James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2015 Earnings Presentation
50 slides from James Hardie Industries's earnings presentation, Nov 20, 2014
Slide 1: Q2 FY15 Management Presentation
Exhibit 99.4 Q2 FY15 MANAGEMENT PRESENTATION 19 NOVEMBER 2014
Slide 2: Disclaimer
DISCLAIMER 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 circulars, invitation
Slide 3: Disclaimer (continued)
DISCLAIMER (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 intended to identify forward-looking
Slide 4: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, CFO • Questions and Answers In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures included in the Definitions se
Slide 5: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 6: Summary and Key Themes
SUMMARY AND KEY THEMES • Group net sales increased 12% for both the quarter and half year compared to last year • Group adjusted net operating profit increased 16% for the second quarter 2015 and 7% for the half year 2015 compared to pcp 1 • US housing market remains below our expectations at the be
Slide 7: Group Overview
GROUP OVERVIEW Three Months and Half Year ended 30 September Q2'15 Q2'14 Change 1H'15 1H'14 Change Adjusted EBIT (US$ millions) 85.1 72.7 17% 156.3 140.2 11% Adjusted EBIT Margin % 19.3 18.5 0.8 pts 18.2 18.3 (0.1) pts Adjusted Net Operating Profit 65.4 56.3 16% 115.5 108.3 7% Net operating cash flo
Slide 8: USA and Europe Fiber Cement Quarter Summary
nd USA AND EUROPE FIBER CEMENT 2 QUARTER SUMMARY 2 nd Quarter Results 1 First Half Year Result 2 Net Sales Up 12% to US$335.4 million Net Sales Up 14% to US$656.9 million Sales Up 9% to 485.4 mmsf Sales Up 9% to 948.6 mmsf Volume Volume Average Up 3% to US$677 per msf Average Up 5% to US$679 per msf
Slide 9: USA and Europe Fiber Cement Quarterly EBIT and Margin
USA AND EUROPE FIBER CEMENT Quarterly EBIT and EBIT Margin 1 80 35 70 30 60 25 50 20 40 15 30 10 20 10 5 0 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 EBIT EBIT Margin 1 Excludes asset impairment charges of US$14.3 million in 4 th quarter FY12, US$5.8 million in 3 rd quarter FY13 and US$11.1 million in 4 t
Slide 10: USA Fiber Cement Top Line Growth
USA FIBER CEMENT Top Line Growth '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 JH Volume Housing Starts JH Revenue Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau PAGE 10
Slide 11: USA and Europe Fiber Cement Average Net Sales Price
USA AND EUROPE FIBER CEMENT Average Net Sales Price 710 679 670 635 630 590 550 FY10 FY11 FY12 FY13 FY14 1H'15 PAGE 11
Slide 12: Asia Pacific Fiber Cement Quarter Summary
nd ASIA PACIFIC FIBER CEMENT 2 QUARTER SUMMARY nd 2 Quarter Results First Half Year Result Net Sales Up 13% to US$105.0 million Net Sales Up 7% to US$200.3 million Sales Up 9% to 116.9 mmsf Sales Up 7% to 225.4 mmsf Volume Volume Average Up 3% to A$959 per msf Average Up 3% to A$950 per msf Price Pr
Slide 13: HY FY15 Global Capex Spend and Key Projects
HY FY15 GLOBAL CAPEX SPEND AND KEY PROJECTS Project Capital Budget Progress during 1H'15 Key engineering work on track Plant City, Florida - 4 th sheet machine and ancillary facilities US$65.0 million Expected to complete construction FY'16 rd Key engineering work on track Cleburne, Texas - 3 sheet
Slide 14: FY2015 Outlook and Guidance
FY2015 OUTLOOK AND GUIDANCE USA and Europe Fiber Cement Outlook • The US housing market recovery remains uncertain in the short-term, however, our view remains unchanged on the medium and longer-term outlook • Due to the slower then expected recovery, we will defer the planned commissioning of a num
Slide 15: Financial Review
FINANCIAL REVIEW Matt Marsh, CFO
Slide 16: Group Results
GROUP RESULTS • Earnings impacted by: • Higher sales volumes and average sales prices across all business units • Higher input costs and plant inefficiencies across our network, which were partially mitigated during Q2 • Higher organizational spend, primarily due to higher compensation expenses and
Slide 17: Results for the 2nd Quarter
nd RESULTS FOR THE 2 QUARTER Summary Three Months ended 30 September Net sales increased 12%, favorably impacted by: US$ Millions Q2 '15 Q2 '14 % Change • Higher sales volumes; and Net sales 440.4 392.0 12 • Higher average net sales prices in local currencies Gross profit 150.9 133.1 13 Gross profit
Slide 18: Results for the 2nd Quarter (continued)
RESULTS FOR THE 2 nd QUARTER (continued) Summary Three Months ended 30 September Asbestos adjustments were favorable due to: US$ Millions Q2 '15 Q2 '14 % Change • 7% favorable change in the AUD / USD exchange rate from beginning to ending balance sheet date for the Net operating profit 127.2 51.9 pe
Slide 19: Results - Half Year 2015
RESULTS - HALF YEAR 2015 Summary Half Year ended 30 September Net sales increased 12%, favorably impacted by: US$ Millions 1H'15 1H'14 % Change • Higher sales volumes; and Net sales 857.2 764.2 12 • Higher average net sales prices in local currencies Gross profit 291.1 259.4 12 Gross profit margin i
Slide 20: Results – Half Year 2015 (continued)
RESULTS – HALF YEAR 2015 (continued) Summary Half Year ended 30 September Asbestos adjustments were favorable due to: US$ Millions 1H'15 1H'14 % Change • 5% favorable change in the AUD / USD exchange rate from Net operating profit 156.1 194.1 (20) the beginning to the ending balance sheet date • Com
Slide 21: Gross Profit - Group
GROSS PROFIT - GROUP 160.0 34.3 35.0 140.0 33.3 34.0 150.9 120.0 33.0 100.0 111.3 32.0 80.0 31.0 60.0 30.0 40.0 29.0 20.0 28.0 - 27.0 Q2 FY13 Q2 FY14 Q2 FY15 • Gross profit has remained strong throughout the past three years • Price has improved as we continue to execute on pricing strategies and th
Slide 22: US Input Costs
US INPUT COSTS Quarterly US Input Costs 10 1,200 Discussion: 9 1,000 8 • Input costs are up significantly over 7 the prior year 800 6 • The price of NBSK pulp is at a three- 600 5 year peak 4 400 3 • The cost of gas for industrial users 2 has nearly doubled since 2013 200 1 • We are engaged in effec
Slide 23: Segment EBIT – 2nd Quarter and Half Year
SEGMENT EBIT – 2 nd QUARTER and HALF YEAR US & Europe Fiber Cement US and Europe Fiber Cement EBIT summary: 160 142.8 140 126.7 • Quarter and half year EBIT increased by 11% and 13%, 120 100 94.3 respectively, when compared to the same periods last year 80 74.8 Q2 EBIT • The increase was driven by v
Slide 24: Segment EBIT – 2nd Quarter and Half Year
SEGMENT EBIT – 2 nd QUARTER and HALF YEAR Research and Development R&D summary: (16) (13.6) (14) (12.3) (11.6) • Continued broadly inline with historic trend (12) (10) • Fluctuations reflect normal variation and timing in number of (8) (6.8) Q2 EBIT (6.3) R&D projects in process at any given period
Slide 25: Changes in AUD vs. USD
CHANGES IN AUD vs. USD 0.00 AUD/USD Exchange Rate on 0.60 31Dec10 31Mar11 S0Jun11 B0Sep 11 31Dect1 31Mar12 S0Jun12 30 Sep 12 31 Dec 12 31 Mar13 SJun 13 30 Sep 13 31 Dec 13 31 Mar14 BJun14 30 Sep 14 Eamings Balance Sheet + Favorable impact from translation of Asia Pacific results - Q2'15 vs Q2'14 v N
Slide 26: Income Tax
INCOME TAX • 23.1% estimated adjusted effective tax rate (ETR) Three Months and Half Year ended 30 September Q2’15 Q2’14 1H’15 1H’14 Operating profit before taxes 144.7 67.5 190.3 224.6 • Adjusted income tax expense and adjusted ETR Asbestos: increased due to changes in geographical mix of earnings
Slide 27: Cashflow
CASHFLOW (US$ Millions) 1H'15 1H'14 Change (%) EBIT 196.0 224.7 (13) • First half cash flow from operations 1 1 (42.5) (92.9) (54) reflect our US$113.0 million Asbestos related contribution to AICF Annual AICF contribution (113.0) - Depreciation & Amortization 34.1 30.6 11 • Higher working capital W
Slide 28: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH 1 Strong Financial Management 2 Disciplined Capital Allocation 3 Liquidity and Funding Investing in R&D and ~$500 million of bank Strong margins and capacity expansion to facilities, 37% liquidity as operating cash flows support organic growth of Q2’15 Strong g
Slide 29: Liquidity Profile
Liquidity Profile 1 Debt Maturity Profile • Strong balance sheet position: $190 • $60.5 million of cash • $505 million of debt facilities $125 • 37% liquidity as of Q2’15 $100 $50 • As of Q2’15, we had net bank debt of US$319.5 $40 million compared to net cash of US$167.5 million $0 at Q4’14 FY'15 F
Slide 30: New Zealand Weathertightness Claims
NEW ZEALAND WEATHERTIGHTNESS CLAIMS NZ Weathertightness Provision 25.0 20.0 15.0 10.0 5.0 - Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 • For the half year, we recorded an expense of US$1.0 million, down from US$4.9 million in the prior corresponding period. The decrease in the expense com
Slide 31: Asbestos Fund – Proforma (unaudited)
ASBESTOS FUND – PROFORMA (unaudited) Claims Data A$ millions AICF cash and investments - 31 March 2014 65.5 • For the quarter and half year ended 30 September 2014, we Contribution to AFFA by James Hardie 119.9 note the following related to asbestos claims: Insurance recoveries 23.4 • Claims receive
Slide 32: Summary and Key Themes
SUMMARY AND KEY THEMES • Group net sales increased 12% for both the quarter and half year compared to last year • Group adjusted net operating profit increased 16% for the second quarter 2015 and 7% for the half year 2015 compared to prior corresponding periods • US housing market remains below our
Slide 33: Questions
James Hardie QUESTIONS
Slide 34: Appendix
James Hardie APPENDIX
Slide 35: Financial Summary
FINANCIAL SUMMARY Three Months ended and Half Year ended 30 September US$ Millions Q2 '15 Q2 '14 % Change 1H'15 1H'14 % Change Net Sales USA and Europe Fiber Cement $ 335.4 $ 298.7 12 $ 656.9 $ 576.8 14 Asia Pacific Fiber Cement 105.0 93.3 13 200.3 187.4 7 Total Net Sales $ 440.4 $ 392.0 12 $ 857.2
Slide 36: Key Ratios
KEY RATIOS Half Year ended 30 September 1H'15 1H'14 1H'13 1 EPS (Diluted) (US Cents) 26c 24c 19c 2 EBIT/ Sales (EBIT margin) 28.1% 18.3% 16.2% 1 Gearing Ratio 21.5% (9.5)% (6.4)% 2 Net Interest Expense Cover 96.3x 66.8x 54.7x 2 Net Interest Paid Cover 200.7x 77.9x 109.3x Net Debt Payback 1.1yrs - -
Slide 37: EBITDA – 2nd Quarter
nd EBITDA – 2 QUARTER Three Months ended 30 September US$ Millions Q2'15 Q2'14 % Change EBIT USA and Europe Fiber Cement $ 74.8 $ 67.3 11 1 Asia Pacific Fiber Cement 25.7 22.1 16 Research & Development (6.8) (5.5) (24) General corporate excluding asbestos and ASIC expenses (8.6) (11.2) 23 Depreciati
Slide 38: EBITDA – Half Year
EBITDA – Half Year Half Year ended 30 September US$ Millions 1H'15 1H'14 % Change EBIT USA and Europe Fiber Cement $ 142.8 $ 126.7 13 1 Asia Pacific Fiber Cement 46.4 43.2 7 Research & Development (13.6) (11.6) (17) General corporate excluding asbestos and ASIC expenses (19.3) (18.1) (7) Depreciatio
Slide 39: Net Interest (Expense) Income
NET INTEREST (EXPENSE) INCOME Three Months ended and Half Year ended 30 September US$ Millions Q2'15 Q2'14 1H'15 1H'14 Gross interest expense $ (1.8) $ (1.0) $ (2.7) $ (2.0) Capitalised interest 0.2 0.0 0.2 0.0 Interest income 0.1 0.1 0.3 0.2 Realised loss on interest rate swaps (0.1) (0.2) (0.3) (0
Slide 40: Total US Housing Starts
TOTAL US HOUSING STARTS Source: US Census Bureau PAGE 40
Slide 41: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS This Management Presentation forms part of a package of information about the company’s results. It should be read in conjunction with the other parts of this package, including the Management’s Analysis of Results, Media Release and Consolidated Financial Statements Defi
Slide 42: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non-US GAAP, but are consistent with those used by Australian companies. Because the company prepares its Condensed Consolidated Financial
Slide 43: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS EBIT margin – EBIT margin is defined as EBIT as a percentage of net sales. Sales Volumes mmsf – million square feet, where a square foot is defined as a standard square foot of 5/16” thickness msf – thousand square feet, where a square foot is defined as a standard square
Slide 44: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBIT and Adjusted EBIT margin – Adjusted EBIT and Adjusted EBIT margin are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. Management has included these financial measures to pro
Slide 45: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted Net operating profit – Adjusted net operating profit is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than net operating profit. Management has included this financial measure to provide investors with
Slide 46: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted Diluted earnings per share – Adjusted diluted earnings per share is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than diluted earnings per share. Management has included this financial measure to provi
Slide 47: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted effective tax rate on earnings – Adjusted effective tax rate on earnings is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. Management has included this financial measure to provi
Slide 48: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA – is not a measure of financial performance under US GAAP and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by US GAAP or as a measure of profitability or liquidity. Not
Slide 49: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted selling, general and administrative expenses – Adjusted selling, general and administrative expenses is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than selling, general and administrative expenses. M
Slide 50: Q2 FY15 Management Presentation
Q2 FY15 MANAGEMENT PRESENTATION 19 November 2014
James Hardie Industries — Q2 FY2015 Earnings Presentation on 6ix