 26: Boral's Fix, Execute, Transform program
Boral’s Fix, Execute, Transform program Our goal is to transform Boral into a global building and construction materials company that is known for its world-leading safety performance, innovative product platform and superior returns on shareholders’ funds. FIX EXECUTE TRANSFORM 2 years FY2013 4 yea
Slide 27: Construction Materials & Cement and Boral Building Products
Construction Materials & Cement and Boral Building Products SHARE OF REVENUE1, % by state WA / NT NT 2 20 NSW / 12 ACT 1 2 61 Qld 22 44 1 17 QLD 1 22 12 1 WA 13 1 SA 3 Vic / Tas / SA 11 1 30 NSW/ 7 10 1 93 by business Timber Other ACT 2 2 1 13 Bricks & 9 Roofing2 4 5 2 VIC/TAS Concrete 7 OPERATING F
Slide 28: Boral's Australian revenues are derived from a number of segments
Boral’s Australian revenues are derived from a number of segments Other engineering2, VWD A$ billions Detached dwellings5, # starts 120.0 140,000 100.0 120,000 80.0 100,000 80,000 60.0 60,000 40.0 Boral’s Australian revenue 40,000 20.0 - by end-market1, % 20,000 - 1990 1992 1994 1996 1998 2000 2002
Slide 29: Australian major road projects pipeline
Australian major road projects pipeline Investment in roads infrastructure expected to translate into stronger materials demand towards end of FY2016 / FY2017 Major Road Construction Projects – Australia Major Value of work Road done Construction by year, Projects A$b (as at October 2015)- Australia
Slide 30: CM&C strategic reserves and integrated downstream operations
In CM&C, Boral is well positioned with strategic reserves and integrated downstream operations 40-50% Quarry QUARRIES 5-15% Quarry CEMENT volumes sold volumes sold Aggregates BITUMEN ~70% of needs internally to and sand internally to from domestic Concrete Asphalt Bitumen Importers manufacturing Aus
Slide 31: CM&C property managed as integrated feature of the business
In CM&C, our Property is also managed as an integrated and ongoing feature of the business New need defined Development / Site opportunity disposal located New land Development use approvals approval Integrated Property Life Cycle Capital Rehabilitation approval End use Operations strategy planning
Slide 32: Property in CM&C: large land bank harvested continually
Property is in CM&C because it has a large land bank and harvests property on a continual basis Australian Property Purchased land operations end use Refreshed land purchases Major developments • Growth corridors, • Residential generally in outer • Industrial / employment NT 2 suburbs or regional QL
Slide 33: Track record of maximising returns from property assets
Boral has a solid track record of maximising returns from our property assets, with strong internal management capability EBIT1, A$m Boral Property Group 10-year average • Partners with business units Property/QEU earnings: as early as possible to $36m maximise value, reduce operational rehabilitati
Slide 34: USG Boral
USG Boral 50%-owned joint venture in Australia, New Zealand, Asia & Middle East SHARE OF REVENUE1, % Other Australia China 13 Indonesia 6 5 36 3 South Korea 8 China 12 2 1 14 2 19 India 3 1 Vietnam Thailand 1 1 3 1 1 Korea Middle East 2 1 Philippines Thailand 1 2 MANUFACTURING FOOTPRINT 3 2 Malaysia
Slide 35: High growth countries and new products underpin USG Boral growth
Operations in high growth countries as well as new products will underpin USG Boral’s growth China SHARE OF REVENUE1, % GDP growth 7.3% Population 1.37 bn Population growth 0.5% Other India Australia GDP growth 7.3% Urban population 55.6% 13 Indonesia Rate of urbanisation 3.1% 6 Population 1.25 bn 3
Slide 36: Boral USA
Boral USA SHARE OF REVENUE1 , % 1 by business 1 Fly Ash & Construction Materials 1 NORTH- 25 MIDWEST 2 EAST Cladding2 1 1 1 52 1 10 6 1 WEST 5 23 4 2 1 3 1 7 Roofing 1 2 2 2 1 1 4 3 3 4 5 6 SOUTH 4 by end market 1 59 1 5 Other 2 RHS&B3 5 4 Non- 7 OPERATING FOOTPRINT4 residential (total number of ope
Slide 37: US new residential construction continuing to recover
In the USA, new residential construction is continuing to recover in all regions Forecasters1 currently expect an average of ~1.2m US housing starts in FY2016 and ~1.5m by FY2018, with all regions forecast to recover strongly ‘000 NORTHEAST2 Region Housing Starts SHARE OF BORAL’S ‘000 MIDWEST2 Regio
Slide 38: 1H FY2016 segment revenue and EBIT
1H FY2016 segment revenue and EBIT External revenue A$m EBIT1 A$m 1H FY2016 1H FY2015 Var, % 1H FY2016 1H FY2015 Var, % Construction 1,489 1,626 (8) 159 150 (6) Materials & Cement Building Products 192 263 (27) 17 14 15 Boral Gypsum2 – – 32 24 31 Boral USA 512 396 29 8 (8) – Unallocated – – (16) (13
Slide 39: Divisional ROFE performance
Divisional ROFE performance Improvement in returns across all divisions, with CM&C ROFE1 now exceeding the cost of capital Construction Materials & Cement Building Products ROFE1 % Returns exceeding cost of capital ROFE1,2 % Strong improvement in returns • Earnings growth reflects operational • Cont
Slide 40: Earnings and dividends per share
Earnings and dividends per share Fully franked interim dividend of 11.0 cents per share declared Earnings and dividends per share1 • Earnings per share1 of 18.2 cents, A$ cents up 28% on 1H FY2015 DPS EPS • Fully franked interim dividend of 31.9 11.0 cents per share, up 29% on 1H FY2015 24.4 • Inter
Slide 41: Debt profile
Debt profile Maintaining a strong balance sheet Gross debt currency exposure 1H FY2016 1H FY2015 As at 31 December 2015 Debt facilities A$m A$m USPP1 1,157 1,044 21% USD Syndicated term credit - - AUD facility CHF notes2 208 184 79% Other loans/ finance 4 16 leases Gross debt 1,369 1,244 Total = A$1
Slide 42: RHS&B activity forecast to increase in FY2016
RHS&B activity forecast to increase in FY2016 Value of work done forecast to increase in all states, but construction materials demand is not expected to pick up until late FY2016 / FY2017 Roads, Highways, Subdivisions & Bridges1 RHS&B – by state1 (value of work done, A$b) FY2016f vs FY2015 (value o
Slide 43: Concrete demand in Australia
Concrete demand in Australia A proxy for construction materials volumes Industry concrete demand in Australia is forecast to stay at high levels for the next five years Macromonitor Forecast1 Concrete Demand across all Australian construction markets, million m3 • ~1.5% CAGR2 in concrete volumes 30
Slide 44: Australian residential activity remains strong
Australian residential activity remains strong Total housing starts estimated to be up 2% (detached down 1%, multi up 5%), driven by strength in Vic, NSW and Qld Total housing starts1 Housing starts – by state1 (‘000) Detached Other 1H FY2016f vs 1H FY2015 +2% (‘000) 214 217 220 211 181 163 163 101
Slide 45: Australian non-residential activity down
Australian non-residential activity down Weaker non-residential building activity in all states except Vic Non-residential1 Non-residential – by state1 (value of work done, A$b) 1H FY2016f v 1H FY2015 (value of work done, A$b) -5% 37.2 36.9 35.5 35.4 34.9 35.0 -7% 33.7 33.9 +3% -7% -9% 10.2 9.6 9.9
Slide 46: US housing activity continues to strengthen
US housing activity continues to strengthen Total US housing starts up 10% in 1H FY2016 US total housing starts1 • US total housing starts of 1,146k1 in 1H (‘000) FY2016, up 10% on 1H FY2015 – Total starts remain 24% below long-term average 1,146 1,055 1,042 1,068 of 1.5m housing starts 954 872 687
Slide 47: Non-IFRS information
Non-IFRS information Boral Limited’s statutory results are reported under International Financial Reporting Standards. Earnings before significant items is a non-IFRS measure reported to provide a greater understanding of the underlying business performance of the Group. Significant items are detail
Slide 48: Disclaimer
Disclaimer The material contained in this document is a presentation of information about the Group’s activities current at the date of the presentation, 10 February 2016. It is provided in summary form and does not purport to be complete. It should be read in conjunction with the Group’s periodic r