Eagle Materials Inc · NYSE:EXP
Eagle Materials — Investor Presentation (June 2006)
49 slides from Eagle Materials's investor presentation, Jun 27, 2006
Slide 1: Set in Motion Investor Presentation
Set in Motion Investor Presentation June 2006 Eagle Materials Inc. NYSE: EXP www.eaglematerials.com
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified
Slide 3: Eagle Materials, Growth Initiatives, Conclusion
Eagle Materials Growth Initiatives Conclusion Eagle Materials Inc.
Slide 4: Eagle Materials business lines
Gypsum Wallboard Cement Paperboard Concrete & Aggregates Eagle Materials Inc.
Slide 5: Eagle Materials' operations are well positioned
Eagle Materials Eagle Materials' operations are well positioned Excellent operators of ,modern assets High-speed wallboard lines and dry process cement plants Maintained in "better than new" condition Operated significantly above rated capacity Low cost producer in all segments Geographically divers
Slide 6: Eagle's market dynamics as a whole
Eagle's market dynamics as a whole Source: Eagle estimates Repair and Remodel New Non-Residential New Residential Other Public East 18 21 41 1 19 Other, 1% Repair and Remodel Construction, 18% New Non-Residential Construction, 21% New Residential Construction, 41% Public Construction, 19%
Slide 7: Eagle's portfolio of building-materials and construction-products businesses
Eagle's portfolio of building-materials and construction-products businesses Wallboard 52% Cement 30% Wallboard Cement Paperboard Con/Agg Revenues 52 30 8 10 Revenue by Segment* Concrete/Aggregates 10% Cement 30% Paper 8% Wallboard Cement Paperboard Con/Agg Operating Earnings 59 30 8 3 Operating Ear
Slide 8: Steady top and bottom line growth
Steady top and bottom line growth ($ in millions) 02 03 04 05 06 07E Revenues 395 429 503 617 860 1000 Revenues 02-07E CAGR - 17% For Fiscal Year Ending March 31 02 03 04 05 06 07E Op Income 79 102 115 172 264 375 Operating Earnings 02-07E CAGR - 28% $79 $102 $115 $172 $264 $360-$390 $1,000
Slide 9: Eagle generates significant cash flow
94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Eagle generates significant cash flow ($ in millions) (L) Revenues (R) Operating Cash Flow * *Cash from operations including changes in working capital
Slide 10: Positive fiscal 2007 outlook for Eagle
Positive fiscal 2007 outlook for Eagle For fiscal 2007, we expect high capacity utilization of the U.S. wallboard industry (>95%) Eagle Materials expected to sell out its cement capacity for the 21st consecutive year and the U.S. Cement Industry will have another record cement consumption year New r
Slide 11: Eagle's Wallboard Operations
Eagle's Wallboard Operations Eagle's Wallboard Operations Wallboard Industry Overview Annual U.S. capacity of 37.8 BSF Industry operating at near full capacity requiring some imports 19% new capacity announced for 2007 - 2010 timeframe National market supplied by regional plant network Historic grow
Slide 12: New residential construction is expected to slow moderately
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Housing Starts 892 1162 1451 1433 1194 852 705 663 1068 1084.2 1072.4 1179.4 1146.4 1081.3 1003.3 894.8 840.4 1029.9 1125.7 1198.4 10
Slide 13: Non-residential recovering from a severe recession
Non-residential recovering from a severe recession Source: PCA 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Construction Output 127.5 140.5 155.4 168.3 179.7 174.7 178.7 165.1 133.5 123 127.6 129.5 137.8 149.6 Private non-residential construction output, 1994 - 2007E (U.S.
Slide 14: Wallboard utilization outlook
Wallboard utilization outlook (numbers in billion square feet) CY 2005 CY 2006 CY 2007 Consumption Estimates: New Residential (51% of Demand) 18.5 17.2 16.2 New Commercial (18% of Demand) 6.5 7.3 7.8 Repair & Remodel (29% of Demand) 10.5 10.8 11.3 Manufactured Housing (2% of Demand) 0.7 0.7 0.7 Tota
Slide 15: Eagle's Wallboard Quarterly Net Sales Price Trend
Eagle's Wallboard Quarterly Net Sales Price Trend 12/31/03 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 5/1/2006 Price 86 95 101 110 109 115 119 132 144 155 167 $/MSF Recently implemented June price increase expected to yield approximately $10/msf
Slide 16: Eagle's wallboard production and cost
Eagle's wallboard production and cost FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Total BSF Produced 0.323 0.376 0.487 0.586 0.672 0.714 1.091 1.151 1.374 1.649 1.89 1.956 2.496 2.547 2.83 2.9 Production Cost / MSF 61.92 53.3 56.43 65 59.74 61.42 64.58 64.02 63.0
Slide 17: Eagle's Wallboard Performance
Eagle's Wallboard Performance FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Segment Earnings 7 12 21 36 56 108 27.1 5 27 36 81.6 154 230 Operating Earnings ($ in millions) Operating margins per msf sold $12.41 $18.05 $28.33 $32.86 $48.98 $78.96 $17.11 $2.59 $13.97 $14.77 $29.45 $
Slide 18: Eagle's Cement Operations
Eagle's Cement Operations Cement Industry Overview Capital intensive with 3-5 year lead-time for greenfield capacity 25%+ imports needed to satisfy domestic demand 17% new capacity announced for 2007-2010 time frame High import costs due to Asian economic strength and high ocean freight rates Eagle
Slide 19: Primary Driver of U.S. Cement Consumption
Primary Driver of U.S. Cement Consumption Source: Portland Cement Association (Spring 2006 Forecast). Public Construction put-in-place with cement consumption 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Public Construction
Slide 20: Improved highway spending
Improved highway spending SAFETEA provides a six-year $286 billion federal highway bill, 42% greater than previous bill Source: U.S. Census, ARTBA 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E Annual spending levels 18.4 18.2 21.3 20.9 20 21.8 21.5 25.
Slide 21: U.S. Cement Industry Overview: Capacity vs. Consumption
Capacity Consumption 75 91 72 76 90 76 77 92.5 82 78 91.5 89 79 94 88 80 91 79 81 94 75 82 91 67 83 93 74 84 92 85 85 89.5 88 86 88.5 91 87 87.5 94 88 88 93 89 86 91 90 85 90 91 86 80 92 87 84 93 87 88 94 87.5 94 95 88.5 95 96 88 100 97 89 106 98 91 114 99 92.5 120 0 94 121 1 96 124 2 98 120 3 100.4
Slide 22: Eagle's Cement Quarterly Net Sales Price Trend
Eagle's Cement Quarterly Net Sales Price Trend 12/31/03 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 5/1/2006 Price 65.72 64.79 68.34 70.05 71.75 73.59 78.55 82.55 83.24 90 91 $/Ton
Slide 23: Eagle's cement production and cost
Eagle's cement production and cost Power and Energy cost components have recently been hard to control which led to us to accelerate our cement modernization projects to control power and energy consumption at the plants. FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E (L
Slide 24: Eagle's Cement Performance
Eagle's Cement Performance FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Operating Earnings 26 35 40 48 57 53 59.6 60 54 50 58 78 90 Operating margins per ton sold $13.00 $17.00 $19.00 $22.00 $26.00 $23.00 $25.00 $25.00 $23.00 $20.00 $21.00 $24.00 $27.00 Operating Earnings ($ in
Slide 25: Eagle's Gypsum Paperboard
Gypsum Paper Industry Overview 7 out of 8 wallboard producers are vertically integrated Non-gypsum paper markets are struggling Eagle's Operations Overview Original design capacity of 220,000 tons has been exceeded - now 320,000 tons Increased paperboard capacity is expected to be absorbed by Eagle'
Slide 26: Eagle's Concrete and Aggregates Operations
Concrete/Aggregates Industry Overview Both industries are highly fragmented Over 7,000 independently operated quarries Top 2 aggregates producers control 13% of the market 2,700 concrete companies owning 6,000 plants Eagle's Operations Overview Strong competitive position in local markets Capacity A
Slide 27: Growth Initiatives
Eagle Materials Growth Initiatives Conclusion Eagle Materials Inc.
Slide 28: Current and planned growth initiatives
Current and planned growth initiatives Approximate Cost Wallboard Greenfield Plant in South Carolina (Late Calendar 2007) $150 Cement Modernization and Expansion of Illinois Cement (Late Calendar 2006) $65 Modernization and Expansion of Nevada Cement (Late Calendar 2008) $200 Modernization and Expan
Slide 29: Growing the Wallboard business
Growing the Wallboard business FY1995 FY2000 FY2006 FY2007E FY2009E BSF Capacity 0.6 1.4 2.8 2.9 BSF Capacity after Georgetown, SC 3.7 30% growth in Wallboard capacity by FY 2009 U.S. Market Share 3% 5% 7.5% 7.5% 9%
Slide 30: Georgetown, South Carolina Project Update
Georgetown, South Carolina Project Update Project Background New gypsum wallboard plant with annual design capacity of 750 mmsf Long-term supply agreement for synthetic gypsum with Santee Cooper (South Carolina Public Service Authority) Increases Eagle's annual wallboard capacity by approximately 30
Slide 31: Growing the wallboard business
Growing the wallboard business EXISTING PLANTS We have announced plans for growth in the Southeast and are in the process of locating additional sources of gypsum for future growth GEORGETOWN, SC
Slide 32: Growing our Cement Business
Growing our Cement Business FY1995 FY2000 FY2006 FY2008E FY2010E Tons of capacity 1.8 2.1 2.65 3.1 Tons of capacity after expansion 4 Approximately 50% growth in manufactured Cement capacity U.S. Market Share 2% 2% 2.6% 3.0% 3.4%
Slide 33: Illinois Expansion Update
Illinois Expansion Update Project Background $65 million expansion Increases capacity by approximately 65% to 1.1 million tons Expected to reduce manufacturing costs by approximately 20% Expanded market share has already been established through imports Project Status Project is on schedule and with
Slide 34: Nevada Cement Modernization Highlights
Nevada Cement Modernization Highlights Plant located just east of Reno, Nevada Serves the Northern Nevada and Northern California cement markets Eagle's oldest plant (circa early 1960's) Approximately $200 million investment Modernization includes: Expanding capacity by approximately 100% to 1.1 mil
Slide 35: Mountain Cement Modernization Highlights
Mountain Cement Modernization Highlights Plant located in Laramie, Wyoming (serves primarily Wyoming and Denver) Approximately $120 million investment Modernization includes: Expanding capacity by approximately 60% to 1.1 million tons Reducing heat consumption by approximately 40% to 2.6 mmbtu per t
Slide 36: Nothing but 1st Class Assets at Eagle Materials
Nothing but 1st Class Assets at Eagle Materials Cement Illinois Cement Company 5 stage preheater/precalciner Texas Lehigh Cement Company 4 stage preheater/precalciner Mountain Cement Company 5 stage preheater/precalciner Nevada Cement Company 5 stage preheater/precalciner Concrete/Aggregate Dominant
Slide 37: Increased Earnings Set In Motion
Increased Earnings Set In Motion Eagle's Growing Manufacturing Capacities Eagle's Growing Manufacturing Capacities Eagle's Growing Manufacturing Capacities Eagle's Growing Manufacturing Capacities Before Expansions After Expansions Increase Wallboard (BSF) 2.8 3.7 +30% Cement (million tons) 2.7 4.0
Slide 38: Conclusion
Eagle Materials Growth Initiatives Conclusion Eagle Materials Inc.
Slide 39: A solid foundation with a bright future
A solid foundation with a bright future Highest margin building materials and construction products public company in the U.S.* Balanced growth strategy focused on cement and wallboard Strong cash flow from low-cost operations Attractive annual dividend Repurchase shares when appropriate *Based on c
Slide 40: Eagle has the highest operating margins of the group
Currently, Eagle has the highest operating margins of the group US Concrete TXI CRH Hanson LaFarge SA Cemex USG Martin Marietta Vulcan Florida Rock Eagle East 0.068 0.1 0.105 0.135 0.151 0.154 0.163 0.172 0.174 0.231 0.288 Source: Company filings through March 31, 2006. EBIT is a non-GAAP measure. S
Slide 41: Dividend yield and payout ratio
Dividend yield and payout ratio Eagle's Dividend (1) Industry Average* Yield 0.017 0.015 Eagle's FY06 Industry TTM * Payout 0.232 0.333 *Industry average includes Vulcan Materials, Rinker Group, Florida Rock, Martin Marietta and TXI. (1) Based on $42 per share stock price Eagle's annual dividend is
Slide 42: FY 2007 Guidance
FY 2007 Guidance 1st Qtr FY 2007 FY 2007 Revenues $275 $1,000 Net Earnings $56.0 - $61.0 $224 - $240 Diluted EPS $1.10 - $1.20 $4.40 - $4.70 ($ in Millions, except per share data)
Slide 43: Question & Answer
Eagle Materials Inc. Question & Answer
Slide 44: Contact Information
Contact Information Steve Rowley, President and CEO Telephone: 214-432-2020 Email: srowley@eaglematerials.com Arthur Zunker, Senior Vice President and CFO Telephone: 214-432-2010 Email: azunker@eaglematerials.com Bill Devlin, Vice President - Controller Telephone: 214-432-2014 Email: bdevlin@eaglema
Slide 45: Appendix
Appendix
Slide 46: oe mince,
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Slide 47: Wallboard - Capacity Announcements
Wallboard - Capacity Announcements New Capacity Announcements 6 greenfield plants and several modernization projects have been announced for the 2007- 2010 timeframe: Greenfield Plants - American Gypsum - 750 mmsf (South Carolina) BPB - 700 mmsf (North Carolina) National - 1 bsf (North Carolina) BPB
Slide 48: Cement - Capacity Announcements
Cement - Capacity Announcements New Capacity Announcements (in clinker short tons) The following capacity increases have been announced for the calendar 2007-2010 timeframe Greenfield Plants - GCC America - 1.1 million tons (Pueblo, CO) Ash Grove - 2.0 million tons (Las Vegas, NV) Holcim - 4.8 milli
Slide 49: Explanation of Non-GAAP Items
Explanation of Non-GAAP Items EBIT represents net income, plus interest expense (less interest income) and provisions for income taxes. EBIT is a non-GAAP measure that provides supplemental information regarding the operating performance of our business without regard to financing methods or capital