James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Day (September 2014)
164 slides from James Hardie Industries's investor day presentation, Sep 24, 2014
Slide 1: External Environment
For personal use only EXTERNAL ENVIRONMENT Matthew Marsh 24 September 2014
Slide 2: Disclaimer
DISCLAIMER For personal use only This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 3: Forward-looking statements cautionary notes
For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to identify forward-looking
Slide 4: Agenda
AGENDA For personal use only • U.S. Economic Indicators • Housing Market Overview • Market Opportunity for James Hardie 4
Slide 5: U.S. Economic Indicators Improving
U.S. ECONOMIC INDICTORS IMPROVING For personal use only 5
Slide 6: GDP and Consumer Confidence
GDP AND CONSUMER CONFIDENCE For personal use only U.S. GDP Consumer Confidence 10% 8% 6% 4% 2% 0% -2% -4% 51 56 60 64 68 72 76 81 85 89 93 97 01 06 10 14 Source: Bureau of Economic Analysis, Morgan Stanley Research. Source: Conference Board, Morgan Stanley Research. Note: Gray shading denotes period
Slide 7: US Consumer Credit Is Strengthening
US CONSUMER CREDIT IS STRENGTHENING For personal use only Home Affordability & Interest Rates 90+ Day Delinquencies Sources: JCHS Tabulations of Freddie Mac. Primary Mortgage Market Survey; National Association of Realtors®, Housing Affordability Index • Ownership affordability drivers are becoming
Slide 8: US Consumer Balance Sheets Are Healthier
US CONSUMER BALANCE SHEETS ARE HEALTHIER For personal use only Household Balance Sheet Yield on All Mortgages vs. 30-Year Fixed Source: US Federal Reserve Source: Bureau of Economic Analysis • Roughly 75% of the household balance sheet is in mortgages… • … and 30-year fixed-rate mortgage rate at his
Slide 9: Housing Market Overview
HOUSING MARKET OVERVIEW For personal use only 9
Slide 10: Home Prices and Inventories
HOME PRICES AND INVENTORIES For personal use only S&P/Case-Schiller U.S. National Home Price Index Home prices have stabilized and are beginning to rise slowly… Existing & New Home Inventories Source: McGraw Hill Financial …while inventories of new and existing homes are near historic lows Source: N
Slide 11: Indicators Suggest Market Is in Recovery
INDICATORS SUGGEST MARKET IS IN RECOVERY For personal use only Single-family new construction and multifamily starts growing at a faster rate than the repair and remodel segment Sources: Dodge New Construction Forecast and James Hardie Internal Management Estimates 11
Slide 12: New Construction Starts Heading Back Towards ~1.5 Million Starts Per Year
NEW CONSTRUCTION STARTS HEADING BACK TOWARDS ~1.5 MILLION STARTS PER YEAR For personal use only • Variation in forecasting starts between different organization exists • New starts growth forecast 2015 range: 20% and 33% • New starts growth forecast for 2016 range: 15% and 16% 12
Slide 13: Underlying Demand for New Houses Likely to Drive New Construction Starts
UNDERLYING DEMAND FOR NEW HOUSES LIKELY TO DRIVE NEW CONSTRUCTION STARTS For personal use only Formations vs. Starts Homeownership Rate • Low household formation numbers • First-time homebuyers in a difficult over the past five years will drive position – student debt, job market, etc. homebuilder d
Slide 14: Pent Up Demand for Housing
PENT UP DEMAND FOR HOUSING For personal use only % of 18-34 year olds living at home Number of people 16 and older per household • Pent-up demand for housing • If the number of people per household returns to the 2000-2003 level it would add • Almost 1/3 of 18-34 year olds now up to more than 4 mill
Slide 15: Underlying Supply for New Houses Likely to Drive New Construction Starts
UNDERLYING SUPPLY FOR NEW HOUSES LIKELY TO DRIVE NEW CONSTRUCTION STARTS For personal use only U.S. Housing starts • Average number of starts since 1959 has been ~1.5M starts per year • 2013 starts aligned with previous “trough” years • Current starts still has room to expand over the next several y
Slide 16: Existing Home Sales Remain Above Normal Levels
EXISTING HOME SALES REMAIN ABOVE NORMAL LEVELS For personal use only SF Home Sales, 1968-April 2014 (SAAR Thousands) SF New Home Sales SF Existing Home Sales 9,000 8,000 7,000 6,000 5,000 45 year average 4.18 million 4,000 3.875 million 3,000 sans 2002-2006 2,000 1,000 0 May-70 May-77 May-84 May-91
Slide 17: New Home Sales Have Lost Share
WHILE HOME SALES ARE AT HIGH LEVELS, NEW HOME SALES HAVE LOST SHARE For personal use only New Home Share of Total SF Home Sales 30% 25% 20% 45 year average 17% (1/6) 15% 10% 5% 0% Source: Commerce Department, National Association of Realtors, Metrostudy Analysis 17
Slide 18: Supplies Remain Below Normal
SUPPLIES REMAIN BELOW NORMAL For personal use only New and Existing SF Months' Supply, 1982-April 2014 New Home Months' Supply Existing SF Months' Supply 16.0 14.0 12.0 10.0 8.0 30 Yr Ave 7.2 6.0 50 Yr Ave 6.1 4.0 2.0 0.0 Source: Commerce Department, National Association of Realtors, Metrostudy Anal
Slide 19: Repair & Remodel Compared to New Construction Is Less Volatile, and Growing
REPAIR & REMODEL COMPARED TO NEW CONSTRUCTION IS LESS VOLATILE, AND GROWING For personal use only Repair & Remodel Market Sources: James Hardie Internal Management Estimates. • Repair & Remodel market is less volatile and currently as big as new construction • Year-over-Year growth ranges from -8% t
Slide 20: Market Opportunity
For personal use only MARKET OPPORTUNITY 20
Slide 21: North America Market Overview
NORTH AMERICA MARKET OVERVIEW For personal use only North America Market Share by Product North America Wood-Look Market Size 4.7BSF Fiber Cement Share: 17% Fiber Cement Share 25% Source: Internal estimates based on NAHB product usage data adjusted Source: Internal estimates based on NAHB product us
Slide 22: Wood-Look Share of Total Market
WOOD-LOOK SHARE OF TOTAL MARKET For personal use only Wood-look products continue to maintain ~ 2/3rds of the of the wall against stone, stucco, and brick Source: Internal estimates based on NAHB product usage data adjusted for regional market intelligence 22
Slide 23: Wood-Look Siding Share
WOOD-LOOK SIDING SHARE For personal use only Growth opportunity varies by region, vinyl & wood in the north, wood and competitive cement in the south and west Internal estimates based on NAHB product usage data adjusted for regional market intelligence 23
Slide 24: Vinyl Continues to Underperform
VINYL CONTINUES TO UNDERPERFORM For personal use only Vinyl’s Weaker Market Position Vinyl Under Performing vs. Starts Source: Internal estimates based on NAHB product usage data adjusted for regional market intelligence 24
Slide 25: Competitive Fiber Cement
COMPETITIVE FIBER CEMENT For personal use only Competitive Fiber Cement competitors appear to be optimizing their businesses instead of ramping up idle capacity Nichiha • Announced restricted shipping radius to local market • Performance concerns in harsh climates; High reject rate Allura • Elementi
Slide 26: Summary
SUMMARY For personal use only • U.S. economic indicators improving .. Broader economy in recovery • Recovering housing market • New construction growth below historic levels … pent up demand and below normal supplies should support new construction starts heading towards 1.5M • Wood look siding is g
Slide 27: Questions
For personal use only QUESTIONS
Slide 28: For personal use only
For personal use only 28
Slide 29: North Division
For personal use only NORTH DIVISION Sean Gadd 24 September 2014
Slide 30: Disclaimer
DISCLAIMER For personal use only This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 31: Forward-looking statements cautionary notes
For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to identify forward-looking
Slide 32: Agenda
AGENDA For personal use only • North Division Overview • North Strategy • Sales Execution Update • Market Moving Initiatives • Summary 4
Slide 33: North Division Overview
NORTH DIVISION OVERVIEW For personal use only Quick Facts Market Dynamics • ~1060 employees • 40 % of JH volume • 4 manufacturing facilities • ~20% of wood-look products • Predominately HZ5 volume • Wood-look at ~65% of market Canada Pacific Northwest Mountain Midwest Northeast 5
Slide 34: North Strategy
NORTH STRATEGY For personal use only • Grow Fiber Cement share by substituting for both vinyl and wood based sidings and trims in the new construction and repair and remodel market segments (35) • Maintain our Fiber Cement category position by delivering differentiated value to supply chain particip
Slide 35: North Division Overview: Regional Vinyl and Wood Shares
NORTH DIVISION OVERVIEW For personal use only • 5 regions • Approach differs due to opportunity and competitor Canada Vinyl share 50% Wood share 15% Northwest Vinyl share 5% Wood share 30% Mountain Northeast Midwest Vinyl share 10% Vinyl share 50% Vinyl share 40% Wood share 35% Wood share 15% Wood s
Slide 36: Product Strategy
PRODUCT STRATEGY For personal use only MARKET Northeast & Pacific Midwest Mountain Canada Northwest CORE PRODUCT x x x x x x x Vinyl Vinyl & Wood Wood Fiber Cement MARKET STANDARD 8
Slide 37: James Hardie Value Proposition
JAMES HARDIE VALUE PROPOSITION For personal use only • James Hardie can deliver superior design to vinyl with a true wood look • James Hardie can deliver superior durability and lower maintenance than real wood, hardboard/OSB exterior products 9
Slide 38: Segments
SEGMENTS For personal use only Single family new construction • Market development • Builders and developers Single family repair and remodel • Hardie standard / vinyl standard neighborhoods • Sold through the contractor Multifamily • Developers and Architects • Bid process 10
Slide 39: Channel Strategy
CHANNEL STRATEGY For personal use only • Align with channel partners in a way that allows full market access and leverage their local service capabilities and customer relationships. • Ensure that the supply chain is built and operates in a manner that enables participants to earn acceptable categor
Slide 40: Manufacturing Strategy
MANUFACTURING STRATEGY For personal use only • Enable James Hardie’s product leadership • Delivers James Hardie brand promise • Ensure capacity is available during periods of peak demand • Allows delivered unit cost to remain relatively flat in all market types 12
Slide 41: Manufacturing – Plant / Market Coverage
MANUFACTURING – PLANT / MARKET COVERAGE For personal use only Plank, Panel Plank, Panel, Backer, Trim, ColorPlus® Products, Artisan® and Artisan® V-Groove Products Plank, Panel, Backer, Plank, Panel, Backer NT3® Trim, Heritage®, soffit, ColorPlus® Products ColorPlus® Products, Mouldings Panel, Backe
Slide 42: Organization / Leadership
ORGANIZATION / LEADERSHIP For personal use only • Driving an overall business capability • Ability to move a market • Executing at a high level with a single focus • Depth and leadership • Tenure and continuity Recruit Engage Develop Evaluate Promote 14
Slide 43: Sales Execution - Starts
SALES EXECUTION - STARTS For personal use only New construction growth has slowed • First 3 quarters of 2014:North starts up 1% versus 2013 Repair & Remodel up roughly 3% year over year Addressable Starts Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 E Q4 E FY 13 FY 13 FY 13 FY 13 FY 14 FY 14 FY 14 FY 14 FY 15 F
Slide 44: Market Performance
MARKET PERFORMANCE For personal use only North Exterior Volume FY11 YTD FY12 YTD FY13 YTD FY14YTD FY15YTD 16
Slide 45: Market Specific Initiatives
MARKET SPECIFIC INITIATIVES For personal use only • Ambassador program in repair and remodel segment • 100% Hardie in single family new construction segment 17
Slide 46: Hardie Ambassador Program: Large Metros
HARDIE AMBASSADOR PROGRAM: LARGE METROS For personal use only • Invest early in a neighborhood • Drive awareness and preference for James Hardie products in vinyl standard neighborhoods • Reaching homeowners through multiple touch points 18
Slide 47: Ambassador Performance
AMBASSADOR PERFORMANCE For personal use only % Growth - Year Before Ambassador Program to Now Chicago DC/Baltimore Boston New Jersey 19
Slide 48: 100% Hardie: Minneapolis
100% HARDIE: MINNEAPOLIS For personal use only Differentiate James Hardie brand PROGRAM PROMISE and create value for both builders and homeowners CHOOSE LIVE BUILD 100% Hardie 100% Hardie 100% Hardie INFLUENCE CHOICE Extend and deepen relationship with brand 20
Slide 49: 100% Hardie Program: Minneapolis
100% HARDIE PROGRAM: MINNEAPOLIS For personal use only • Single family new construction target • Responds to Hardboard/OSB positioning of; looks like James Hardie but costs less • Creates and builds additional value at the builder level, and ultimately for the homeowner, to offset Hardboard/OSB sidi
Slide 50: 100% Hardie: Minneapolis Components
100% HARDIE: MINNEAPOLIS For personal use only 100% Hardie Components • 100% Hardie Positioning • Color palette reset • Marketing campaign • Siding Solution Center 22
Slide 51: Siding Solution Center: Minneapolis
SIDING SOLUTION CENTER: MINNEAPOLIS For personal use only • Increase the quality of installation in the market • Increase the supply of qualified labor to install James Hardie in the new construction segment • Responds to the ease of install perception of Hardboard/OSB that some builders value, espe
Slide 52: Performance of 100% Hardie: Minneapolis
PERFORMANCE OF 100% HARDIE: MINNEAPOLIS For personal use only Builder Adoption of the Program May June July August 24
Slide 53: Summary
SUMMARY For personal use only Growth will come through substituting both vinyl and wood based sidings and trims • Market development against vinyl • Defend and grow against wood based exterior products through; enhanced sales programs, more effective product positioning improved channel alignm
Slide 54: Questions
For personal use only QUESTIONS
Slide 55: South Division
For personal use only SOUTH DIVISION Ryan Sullivan 24 September 2014
Slide 56: Disclaimer
DISCLAIMER For personal use only This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 57: Forward-looking statements cautionary notes
For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to identify forward-looking
Slide 58: Agenda
AGENDA For personal use only • South Division: Overview and Starts Activity • Market: Product & Segment Strategies • Manufacturing: Capability & Capacity 4
Slide 59: South Division at a Glance
SOUTH DIVISION AT A GLANCE For personal use only Quick Facts Manufacturing Employees: ~640 Sales Employees: ~100 FY14 Volume: ~890 mmsf ~60% of North American Volume ~80% Exteriors vs Interiors ~85% Single Family vs Multi Family Source: Company data 5
Slide 60: South Starts Summary
SOUTH STARTS SUMMARY For personal use only While the South Division continues to grow above the market, we have seen starts forecasts come down significantly since our FY15 planning cycle Source: Dodge/Company data 6
Slide 61: Southern Division FY15 Focus Areas
SOUTHERN DIVISION FY15 FOCUS AREAS For personal use only Organizational Development Focused growth from hardboard and vinyl while executing on the 90 • Key Product Initiatives – Trim, ColorPlus® and Top of Market • Key Segment Initiatives – New contractor program, Ambassador program, 100% Hardie bui
Slide 62: Product Strategy: Trim
PRODUCT STRATEGY: TRIM For personal use only Position durability of JH trim against lower performing wood and hardboard trim Trim Product Initiatives in South Sanded Edge Expansion HardieTrim® Mouldings 1x2 8
Slide 63: Product Strategy: ColorPlus
PRODUCT STRATEGY: COLORPLUS ® For personal use only Provide a superior performing product to homeowners Provide a more economical JH solution in high paint cost markets Organizational focus for C+ is on Repair/Remodel segments across the South, and New Construction in markets with high field paint c
Slide 64: Product Strategy: Top of Market
PRODUCT STRATEGY: TOP OF MARKET For personal use only We are expanding our access to the “Top of Market” by launching new products and entering new markets Reveal® Panel System Artisan® Plank Artisan® V Rustic 10
Slide 65: Segment Strategies
SEGMENT STRATEGIES For personal use only 3 key segment initiatives within the Single Family segment to accelerate growth and product mix shift New R&R Contractor R&R Ambassador 100% Hardie Program Program 11
Slide 66: R&R Segment Strategy
R&R SEGMENT STRATEGY For personal use only Ensure R&R segment is disproportionate share of 35-90 Build and maintain a Ensure differentiated Build an organization of Focus resources on vinyl winning network of position with the R&R experts standard markets aligned contractors homeowner Contractor Tra
Slide 67: Purpose of Website Contractor Program
PURPOSE OF WEBSITE CONTRACTOR PROGRAM For personal use only To increase the number of homes that receive a high-quality Hardie sales and install experience via growing our network of aligned contractors. JH POV CONTRACTOR POV HOMEOWNER POV • Extension of our Brand. • Manufacturer endorsement • Find
Slide 68: Why Change Our Program Now?
WHY CHANGE OUR PROGRAM NOW? Combining the best of both programs and offering even more non-product For personal use only value adds and growth opportunities for companies of all sizes. Preferred Remodeler Program Associate Contractor Program Dedicated Any Contractor or Remodeler, Replacement Contrac
Slide 69: Cementing Ourselves as Your Greatest Ally
CEMENTING OURSELVES AS YOUR GREATEST ALLY For personal use only Program launching Q3 FY15 15
Slide 70: Membership Levels for Any Size Business
MEMBERSHIP LEVELS FOR ANY SIZE BUSINESS By offering one consolidated program, we are able to streamline the contractor For personal use only acquisition and account development process, as new companies are brought on board and we work to help grow their businesses with James Hardie as a focus. REWA
Slide 71: South Division Manufacturing
SOUTH DIVISION MANUFACTURING For personal use only Plant Key Capabilities Keys to Operational Strategy Sheet Machines: 4’ wide, 5’ wide Low Density Production Fontana, CA Primary products: Panel, Backer • Safety Key Imports: Trim, Heritage® , Artisan® and ColorPlus® Products • Customer service deliv
Slide 72: South Manufacturing Locations
SOUTH MANUFACTURING LOCATIONS For personal use only HZ10 Manufacturing Facility ColorPlus ® VMI Distribution Center Products Facility Big Box Distribution Center 18
Slide 73: Southern Capacity Update
SOUTHERN CAPACITY UPDATE For personal use only Capacity expansion plans aligned to current forecast and our 85% target utilization rate • Fontana: Ramp-up currently on track • Plant City Trim: Construction complete Q415 • Cleburne: Construction complete Q116 • Evaluating next capacity add: Summervil
Slide 74: Summary
SUMMARY For personal use only • South is predominantly mature FC market. Growth must come from wood, hardboard, accessories, and vinyl in certain regions • Starts/Market coming in below forecast • Key Product Initiatives; Trim, ColorPlus®, and Top of Market • Key Segment Initiatives; New Contractor
Slide 75: Questions
For personal use only QUESTIONS
Slide 76: Supply Chain
For personal use only SUPPLY CHAIN Ryan Kilcullen 24 September 2014
Slide 77: Disclaimer
DISCLAIMER For personal use only This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 78: Forward-looking statements cautionary notes
For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to identify forward-looking
Slide 79: Agenda
AGENDA For personal use only • Supply Chain at JH • Network Expansion Impact • Customer Focus • Freight Market and JH Performance 4
Slide 80: JH Supply Chain Overview
For personal use only JH SUPPLY CHAIN OVERVIEW 5
Slide 81: JH Supply Chain
JH SUPPLY CHAIN For personal use only Managing the three flows: Product, Information and Cash Flow Product Flow Raw Material Manufacturing Outbound Channel Jobsite Warehousing Suppliers Scheduling Freight Management Delivery JH Supply Chain Organization Information Flow Raw Material Production Inven
Slide 82: JH Supply Chain Objectives
JH SUPPLY CHAIN OBJECTIVES For personal use only JH Supply Chain has two primary objectives 1. Customer value creation 2. Operational and financial efficiency We accomplish by • Leveraging our network scope and operating capability to enhance the profitability and experience of our customers • Deplo
Slide 83: Example 1: VMIs
EXAMPLE 1: VMIS For personal use only VMIs are a critical element of our overall business strategy Customer Value Creation Optimizing JH Returns • Significant reduction in working capital • Lower freight costs - Weight max, ideal sourcing, lead time • Wider SKU offering • Order volatility is greatly
Slide 84: Example 2: Jobpacks
EXAMPLE 2: JOBPACKS For personal use only Jobpacks enable full wrap ColorPlus through an efficient supply chain Customer Value Creation Optimizing JH Returns • To-the-piece ordering capability reduces • HardieLink enables efficient order flow jobsite waste and returns cost • APO scheduling creates e
Slide 85: JH Network Evolution (FY05)
JH NETWORK EVOLUTION For personal use only Customer Value Creation JH Network – FY05 • Limited non-product value creation in JH supply Chain • Product mixing rules force complexity onto our customer base Optimizing JH Returns • Production scheduling is focused on enabling flat sheet PcI/PdI • Freigh
Slide 86: JH Network Evolution (Today)
JH NETWORK EVOLUTION For personal use only Customer Value Creation • Network density enables flexible ordering JH Network – Today rules to mix full range of products • VMIs and jobpacks create profitable options for servicing all builder types Optimizing JH Returns • Focus is on internal JH optimiza
Slide 87: JH Network Evolution (35/90)
JH NETWORK EVOLUTION For personal use only Customer Value Creation • Customer-focused value chain makes JH JH Network – 35/90 an easy-to-work with Business Partner • Deeper understanding of non-product value enhances customer profitability Optimizing JH Returns • Integrated supply chain (raw materia
Slide 88: Challenges of Increasing Network Scale
CHALLENGES OF INCREASING NETWORK SCALE For personal use only A growing network also brings supply chain challenges Capturing the full benefit of scale requires: 1. A step change in organizational capability 2. Optimization logic in our daily supply chain operations 13
Slide 89: Organizational Capability
ORGANIZATIONAL CAPABILITY For personal use only Attract, develop and retain supply chain talent that can manage the challenges of our 35/90 network 5 Pillar Strategy Recruit Engage Develop Evaluate Grow/Promote External Connection to APICS Quality In-Role Career Technical the Business Technical Perf
Slide 90: Process Capability
PROCESS CAPABILITY For personal use only Capturing the opportunities of a highly integrated network requires enhanced operating capabilities Order Flow Planning Processes Freight Management • Integration with • Flat sheet • Multi-stop customer ERPs scheduling logic optimization • HardieLink • APO de
Slide 91: Process Enhancement Example
PROCESS ENHANCEMENT EXAMPLE For personal use only Automated order flow systems enable jobpack fulfillment with high organizational, manufacturing and freight cost efficiency HardieLink APO Production Scheduling Optimization Order Entry System Customer Automated, Re-aggregated orders with optimized o
Slide 92: Customer Value Initiative: On-Time Service
For personal use only CUSTOMER VALUE INITIATIVE: ON-TIME SERVICE 17
Slide 93: The Importance of Consistent Service
THE IMPORTANCE OF CONSISTENT SERVICE For personal use only Consistent on-time performance critical component of enabling 35/90 Importance to the Channel Importance to Hardie • Secures market position • Enables us to capitalize on our sales force investment • Maintains our brand • Reduces waste in ou
Slide 94: Ensuring Sufficient Capacity for Demand
ENSURING SUFFICIENT CAPACITY FOR DEMAND For personal use only Constant network balancing ensures we have sufficient production capacity to meet customer demand Regional Sourcing Zones Lowest Cost Sourcing Actual Network Sourcing Customer demand is grouped into Manufacturing & freight costs Introduci
Slide 95: Operational Excellence in Order Fulfillment
OPERATIONAL EXCELLENCE IN ORDER FULFILLMENT For personal use only A strong customer focus drives our daily replenishment activities 20
Slide 96: On-Time Service Summary
ON-TIME SERVICE SUMMARY For personal use only • On-time service is an important component of JH Customer Focus and has a direct link to 35/90 • Our supply chain systems are designed for on-time service at optimized total landed cost • Our recent performance has been strong – the most recent 3 quarte
Slide 97: Maximizing JH Returns: Managing the Rising Transportation Market
For personal use only MAXIMIZING JH RETURNS: MANAGING THE RISING TRANSPORTATION MARKET 22
Slide 98: External Transportation Cost
EXTERNAL TRANSPORTATION COST For personal use only Market rates* have rebounded dramatically from recession-levels External factors are driving freight costs to historic highs *Source: KeyBanc Capital Markets Truckload Spot Index 23
Slide 99: Headwinds in the Freight Market
HEADWINDS IN THE FREIGHT MARKET For personal use only Fundamental shifts in the demand/supply equation driving cost Demand Drivers Supply Constraints Post-recession economic recovery Recent regulatory changes that reduce driver capacity Increasingly congested rail system Demographic shifts = an annu
Slide 100: JH Network and Market Freight Costs
JH NETWORK AND MARKET FREIGHT COSTS For personal use only FY05 – FY12 JH freight cost trended inline with market rates FY13 – FY15 JH freight costs separate from the market trend as a result of multiple initiatives to improve our network efficiency 25
Slide 101: Progress Driving the Recent Separation
PROGRESS DRIVING THE RECENT SEPARATION For personal use only Result How it was Achieved • Significantly higher utilization of rail 14% reduction in average length • Plant-to-plant and ColorPlus® product of truckload haul network rail • VMI-enabled sourcing improvements • Automated LTL truckload buil
Slide 102: JH Transportation Summary
JH TRANSPORTATION SUMMARY For personal use only • There are significant headwinds in the external freight market • Network efficiencies have largely offset these costs • Our ability to continue to off-set this cost pressure will become more reliant on closer partnerships with Customers and Carriers
Slide 103: Supply Chain Summary
For personal use only SUPPLY CHAIN SUMMARY 28
Slide 104: Supply Chain Summary
SUPPLY CHAIN SUMMARY For personal use only • JH Supply Chain is focused on delivering customer value while optimizing financial returns • Our expanding network enables us to maximize both of these objectives – while requiring improved organizational and process capabilities • FY15 YTD we are deliver
Slide 105: Questions
For personal use only QUESTIONS
Slide 106: Manufacturing Capacity
For personal use only MANUFACTURING CAPACITY Tyler Hart 24 September 2014
Slide 107: Disclaimer
DISCLAIMER For personal use only This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 108: Forward-looking statements cautionary notes
For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to identify forward-looking
Slide 109: Agenda / Key Take Aways
AGENDA / KEY TAKE AWAYS For personal use only • BACKGROUND • CAPACITY DIRECTIONAL CONCEPTS – LOGIC – CURRENT PLAN AND FORECAST – NEXT STATE OF MANUFACTURING • TACTICAL REVIEW OF CAPITAL PROJECT 4
Slide 110: Capacity Utilization Logic – 85% or 95%
CAPACITY UTILIZATION LOGIC – 85% OR 95% For personal use only Utilization concept allows for both a short and long term sheet machine start up capacity decision while allowing flexibility to act accordingly inside the network. 5
Slide 111: Capacity Utilization Logic – 95% Plan
CAPACITY UTILIZATION LOGIC – 85% OR 95% For personal use only 95% Plan – 3 to 6 Months out (Short Term) • History / Experience on ramp up and utilization • Ramp up effects design and utilization needs 6
Slide 112: Capacity Utilization Logic – 85% Plan
CAPACITY UTILIZATION LOGIC – 85% OR 95% For personal use only 85% Plan – 16 + Months out (Long Term) • History of Growth • Risk adverse – Be early rather than late Start Up Ramp Up Start Construction 7
Slide 113: Capacity Planning Logic – Long Term
CAPACITY PLANNING LOGIC – LONG TERM • Two Key Inputs to Plan For personal use only • James Hardie Growth – R&R Growth Rate – New Construction Starts – James Hardie Market Growth • Results – US house starts behind plan – James Hardie Market Growth at plan Dodge New Construction Forecast FY14 – FY19 8
Slide 114: Capacity Planning Logic
CAPACITY PLANNING LOGIC • Inflection point indicates total # of For personal use only • Determines Ideal # of plants • Long Term Cost curve = plants + Fixed – New Additions + Freight • Summerville + Capital • Tacoma + Inventory • Green Fields 9
Slide 115: Agenda / Key Take Aways
AGENDA / KEY TAKE AWAYS For personal use only • BACKGROUND • CAPACITY DIRECTIONAL CONCEPTS – LOGIC – CURRENT PLAN AND FORECAST – NEXT STATE OF MANUFACTURING • TACTICAL REVIEW OF CAPITAL PROJECT 10
Slide 116: Capacity Plan FY14 and FY15 Guidance
CAPACITY PLAN FY14 AND FY15 GUIDANCE FY14 PLAN FY15 Difference to Plan For personal use only FY 14 No Additional Capacity Started Up SM1 Wax FY 15 Fontana SM1/SM2 and Cleburne Only need SM2 Fontana FY16 Cleburne SM3 and PC SM 4 and Trim AC Cleburne Start Up Dependent on Demand Schedule FY17 Tacoma S
Slide 117: Capacity Sensitivity
CAPACITY SENSITIVITY For personal use only • Evaluated demand plan with range of ±10% – Capacity changes are not influenced by small demand swings – Lower demand pushes out 1 yr – Higher demand pulls decisions sooner or run above utilization target 12
Slide 118: Capacity Efficiency
CAPACITY EFFICIENCY For personal use only Capital $ / Square Feet Produced • Good measurement for plank and panel line • Good measurement of Green Field vs Brown Field. • Poor Measurement of specialty products impact on both capital cost and revenue Revenue and/or Margin vs Capital $ • Takes into ac
Slide 119: Capacity Concepts Summary
CAPACITY CONCEPTS SUMMARY For personal use only • Planning is a sliding scale • Capacity additions are more weighted today toward specialty products • Capacity additions leads us to optimization to ensure return on investment 14
Slide 120: Agenda / Key Take Aways
AGENDA / KEY TAKE AWAYS For personal use only • BACKGROUND • CAPACITY DIRECTIONAL CONCEPTS – LOGIC – CURRENT PLAN AND FORECAST – NEXT STATE OF MANUFACTURING • TACTICAL REVIEW OF CAPITAL PROJECT 15
Slide 121: Next State of Manufacturing
NEXT STATE OF MANUFACTURING For personal use only Optimization of capital cost • Governmental Influences : Water, Air, Building • Current Non Compressible Influences : Water Discharge, Curing, Raw Materials, • Current Compressible Influences : Machine output, building utilization/line design, labor
Slide 122: Next State of Manufacturing: Line Design Example
NEXT STATE OF MANUFACTURING Example of Line Design, Building Utilization, Machine output For personal use only Plant 1 Plant 2 Edge Treatment Yes Yes Top Treatment Yes No Coating Process 1 Coater 2 Coaters Drying Process 1 Dryer 2 Dryers Automatic On Loader Yes No Sealers No Yes Building Space (ft^2
Slide 123: Agenda / Key Take Aways
AGENDA / KEY TAKE AWAYS For personal use only • BACKGROUND • CAPACITY DIRECTIONAL CONCEPTS – LOGIC – CURRENT PLAN AND FORECAST – NEXT STATE OF MANUFACTURING • TACTICAL REVIEW OF CAPITAL PROJECT 18
Slide 124: Capacity Update
CAPACITY UPDATE For personal use only Capacity expansion plans aligned to current forecast and our target utilization rate – Fontana: Ramp-up currently on track – Plant City Trim: Construction complete Q4FY15 – Cleburne: Construction complete Q1FY16 – Next Capacity Addition: – Summerville FY17 – Fut
Slide 125: Summary
SUMMARY For personal use only • Capacity planning is sliding scale relative to market and share growth but base thought process is the same. • The forecast has been reduced in response to slower than expected US housing recovery • Capacity headwinds: – Construction cost increase – offset partially b
Slide 126: Questions
For personal use only QUESTIONS
Slide 127: R&D Overview
For personal use only R&D OVERVIEW Michael Benjamin 24 September 2014
Slide 128: Disclaimer
DISCLAIMER For personal use only This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the SEC, on Forms 20-F and 6-K, in its annual reports to shareholders, in offering
Slide 129: Forward-looking statements cautionary notes
For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and similar expressions are intended to identify forward-looking
Slide 130: Background
BACKGROUND For personal use only Michael Benjamin, Director, R&D 11+ years in James Hardie USA 6 years in R&D Fontana • Product Development • Technology Implementation 4 years in R&D Chicago • Non-FC R&D Manager • ColorPlus R&D Manager 1+ year in R&D Fontana • US R&D Director • Role includes R&D, En
Slide 131: Presentation Agenda
PRESENTATION AGENDA For personal use only • R&D Strategy • R&D Overview – Dynamic Capability – FC Centric Focus – JH Business Impact • Key Takeaways / Summary • Questions 5
Slide 132: Technology Strategy
TECHNOLOGY STRATEGY For personal use only Enable James Hardie Product Leadership Strategy • Provide a continuous pipeline of innovative new products and technologies with sustainable advantages to achieve our category and market share goals • Our role is to act as the technology pipeline for the org
Slide 133: R&D Overview
R&D OVERVIEW For personal use only JH R&D’s Key Strengths Dynamic Capability Evolves further – technology advantage FC Centric Focus JH Business Impact Capability Focus Results People Execution 7
Slide 134: Dynamic Capability
Capability For personal use only Focus JH Business Impact R&D Overview DYNAMIC CAPABILITY
Slide 135: R&D Locations
R&D LOCATIONS For personal use only Three research centers – US and Australia • Fontana, CA • Naperville, IL • Sydney, NSW Naperville, IL CA Fontana, CA Sydney, NSW 9
Slide 136: R&D Resources
R&D RESOURCES For personal use only Diverse workforce of 130+ technologists • Scientists Chemistry, Materials, Inorganic, Composite, Wood & Fibers and Building Science • Engineers Chemical, Mechanical, Electrical, Civil and Environmental Others 16+ Yrs 0-5 Yrs 10% Bachelor's 11% 27% PhD's 32% 11
Slide 137: Research Capabilities
RESEARCH CAPABILITIES For personal use only Thermal Properties Compositional Analysis Mechanical Properties Microscopy 11
Slide 138: Research Capabilities: Longer-Term, Real-Life Exposure
RESEARCH CAPABILITIES For personal use only Longer-Term, Real-Life Exposure 12
Slide 139: Innovation Capability
INNOVATION CAPABILITY For personal use only Innovation tools • 3D printing prototypes (Faster concepts) • Pilot processes (Concept investment) Intellectual property • Idea generation process • Focused approach on opportunities FY15 IP Concepts YTD IP Space Available New Tech New Platforms NT3 Tech A
Slide 140: Non-FC Capability
NON–FC CAPABILITY For personal use only Chicago R&D is operational from Q4 FY13, focusing mainly on non–FC development • Product Development • Non-FC materials characterization • Product and system testing • Pilot lines Currently capable to develop and implement non-FC technology initiatives aligned
Slide 141: R&D Spend
R&D SPEND For personal use only R&D yearly spend is divided between research and development projects Research – Core understanding of technologies and science behind them Development – Focus around implementing new technology and new products 15
Slide 142: FC Centric Focus
Capability For personal use only Focus JH Business Impact R&D Overview FC CENTRIC FOCUS
Slide 143: JH Innovation Process
JH INNOVATION PROCESS For personal use only Enable effective development and implementation of key initiatives Ensure continuous pipeline of new concepts and ideas Business Strategy Decision to Decision to Transfer to Business Need Develop Implement BAU Post Feedback Feasibility Development Implemen
Slide 144: FC Strategic Priorities
FC STRATEGIC PRIORITIES For personal use only Product Technical Support Performance • Substrate Development • Best Practices/Install • Coatings Development • Raw Material Sourcing • Raw Materials Formulation • Manufacturing Process Optimization • Test Method Development • Yield Improvements Platform
Slide 145: Product Performance Approach
PRODUCT PERFORMANCE APPROACH For personal use only Multi-faceted approach to product performance Formulation • Material • Primers Composition • Raw Material • Top Coat • Product Selection Formation • Raw Material Interaction Substrate Coatings Product Performance 19
Slide 146: Raw Material Focus
RAW MATERIAL FOCUS For personal use only Raw material research is an important aspect of product performance and technical support strategies Enhance product performance • Raw material selection • Formulations Technical support • Secure supply – pulp, cement, silica et al., - Raw material sourcing /
Slide 147: Low Density Additives
LOW DENSITY ADDITIVES For personal use only James Hardie uses low density functional additives for: • Lighter / Thicker products • Ease of use • Performance Our strategy is to reduce dependency on commercial additives to in-house technology substitutes LD Additive Interiors A LD LD Low Exteriors LD
Slide 148: Platform Development Focus
PLATFORM DEVELOPMENT FOCUS For personal use only Invest in new manufacturing platforms to enable step- change products in current or new category Platform A Platform B Platform C Platform D (Current) (Current) (New) (New) • Plank / Panel • Thicker • Aesthetics • Shapes • Flat sheets products • Produ
Slide 149: Product Development Focus
PRODUCT DEVELOPMENT FOCUS For personal use only Balanced mix of step change products and product line extensions to drive JH category and market share growth Form Function Features • Aesthetics • Water • Concealed • Texture management fastening • Shape • Durability • Nail line • Weight • Energy • Ea
Slide 150: Non-FC Strategic Priorities
NON–FC STRATEGIC PRIORITIES For personal use only Evaluate and develop non–FC technologies for fit with current and future JH business Mouldings – Provide shapes to complement JH FC trim portfolio Windows – Develop non-FC technology as an entry vehicle into fiber glass windows 24
Slide 151: JH Business Impact
Capability For personal use only Focus JH Business Impact R&D Overview JH BUSINESS IMPACT
Slide 152: HardieZone – Engineered for Climate
HARDIEZONE® – ENGINEERED FOR CLIMATE ® For personal use only Delivered HardieZone® Engineered for Climate® Products 7th Generation of FC products 26
Slide 153: Product Performance
PRODUCT PERFORMANCE For personal use only HZ5® siding performs 5x better than generic FC in system testing 120 100 DURABILITY INDEX 80 BETTER 60 100 40 60 20 40 20 0 Generic Fiber HZ5 Cement TIME Source: James Hardie Internal Research and Testing 27
Slide 154: JH vs. Competitors (OSB / Hardboard)
JH vs. COMPETITORS (OSB / Hardboard) For personal use only Like Hardboard, OSB siding is a wood based, manufactured product that can experience similar issues when exposed in external applications : • Fire • Splitting • Mold Growth Mold Growth Termite Activity • Termites • Significant Moisture Movem
Slide 155: JH vs. Competitors (CFC)
JH vs. COMPETITORS (CFC) For personal use only Competitive Fiber Cement Siding • Low quality raw materials • More brittle, nailing damage • Few approved wind load solutions • High movement (moisture) • Poor paint and primer adhesion JH CFC # Blind Nail Solutions Nailing 6 35 (Exp. Cat D @ 30ft.) Har
Slide 156: JH vs. Competitors (Vinyl)
JH vs. COMPETITORS (Vinyl) For personal use only Vinyl / PVC Siding • Looks cheap • Relatively durable but can melt even from reflected light (low-e window) • Very high thermal movement 7x compared to JH • Poor impact resistance Source: James Hardie Internal Research and Testing 30
Slide 157: JH vs. Competitors (Trim)
JH vs. COMPETITORS (Trim) For personal use only • OSB / Hardboard trim • Poor paint adhesion Paint Adhesion – • Low resistance to mold OSB / Hardboard • High water absorption and swelling • PVC trim • High thermal expansion (7x) • High movement / High gapping Gapping - • Low thermal stability / Yell
Slide 158: Low Density Additives
LOW DENSITY ADDITIVES For personal use only By focusing on low density research, JH was able to reduce the dependency on commercial additives to in-house technology substitutes This Enables: • Lighter / Thicker products • Cost – effective, Durable products • Reliable supply of raw material 32
Slide 159: Product Development
PRODUCT DEVELOPMENT For personal use only HardieReveal2.0™Panel HardieTrim™ Mouldings System HardiePlank® Lap Siding with Insulation Other Products • Trim extensions • Shingle extensions • High-end panel extensions Artisan® V-Rustic Siding 33
Slide 160: Strong JH Business Impact
STRONG JH BUSINESS IMPACT For personal use only In summary, JH R&D has enabled • Impact on product performance • Product leadership compared to competitors • Impact on raw materials and low density materials • Product and platform development • Better innovation 34
Slide 161: Summary
Capability For personal use only Focus JH Business Impact R&D Overview SUMMARY
Slide 162: Key Takeaways
KEY TAKEAWAYS For personal use only James Hardie R&D invests and functions towards: Ensuring Product Performance • JH products demonstrate superior durability compared to the competition Maintaining Product Leadership • Differentiated products are being created to enable future PDG vs. wood and viny
Slide 163: R&D Future Deliverables
R&D FUTURE DELIVERABLES For personal use only Continue Research and Development of Key Technology Strategies • Product Performance • Raw Materials • Low Density Continue Investments of Key Platform Strategies Continue to Deliver New Products Aligned with Corporate Strategy • Act as the technology pi
Slide 164: Questions
Capability For personal use only Focus JH Business Impact R&D Overview QUESTIONS
James Hardie Industries — Investor Day (September 2014) on 6ix