James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2018)
70 slides from James Hardie Industries's investor presentation, Sep 20, 2018
Slide 1: James Hardie North America Investor & Analyst Tour - Day 1 Presentations
For personal use only • Xxx • Xxx JAMES HARDIE NORTH AMERICA INVESTOR & ANALYST TOUR 20th & 21st SEPTEMBER 2018 DAY 1 PRESENTATIONS
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS For personal use only 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 a
Slide 3: Cautionary Note on Forward-Looking Statements (Continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (CONTINUED) 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 sim
Slide 4: Louis Gries
For personal use only • Xxx • Xxx Company Update Louis Gries
Slide 5: Global Strategy
GLOBAL STRATEGY For personal use only We are an Organic Growth Company • North America: 35/90 • Exteriors volume growth above market with 20-25% EBIT margin • Europe: Create a €1 billion business with Hardie like returns within the next 10 years • APAC: Deliver organic growth above market with stron
Slide 6: Organization Chart – Transition Period
ORGANIZATION CHART – TRANSITION PERIOD For personal use only PAGE 3
Slide 7: NA Fiber Cement Organic Growth Strategy Update & Go-Forward
For personal use only • Xxx • Xxx NA Fiber Cement Organic Growth Strategy Update & Go-Forward
Slide 8: What Is 35/90?
WHAT IS 35/90? For personal use only • Exterior strategy for North America business • Siding & trims • Participate in all segments • Market Development to switch the preference for vinyl in Northern and Mid-Atlantic regions • Defend against hard siding competitors that attempt to position themselves
Slide 9: Siding Industry Categories
SIDING INDUSTRY CATEGORIES For personal use only • Natural Wood • Hardboard • OSB • Aluminum • Vinyl • Fiber Cement • Resin-based PAGE 6
Slide 10: Built for Percent
BUILT FOR 6 PERCENT For personal use only PAGE 7
Slide 11: Getting Back to Percent
GETTING BACK TO 6 PERCENT For personal use only • Capacity shortfall has been addressed across all product lines • Value Props are strong, but are being enhanced: • Market Development model vs. vinyl had to be tuned-up to address an increasing on-the-wall premium relative to home value • In competit
Slide 12: JH Interiors – Historical Perspective
JH INTERIORS – HISTORICAL PERSPECTIVE For personal use only From zero to market share leader based on: • Technical product performance advantages • Contractor benefits • Focused approach to market share development The cement board category grew rapidly from 1990 - 2012 • Category growth has flatten
Slide 13: JH Ops Enables the Organic Growth Strategy
JH OPS ENABLES THE ORGANIC GROWTH STRATEGY For personal use only • High throughput, low unit cost advantage over other FC participants • Further gains available in plant performance, product capability & capital efficiency • 1991 – 2018 ... and beyond • 24/7 operation • Machine scale • Regional site
Slide 14: Q&A
For personal use only • Xxx • Xxx Q&A
Slide 15: Zero Harm
For personal use only • Xxx • Xxx Zero Harm Ryan Kilcullen
Slide 16: Agenda
AGENDA For personal use only • History of safety at James Hardie • Zero Harm journey • Zero Harm approach & progress • Next steps PAGE 2
Slide 17: Safety at Hardie – Historical Perspective
SAFETY AT HARDIE – HISTORICAL PERSPECTIVE For personal use only 1991 2006 2017 NA Business 2 & 20 Zero Harm Start-Up Safety Lead & Approach Compliance Manage Risk Empower Safety Avoid React to Engage Work Culture Injuries Incidents Teams Targeted Industry Above Average Top Quartile World Class Perfo
Slide 18: Transformation to Zero Harm
TRANSFORMATION TO ZERO HARM For personal use only From an industry top …to a World Class safety quartile performer (2 & 20)… culture (Zero Harm) Leadership drives “safety results” Leadership enables culture Employee compliance Employee empowerment & ownership “Safety spend” to maintain Zero Harm thi
Slide 19: Our Strategy for Transformation
OUR STRATEGY FOR TRANSFORMATION For personal use only A Comprehensive Strategy Results in a 5-year Journey to to Enable the Cultural Shift World Class Performance PAGE 5
Slide 20: Zero Harm Road Map
ZERO HARM ROAD MAP For personal use only A 5-year roadmap was established & guides our resource allocation and focus… Desired Outcomes Core Programs & Accomplishments Progress vs Expectation Year1 2&20 Goal Zero Harm Operator empowerment Hourly directed sub-committee at all facilities All NA sites i
Slide 21: Zero Harm Strategy – Safe People
ZERO HARM STRATEGY – SAFE PEOPLE For personal use only Safe People Leadership that enables Empowered employees Peer-to-Peer Language PAGE 7
Slide 22: Zero Harm Strategy – Places & Systems
ZERO HARM STRATEGY – PLACES & SYSTEMS For personal use only Safe Places Zero Harm integrated design Facilities that represent our brand Safe Systems Global best practice sharing World class benchmarking PAGE 8
Slide 23: Zero Harm Results – North America
ZERO HARM RESULTS – NORTH AMERICA For personal use only Incident Frequency Incident Severity Incident Frequency Incident Severity Zero Harm Performance Zero Harm Performance FY17 FY18 FY19 YTD World Class FY17 FY18 FY19 YTD World Class PAGE 9
Slide 24: Zero Harm – Global Deployment
ZERO HARM – GLOBAL DEPLOYMENT For personal use only We are leveraging our global resources & applying a universal approach to our Zero Harm strategy PAGE 10
Slide 25: Key Takeaways
KEY TAKEAWAYS For personal use only • JH organization is highly committed to journey to world class safety performance • Work force empowerment & leadership engagement are critical to our Zero Harm strategy • Global integration is occurring & best practice sharing is raising the standard in all regi
Slide 26: Q&A
For personal use only • Xxx • Xxx Q&A
Slide 27: Operations
For personal use only • Xxx • Xxx OPERATIONS Matt Marsh Ryan Kilcullen Dave Merkley
Slide 28: Agenda
AGENDA For personal use only • Introduction • Enabling Growth & Network Returns • Transforming Our Manufacturing Approach • Customer Value Creation & FC Process Innovation • Capacity Project Update PAGE 2
Slide 29: Introduction
For personal use only • Xxx • Xxx INTRODUCTION
Slide 30: Hardie Operations – Historical Perspective
HARDIE OPERATIONS – HISTORICAL PERSPECTIVE For personal use only JH Operations: A significant enabler of our 35/90 organic growth strategy NETWORK CAPACITY FC MANUFACTURING PROCESS INNOVATION & WITH UNIQUE RETURNS SCALE ADVANTAGE CUSTOMER VALUE • Regional flexibility • Hatcheck scale up • Engineered
Slide 31: Hardie Plant Overview
HARDIE PLANT OVERVIEW For personal use only Manufacturing Key Process Inventory Processes Objectives Model Raw Materials Continuous Long Continuous Make-to- Pre-Autoclave Process Run Inventory Sheet Machine Raw Material Raw Material Postponed Conversion Yield Differentiation Autoclaves Finishing Mat
Slide 32: Sheet Machine Index Concept
SHEET MACHINE INDEX CONCEPT For personal use only 4x4 Sheet Machine 9x5 Sheet Machine Machine Throughput Drivers Tub 1 Tub 1 Machine throughput of “design product” is determined by: 4 Tubs • Machine index • Film build capability Tub 4 9 Other factors that influence Tubs throughput: 4’ Width • Produc
Slide 33: Machine Indexing Created High Throughput FC
MACHINE INDEXING CREATED HIGH THROUGHPUT FC For personal use only A culture of engineering step-change has yielded a tremendous increase in manufacturing scale Key: Tub Config Finishing SM Index PAGE 7
Slide 34: Manufacturing Scale Creates FC Moat
MANUFACTURING SCALE CREATES FC MOAT For personal use only Manufacturing scale creates a significant competitive advantage Capital $/Annual machine hour Volume/gross Throughput Fontana Plant City Tacoma Pulaski Fontana Plant City Tacoma Pulaski Capital Efficiency Unmatched Machine Size & Automation b
Slide 35: Process Innovation Leads to Customer Value
PROCESS INNOVATION LEADS TO CUSTOMER VALUE For personal use only Internally developed process capability enables product differentiation Product thickness & density HardieTrim® & Artisan® control product lines Fit-to-purpose manufacturing HardieZone ® Engineered processing for Climate® Post-processi
Slide 36: Hardie Operations – Enabling Future Value Creation
HARDIE OPERATIONS – ENABLING FUTURE VALUE CREATION For personal use only JH Operations: Organized to deliver on the next phase of value creation in our 35/90 organic growth strategy NETWORK CAPACITY FC MANUFACTURING PROCESS INNOVATION & WITH UNIQUE RETURNS SCALE ADVANTAGE CUSTOMER VALUE High scale m
Slide 37: Enabling Growth & Network Returns
For personal use only • Xxx • Xxx ENABLING GROWTH & NETWORK RETURNS
Slide 38: Historical Core Concepts in Capacity Planning
HISTORICAL CORE CONCEPTS IN CAPACITY PLANNING For personal use only Core concepts of our approach to capacity management Provide supply ahead of demand to enable JH organic growth strategy Make network design investments with the end state in mind Design an optimal network footprint for JH by optimi
Slide 39: Designing an Optimized JH Footprint
DESIGNING AN OPTIMIZED JH FOOTPRINT For personal use only JH Total Network Cost Trade-Off Curve Total Network Cost # of Site Locations As the Number of Freight Total Manufacturing Sites Increases Capex Site Opex PAGE 13
Slide 40: Phases of Our Network Expansion
PHASES OF OUR NETWORK EXPANSION For personal use only Phase 1 Phase 2 Phase 3 Markets HZ10 HZ5 Existing Enabled Approach Greenfield Greenfield Brownfield Bias Network Significant LOH Continued LOH Reductions Product Line Flexibility Enabler Reductions Post-autoclave Value Add Multi-Line Sites Full-W
Slide 41: JH North American Manufacturing Network
JH NORTH AMERICAN MANUFACTURING NETWORK For personal use only Post-recession Single & doublecapacity adds –plants line flat sheet combination of greenfield were constructed & brownfield to enable NA FCsites growth Recent brownfield Locations driven bysites have used proximity to rawsite optionality
Slide 42: Key Learnings Through Phase of Our Expansion
KEY LEARNINGS THROUGH PHASE 3 OF OUR EXPANSION For personal use only Insights from our expansion to date have led us to value creation opportunities for our phase 4 expansion Key Insights Brownfield expansion offers a significant capital efficiency over greenfield Multi-line (3+ SM) plants can be ef
Slide 43: Insight Example #1: Multi-Line Operating Opportunity
INSIGHT EXAMPLE #1: MULTI-LINE OPERATING OPPORTUNITY For personal use only Addition of 3rd SM Opportunities Cleburne Pre-Expansion Post-autoclave flexibility ColorPlus® By-pass finishing for Color Finishing Finishing Finishing Shared systems running at high utilizations, driving plant decision makin
Slide 44: Insight Example #2: Regional Product Specialization
INSIGHT EXAMPLE #2: REGIONAL PRODUCT SPECIALIZATION For personal use only Regional Specialization of Products: • Input cost advantage • Machines advantaged Operational Advantages • Reduced changeovers • Improvements from specialization Opportunity to ship higher ratio of products via rail PAGE 18
Slide 45: Insight Example #3: Post Autoclave Spoke Opportunity
INSIGHT EXAMPLE #3: POST AUTOCLAVE SPOKE OPPORTUNITY For personal use only Enabled mega-site provides in market, post autoclave operations Low input cost Low capital cost (land, building, and installation) Rail In plant economies of scale Competitive rail enabled Prattville, AL Shortened truck lengt
Slide 46: Insight Example #4: Specialization for Effective Capacity
INSIGHT EXAMPLE #4: SPECIALIZATION FOR EFFECTIVE CAPACITY For personal use only 5 foot wide machines Optimize products to Plank Plank Opportunity machines Plank Plank Panel Plank More output with same hours Changeover Reduction Low incremental cost to produce Efficient supply chain Plant B 5 foot ma
Slide 47: Today to 35/90 – Phase of Our Network Expansion
TODAY TO 35/90 – PHASE 4 OF OUR NETWORK EXPANSION For personal use only In our phase 4 network expansion we will look to apply these insights Brownfield expansions at existing sites Investments in multi-line (3+ SM) sites will enable efficient mega-sites Individual capacity investments will deliver
Slide 48: Core Concepts of a Mega-Site (Inside the Walls)
CORE CONCEPTS OF A MEGA-SITE (INSIDE THE WALLS) For personal use only 1 Capex & opex efficiencies from multi- In 6 Market line construction & operations Spoke Potential Mega-Site Configuration Flex product line capability for full local 2 Finished Goods market coverage, specialized to distribute Inv
Slide 49: Core Concepts of Mega-Sites (Outside the Walls)
CORE CONCEPTS OF MEGA-SITES (OUTSIDE THE WALLS) For personal use only Deliver landed cost advantage while benefiting from site scale Tacoma, WA – In-market spoke enables freight efficiencies Reno, NV Peru, IL Pulaski, VA – High volume rail capability Fontana, CA Summerville, SC Waxahachie, TX – Opti
Slide 50: Capacity Summary
CAPACITY SUMMARY For personal use only • Our current network footprint was designed to enable future organic volume growth at a high efficiency • Insights from our network build out are well understood, and learnings are being applied to future investments • Mega-site facilities will enable a scale
Slide 51: Transforming Our Manufacturing Approach
For personal use only • Xxx • Xxx TRANSFORMING OUR MANUFACTURING APPROACH
Slide 52: Historical Manufacturing Approach
HISTORICAL MANUFACTURING APPROACH For personal use only JH Manufacturing Approach: A decentralized, entrepreneurial approach utilizing step change engineering to scale a process with unlocked potential An approach that enabled unique …that contributed significantly to manufacturing capabilities… the
Slide 53: An Approach That Aligns with the Opportunity
AN APPROACH THAT ALIGNS WITH THE OPPORTUNITY For personal use only The value creation opportunity in JH manufacturing has shifted significantly… Potential of the technology Raise the Sheet Machine Throughput potential 6x Reach the Raise the potential 18x potential 20x Machine design potential Reach
Slide 54: A New Path Forward for Hardie Manufacturing
A NEW PATH FORWARD FOR HARDIE MANUFACTURING For personal use only We are in the early stages of deployment of a shift in how we manage of manufacturing site operations… From To Local site autonomy Network standardization Step change delivers the gains Continuous improvement sustains & improves Techn
Slide 55: A Transformation to Lean Manufacturing
A TRANSFORMATION TO LEAN MANUFACTURING For personal use only The adoption of a lean manufacturing approach will create the platform for our manufacturing transformation Expected Outcomes of Lean Sustain & Build on Improvements • A JH manufacturing operating system • Increased standardization • Commo
Slide 56: Machine & Process Reliability
MACHINE & PROCESS RELIABILITY For personal use only We have recently launched a reliability initiative designed to increase the net production hours of our sheet machines Opportunity Approach Total Available Hrs Type 1 Loss 1. Planned Outage Type 2 Loss Minimization Production Type 3 Loss Week of 2.
Slide 57: Additional Areas of Opportunity & Focus
ADDITIONAL AREAS OF OPPORTUNITY & FOCUS For personal use only We have invested in organizational capability to deliver on a number of specific additional opportunities inside of JH operations Product Line Operations ColorPlus® Operations Post Autoclave 2.0 Manufacturing focus on Enabling the market
Slide 58: JH Manufacturing Strategy Summary
JH MANUFACTURING STRATEGY SUMMARY For personal use only • A culture of innovation & step change has delivered significant value creation from our historical manufacturing approach • Greater efficiencies in our base network will be generated from a shift to continuous improvement, world class manufac
Slide 59: Customer Value Creation & FC Process Innovation
For personal use only • Xxx • Xxx CUSTOMER VALUE CREATION & FC PROCESS INNOVATION
Slide 60: JH Manufacturing Step Change
JH MANUFACTURING STEP CHANGE For personal use only We have also doubled down on our ability to deliver break through engineering step change in all areas of JH manufacturing Step innovation in… …enables break through progress JH Manufacturing Capability Next Generation Hatschek New Product Enablers
Slide 61: Step Changing the Hatschek Process
STEP CHANGING THE HATSCHEK PROCESS For personal use only Current Speeds vs. Enabled by step change Nameplate innovation… Potential Speed Gains • Significant increase in drainage Sheet Machine Speed Beyond Design Potential to Close rate Gap to Nameplate • Raw material formation Current Current modifi
Slide 62: Manufacturing Platform Step Change
MANUFACTURING PLATFORM STEP CHANGE For personal use only Manufacturing platform innovation has the potential to unlock significant process, product and cost levers in fiber cement manufacturing Enabling Product Enabling Total Enabling New Attributes Cost Optimization Products Platform A Platform B P
Slide 63: Manufacturing and Supply Chain Scale
MANUFACTURING AND SUPPLY CHAIN SCALE For personal use only Supply Chain enables efficient, full truck load shipments to distribution Scale and aggregation allows for efficient manufacturing Optionality offered Full Truck Aggregated Paint Long Sheet Machine to Customer Shipments Runs Product Runs PAG
Slide 64: Manufacturing Capability Summary
MANUFACTURING CAPABILITY SUMMARY For personal use only • We have an established history in step change manufacturing innovation • We are adding to and enhancing the talent and capability of our engineering teams with the talent & capability to accelerate the pace of step change in JH • The value ass
Slide 65: Capacity Project Update
For personal use only • Xxx • Xxx CAPACITY PROJECT UPDATE
Slide 66: Tacoma Update
TACOMA 2 UPDATE For personal use only • In start-up phase – C+ line expected 1H FY20 • Nameplate Capacity - 300 mmstdft/year • Capabilities – Plank, Backer, HardieShingle®, ColorPlus® Technology • 130 Employees at full production First Stacks Produced • Site benefits – Low input cost – Proximity to
Slide 67: Alabama Update
ALABAMA UPDATE For personal use only • Construction in process • Expected commissioning 1H FY20 • Initial Nameplate Capacity – 600 mmstdft/year • Anticipated Capabilities – HZ10 & HZ5 Plank, Backer, Aspyre Plank • 175 – 200 Employees at full production • Site benefits • Low input cost • Skilled manu
Slide 68: Summary
SUMMARY For personal use only • Tacoma II and Alabama projects are on-track • Both investments bring incremental flat sheet and product line capacity to support future demand creation • Learnings from our previous experience in building & operating sites are being applied PAGE 42
Slide 69: Overall Summary
OVERALL SUMMARY For personal use only • We have a clear path forward in operations to continue to enable our 35/90 organic growth strategy • Our network design capabilities continue to improve and mega- sites are expected to be important to future capacity • Our journey to world class manufacturing
Slide 70: Q&A
For personal use only • Xxx • Xxx Q&A
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