James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Non-Deal Roadshow (2019)
84 slides from James Hardie Industries's roadshow presentation, 2019
Slide 1: Sustainable and Profitable Growth Above Market
Sustainable and Profitable Growth Above Market Jack Truong, CEO 1
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS This Management Presentation contains forward-looking statements. James Hardie Industries plc (the “Company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and Exchange Commission,
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (continued) 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 i
Slide 4: We Are an Organic Growth Company with Global Reach
We Are an Organic Growth Company with Global Reach… EUROPE Net Sales $368MM EBIT $10MM EBIT % 2.7% # Employees 1,000 EBIT included Integration costs ASIA PACIFIC NORTH AMERICA Net Sales $447MM Net Sales $1,677MM EBIT $100MM EBIT $388MM EBIT % 22.3% EBIT % 23.1% # Employees 1,100 # Employees 2,700 FY
Slide 5: A Broad Portfolio of Products & Brands
…with a Broad Portfolio of Products & Brands PRODUCT PLATFORMS Trim / Tile Commercial Flooring Siding Soffit Interior Walls Fiber Gypsum Fascia Backerboard Exteriors PORTFOLIO OF BRANDS 5
Slide 6: Our Products Offer Design Flexibility
Our Products Offer Design Flexibility… …from traditional to luxury homes to commercial buildings …from the desert to coastal areas in varying climates MID-CENTURY MODERN MULTI-FAMILY CONTEMPORARY LUXURY RURAL COASTAL MOUNTAINS COMMERCIAL 6
Slide 7: Our Global Manufacturing Footprint is Strategically Located
Our Global Manufacturing Footprint is Strategically Located 7
Slide 8: We Deliver Strong Value Propositions to Our Customers
We Deliver Strong Value Propositions to Our Customers 8
Slide 9: Clear Objectives for Long Term Value Creation
We Have Clear Objectives for Long Term Value Creation Growth Above Market with Strong Returns EUROPE €1 BILLION REVENUE with 20% EBIT MARGIN NORTH AMERICA 35/90 with 20-25% EBIT MARGIN ASIA PACIFIC DELIVER GROWTH with 20-25% EBIT MARGIN 9 ABOVE MARKET
Slide 10: Transforming to Continue Our Profitable Growth Journey
We Are Transforming to Continue Our Profitable Growth Journey FROM: TO: Big, SMALL Company Small, BIG Company • Leverage for scale • Standardize processes for global best practice replication • Continuous improvement mindset 10
Slide 11: North America Commercial: From Pull to Push-Pull
North America Commercial: FROM Pull TO Push-Pull Builders Distributors JH & Dealers R&R Contractors • Analytics • Supply Chain Integration • Ease of Doing Business • Win-Win Approach • Demand Creation • Installation Training • End-user Marketing • Right Products for Right Segments 11
Slide 12: Operations: From World's Best Fiber Cement Producer to World Class Manufacturer
Operations: FROM World’s Best Fiber Cement Producer… …TO World Class Manufacturer via LEAN It is all about fostering employees engagement while making our operations more predictable and with less variation 3-Year Cumulative Lean Cost Reduction North America $100 MM Asia Pacific $19 MM Europe $20 MM
Slide 13: North America Interior Business: Focus on Executing Fundamentals
North America Interior Business: Focus on Executing Fundamentals Placement Clear Packaging In Building Materials Section New Products Organization Waterproof Focus on Account Management Backer Board New Sales Leadership 13
Slide 14: Innovation: Leverage Our Global R&D Capabilities
Innovation: Leverage Our Global Research & Development Capabilities 10% employees 40% employees 50% employees Over 130 Global R&D Employees with World Class Expertise in: • High performance fiber cement and fiber gypsum formulations • Durable surface coatings & textured surfaces 14 • Ultra high thro
Slide 15: James Hardie Fiber Cement Substrate Generations
James Hardie Fiber Cement Substrate Generations 1st James Hardie Invents Fiber Cement 2nd Primer Added 3rd Substrate Composition Other Fiber Cement Manufacturers Only Meet Our 3rd Generation 4th Surface Adhesion Technology 5th ColorPlus® Technology 6th Modified Thickness Technology We Own 650 7th En
Slide 16: Customer Insights to Innovation Process
Customer Insights to Innovation Process to Deliver… …High Impact New Products Mega Customer Winning Trends Insights Product Concepts Stage Gates CONCEPT PRODUCT DISCOVERY SCALE UP LAUNCH FEASIBILITY DEVELOPMENT Urbanization Prioritization Product Commercialization Development 16
Slide 17: FY20 Global New Products
FY20 Global New Products The Aspyre HardieSoffit® HardieBacker® Collection by im Artisan® eoaoab eae tik Hardie HardiePlank® James VentedPlus™ | shingle Siding » | Windbreaker™ VL Exotec Vero EasyTex - Panels HydroDefense Hardie™ Technoloy gy AMAA E =| h ==, WANN E 17 (>) JamesHardie
Slide 18: Europe: €1B Revenue at 20% EBIT Margin by FY2029
EUROPE: €1B Revenue at 20% EBIT Margin by FY2029 Growth Pathway €1B European Manufacturing Footprint New Fiber Cement Existing Fiber Cement €320MM Fiber Gypsum Unlocking Plant Capacity to Improve Margin + ~200-300 bps margin improvement + ~200 bps margin improvement 18
Slide 19: APAC: 3-5% Growth Above Market at 20-25% EBIT Margin
APAC: 3-5% Growth Above Market at 20-25% EBIT Margin FROM: Consumer Survey: Cladding Preference TO: (June 2018, n = 6,500, JH Insights) 19
Slide 20: Transforming How We Execute to Deliver Sustainable, Profitable Growth
Transforming HOW We Execute to Deliver Sustainable, Profitable Growth FROM TO • Leading with Clarity of Direction Managing Top Down • Empowerment & Accountability Working Cross Functionally With Working in Silos Clear Alignment Regionally Focused Global Business with Best Practice Businesses Sharing
Slide 21: James Hardie Sustainability Highlights
James Hardie Sustainability Highlights Zero to Landfill Zero Harm Culture Manufacturing process produces zero landfill waste Commitment to providing a safe and healthy in Fiber Gypsum Plants working environment for every individual (employee, vendor, and visitor) 100% Recycled Fibers 100% of fibers
Slide 22: Exteriors
EXTERIORS Sean Gadd, Chief Commercial Officer 1 Johnny Cope, NA Head of Sales
Slide 23: Agenda
Agenda • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 2
Slide 24: Agenda
Agenda • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 3
Slide 25: Exteriors Strategic Objective
Exteriors Strategic Objective New Construction 35% Market Share 90% Category Share Multifamily Repair & Remodel 4
Slide 26: Changing Market Landscape
Changing Market Landscape • Dealers continue to consolidate greater scale and reach • Competitive landscape • Fragmented builders and contractors Builders Distributors JH & Dealers R&R Contractors Customers 5
Slide 27: A Change in Approach – Pull to Push/Pull
A Change in Approach – Pull to Push/Pull Customers Heavy Pull Focus Push / Pull Organization Separate Commercial Sales, Marketing Team, under one & Segments leader Product Full Exterior Siding Focus Solutions 6
Slide 28: Agenda
Agenda • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 7
Slide 29: How James Hardie Creates Customer Value
How James Hardie Creates Customer Value Working Ease of Product Growth Doing Capital Leadership Business • Demand • Supply chain • Full product • Improved Creation integration portfolio partnership • All segments • Product mix • New products • Win-win approach approach • All home types • End user •
Slide 30: Single Family New Construction - Push-Pull (Part 1)
Single Family New Construction - Push-Pull (Part 1) • Hardie gets established in top price bands via market development pull approach Hardie getting established Still following the old standard PULL: Win With Color (Hardie Focus) • Segment Target Position • Overcome switching barriers and costs • Le
Slide 31: Single Family New Construction - Push-Pull (Part 2)
Single Family New Construction - Push-Pull (Part 2) • Partnering with channel customers enables and accelerates “closing out” price bands Hardie and customer partners setting the new standard Still following the old standard PUSH: Win With Color (Customer Partnering) • Products on ground • Alignment
Slide 32: Repair & Remodel: Low-S - Push-Pull (Part 1)
Repair & Remodel: Low-S - Push-Pull (Part 1) • Hardie sets up aligned market-mover contractors (Boats) in key target neighborhoods (Vinyl Battlegrounds) • Vinyl Battlegrounds generally are adjacent to “lockdown” neighborhoods PULL: Win With Color (Hardie Focus) • Right Neighborhood • Right Contracto
Slide 33: Repair & Remodel: Low-S - Push-Pull (Part 2)
Repair & Remodel: Low-S - Push-Pull (Part 2) • Integration with our channel partners ensure the wake comes faster and goes to James Hardie PUSH: Win With Color (Customer Partnering) • Data Sharing & Analytics • Right Products Available in Market • Joint Contractor Targeting & Growth Plans • Co-marke
Slide 34: High-S: Account Management
High-S: Account Management • In High-S we are the market Wood-Look Cladding Split standard In Selected High-S Regions • Account management is critical for both new construction and R&R − Grow by partnering with our customers to take share from like alternatives − Grow by partnering with our customer
Slide 35: Agenda
Agenda • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 14
Slide 36: Organization: Commercial Structure
Organization: Commercial Structure Market Development Dedicated Hunters • Setting up Commercial team for clarity of direction and alignment from strategy to field execution • Double down on exteriors market development (demand creation/pull), funded by interiors alternative approach • Account manage
Slide 37: Agenda
Agenda • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 16
Slide 38: The Right Product Portfolio
The Right Product Portfolio High Paint Cost Markets Low Paint Cost Markets Luxury 2nd Move-Up Starter Homes 17
Slide 39: Broad Product Portfolio: Complete Exterior
Broad Product Portfolio: Complete Exterior 18
Slide 40: Win With Color: Enabling Further Penetration
Win With Color: Enabling Further Penetration • Leverage scale and manufacturing technology to deliver lower total installed cost to drive accelerated penetration, whilst offering greater choice for consumers who are willing to pay JH Manufacturing Channel Customers Install Partners Lower • Longer ru
Slide 41: Agenda
Agenda • Strategy Overview and Change in Approach • Creating Customer Value • Organizational Structure • The Right Product Portfolio • Execution Examples 20
Slide 42: Boston, MA - New Construction Market Development
Boston, MA - New Construction Market Development Win With Color • New Construction conversion from vinyl • Delivered by reducing on-the-wall costs 21
Slide 43: Boston, MA - R&R Market Development
Boston, MA - R&R Market Development Win With Color • Target neighborhood • Converted vinyl via aligned contractor • Followed up with “2-10” activity 22
Slide 44: Boise, ID - Win Against Engineered Wood
Boise, ID - Win Against Engineered Wood Account Management • Partnering with our customer to convert a large builder from engineered wood • Securing multiple stocking positions • Leading to more builder conversions 23
Slide 45: Dallas, TX—James Hardie Full Wrap Initiative
Dallas, TX—James Hardie Full Wrap Initiative Account Management • Partnering with our customer to convert a builder to use our trim and soffit in addition to our plank 24
Slide 46: Summary: Executing The Strategy, Gaining Momentum
Summary: Executing The Strategy, Gaining Momentum Customers • Partnering with our channel customers Heavy Pull Focus Push / Pull to capture share in the tail • Doubling down on pull-through market development Organization • Aligned sales, product & segment Separate Commercial strategy and marketing
Slide 47: Zero Harm & Lean Transformation
Zero Harm & Lean Transformation Ryan 1 Kilcullen, EVP - Operations
Slide 48: Agenda
AGENDA Zero Harm Foundation Lean Transformation Alabama Construction Update 2
Slide 49: Agenda
AGENDA Zero Harm Foundation Lean Transformation Alabama Construction Update 3
Slide 50: Our Zero Harm Strategy
OUR ZERO HARM STRATEGY Zero Harm is the foundation of everything we do… • Safe People − Empowered & Engaged − Living Zero Harm 24/7 • Safe Places − World Class Work Environment − Standardized & Organized • Safe Systems − Processes Enabling Safe Work − Forward-Looking Risk Reduction 4
Slide 51: Global Standardization
GLOBAL STANDARDIZATION Global approach to our Zero Harm culture • Global standards • Global organization With processes to replicate regional best practices • Local innovation shared & replicated • Replication celebrated as an equal to invention 5
Slide 52: Safe People – Leadership Commitment
SAFE PEOPLE – LEADERSHIP COMMITMENT Oversight at ELT level • Prattville construction pause Significant investment • 20+ incremental global safety professionals since FY17 • Investment in safety data management system, training, facilities upgrades, etc. 6
Slide 53: Safe People – Global Mindset
SAFE PEOPLE – GLOBAL MINDSET Improve, Standardize, Replicate – on a global scale – PPE example Before After (Europe) (Europe) 7
Slide 54: Safe Places – Global Mindset
SAFE PLACES – GLOBAL MINDSET • One JH standard in our plants accelerates best practice replication • Global best practices, benchmarked to world class levels, with strong local ownership − 5S replication – standardization − Pedestrian/Forklift standardization leads global improvement team Before Aft
Slide 55: Global Performance & Summary
GLOBAL PERFORMANCE & SUMMARY Incident Frequency • Lagging indicators are 1.6 tracking in-line with our 1.4 strategic roadmap 1.2 1.0 0.8 0.6 • Our focus remains on creating 0.4 0.2 a culture of empowerment at 0.0 FY17 FY18 FY19 the floor level DART 0.8 • We are making progress, but 0.7 0.6 we will n
Slide 56: Zero Harm Summary
ZERO HARM SUMMARY • Zero Harm is the foundation of everything we do • Strong leadership commitment • Operators are empowered & engaged to live Zero Harm 24/7 • We are making good progress, but will never be satisfied until true Zero Harm is achieved • Zero Harm fundamentals are at the core of how we
Slide 57: Agenda
AGENDA Zero Harm Foundation Lean Transformation Alabama Construction Update 11
Slide 58: Lean Manufacturing Transformation
LEAN MANUFACTURING TRANSFORMATION Transforming FROM the world’s best fiber cement producer TO a world class manufacturer From To Local site autonomy A highly integrated network, operating as one Silos of Fiber Cement knowledge & A connected organization, leveraging scale & hero dependency organizati
Slide 59: HMOS
HMOS From the world’s best producer of Fiber Cement to a world class manufacturer L2: Process, Reliability, & Six Sigma L3: Plant Management & Steering team Manufacturing Operating System -Leadership drive & engagement -Change management capabilities -Lean tools L1: Operators & Supervisors It is all
Slide 60: HMOS
HMOS • HMOS enables flawless, daily HMOS Framework execution to the company strategy, with feedback up & down the site Strategy Deployment • Consistent execution reduces variation • Predictability & connectivity - enable time to add value & increase engagement of operators • Engaged operators, reduc
Slide 61: Connecting the Network – L4
CONNECTING THE NETWORK – L4 • We are creating a force multiplier by connecting all of our sites into a highly integrated network • Best practice sharing is accelerating our pace of improvement • Clear targets, measured & reviewed frequently • Intra-site sharing & communication is accelerating Prattv
Slide 62: HMOS Global Timeline
HMOS GLOBAL TIMELINE Lean Cost Out Targets Region FY20‐FY22 (in millions) North America US$100 Europe US$20 APAC US$19 APAC Rosehill, AUS Carole Park, AUD Penrose, NZ Peru, USA Summerville, USA Cleburne, USA Reno, USA Orejo, ES Cabuyao, PHL Cooroy, AUS Waxahachie, USA Pulaski, USA Plant City, USA Ta
Slide 63: Getting Started – The Power of Gemba
GETTING STARTED – THE POWER OF GEMBA • Leverage learnings from APAC and generate excitement in NA − 40+ NA employees GEMBA to APAC (Feb & May 2019) • Lay the groundwork for future deployment in Europe − 15 EU manufacturing employees GEMBA to NA (Jul 2019) • Replicate & Improve − APAC GEMBA to NA to
Slide 64: Organizational Capability
ORGANIZATIONAL CAPABILITY Significant investments in organizational capability to enable the transformation… • NA Lean VP with a team of 10 Lean professionals • Lean roles created at all of our manufacturing facilities • All 2,000+ NA manufacturing employees will be trained in Lean by end of this fi
Slide 65: Employee Empowerment
EMPLOYEE EMPOWERMENT • Operators transforming from Doers → Thinkers → Problem Solvers • Management GEMBAs significantly increase leadership presence on the floor & help solve problems faster – at the source • Recognition of employee contributions is happening on a daily basis. It is a core principal
Slide 66: Performance Drivers Impact the P&L
PERFORMANCE DRIVERS IMPACT THE P&L Roll Throughput Yield How Lean Manufacturing Net available hours is impacting our P&L Lower cost per square foot Net Available Hours (NA network) 20
Slide 67: Delivering Value
DELIVERING VALUE • We are targeting $100M cost out in NA • We are on-track and committed to full delivery • Additional upside realized by deferred capital investment FY20 – FY22 Region Lean Cost Out Targets APAC $19MM USD • Global cost-out targets established Europe $20MM USD 21
Slide 68: Lean Summary – The Journey Never Ends
LEAN SUMMARY – THE JOURNEY NEVER ENDS • We are on-track to implement HMOS in all 9 NA plants by the end of Q3 FY20 • Employee engagement is improving • We are on-track to deliver our $100MM cost-out target in NA • We are forward-looking in our approach & see significant opportunity through lean depl
Slide 69: Agenda
AGENDA Zero Harm Foundation Lean Transformation Alabama Construction Update 23
Slide 70: Prattville Construction Update
PRATTVILLE CONSTRUCTION UPDATE Prattville, Alabama greenfield expansion project is on-budget and on-track to be completed by end of calendar year 2019 • 1H FY21 Commissioning Best Practice Sharing and Replication from Global engineering teams 24
Slide 71: Summary
SUMMARY • Zero Harm is the foundation of everything we do • HMOS is a cultural transformation in how we operate. It connects our sites & our network as one JH operating system • Employee engagement is improving • Lean savings commitment is on-track • Alabama construction is on-track 25
Slide 72: Interiors
INTERIORS Sean Gadd, Chief Commercial Officer 1
Slide 73: Agenda
Agenda • Underlayment Overview • A Change in Approach • Execution Fundamentals • Interiors Trajectory 2
Slide 74: Tile Underlayment Overview
Tile Underlayment Overview U.S. Underlayment Products Foam Boards Fiber Gypsum Glass Mat Gypsum Fiber Cement Mats & Membranes Glass Mesh Source: Ciprus 3
Slide 75: A Change in Approach
A Change in Approach Retail Hardie Reps calling Strategic Key on retail stores account management Contractor Small Box Focused on larger store contractors contractors Products Product portfolio 2 Products based on insights 4
Slide 76: Retail Approach: Home Depot and Lowe's
Retail Approach: Home Depot and Lowe’s • Customer centric approach • Account Management approach • Retail fundamentals − Product • HardieBacker 500, HardieBacker ¼” − Promotion − Positioning • New Leadership 5
Slide 77: Execution Fundamentals
Execution Fundamentals Building Materials Flooring • Customer insights • Better positioning • Improved packaging • Better placement in the stores 6
Slide 78: Global Mindset, Best Practice Sharing, Replication
Global Mindset, Best Practice Sharing, Replication Interior Solutions based on Fermacell Fiber Gypsum at a leading DIY retailer in Germany 7
Slide 79: Pro Channel Approach
Pro Channel Approach Key Pro Channel Partners • Partner for performance with key accounts • Strong customer acquisition team driving large conversions • Support through inside sales • Right Product − 4x8 HardieBacker® 500 8
Slide 80: Interiors Trajectory
Interiors Trajectory • Short-term: execute fundamentals to take share and grow • Long-term: commercialize customer driven innovations to accelerate growth Product Portfolio Expansion Gain share in Retail and Pro with HardieBacker FY20 FY21 FY22+ 9
Slide 81: HydroDefense Launch
HydroDefenseTM Launch • Product Description ‒ The first waterproof1 cement backer board ‒ Installed cost advantage vs. current waterproofing practices ‒ Maintains market leading performance of existing HardieBacker • Why Waterproof Backer Board? Tile Installer Test Results ‒ Waterproofing is #1 tren
Slide 82: Summary: Resetting For Growth
Summary: Resetting For Growth Retail • Sales org restructure to match strategy Hardie Reps calling Strategic Key • Built up retail bench strength on retail stores account management • Enhancing customer partnerships Contractor Small Box Focused on • Focusing on larger contractors at both store contr
Slide 83: Sustainable and Profitable Growth Above Market
Sustainable and Profitable Growth Above Market Jack Truong, CEO 1
Slide 84: Summary
SUMMARY 1. We are transforming commercially to push-pull approach and becoming a world class manufacturer to reignite our track record of growth above market with strong returns 2. We are investing in customer driven innovation to deliver aggressive long- term growth goals in every region. 3. We aff