Eagle Materials Inc · NYSE:EXP
Eagle Materials — Investor Presentation (June 2006)
51 slides from Eagle Materials's investor presentation, June 2006
Slide 1: Set in Motion Investor Presentation
Set in Motion Investor Presentation z 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 Inc.
Eagle Materials Inc. 1. Eagle Materials 2. Growth Initiatives 3. Conclusion 3
Slide 4: Eagle Materials Inc.
Eagle Materials Inc. Gypsum Cement Wallboard Concrete & Paperboard Aggregates 4
Slide 5: Eagle Materials
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 – Geographi
Slide 6: Eagle's market dynamics as a whole
Eagle’s market dynamics as a whole Public Construction, 19% Repair and Remodel Construction, 18% Other, 1% New Non-Residential Construction, 21% New Residential Construction, 41% Source: Eagle estimates 6
Slide 7: Eagle's portfolio of building-materials and construction-products businesses
Eagle’s portfolio of building-materials and construction-products businesses Revenue by Segment* Operating Earnings by Segment* Concrete/Aggregates Concrete/Aggregates 10% Wallboard 3% Paper 52% Wallboard 8% 59% Paper 8% Cement Cement 30% 30% *FY 06 including Joint Venture revenues, excludes other,
Slide 8: Steady top and bottom line growth
Steady top and bottom line growth ($ in millions) Revenues Operating Earnings 02-07E CAGR – 17% 02-07E CAGR – 28% $1,200 $400 $360-$390 $1,000 $1,000 $860 $300 $264 $800 $617 $600 $503 $200 $172 $429 $395 $400 $115 $102 $100 $79 $200 $0 $0 02 03 04 05 06 07E 02 03 04 05 06 07E For Fiscal Year Ending
Slide 9: Eagle generates significant cash flow
Eagle generates significant cash flow ($ in millions) (L) Revenues (R) Operating Cash Flow * $1,000 $250 $225 $800 $200 $175 $600 $150 $125 $400 $100 $75 $200 $50 $25 $0 $0 95 96 97 98 99 00 01 02 03 04 05 06 E 07 FY FY FY FY FY FY FY FY FY FY FY FY FY *Cash from operations including changes in work
Slide 10: Positive fiscal 2007 outlook for Eagle
Positive fiscal 2007 outlook for Eagle For fiscal 2007, we expect high capacity utilization of the U.S. wallboard industry (>95%) Eagle Materials expected to sell out its cement capacity for the 21st consecutive year and the U.S. Cement Industry will have another record cement consumption year New r
Slide 11: Eagle's Wallboard Operations
Eagle’s Wallboard Operations Wallboard 59% Wallboard Industry Overview – Annual U.S. capacity of 37.8 BSF – Industry operating at near full capacity requiring some imports – 19% new capacity announced for 2007 – 2010 timeframe – National market supplied by regional plant network – Historic growth le
Slide 12: New residential construction is expected to slow moderately
New residential construction is expected to slow moderately (R) U.S. Treasury – (L) Single Family Starts-000’s Housing Starts 10 year Treasury 10 year constant maturity 2,000 12% drop from 1.7 million 16 1,800 units to 1.5 million units 14 1,600 12 1,400 10 1,200 1,000 8 800 6 600 4 400 2 200 0 0 19
Slide 13: Non-residential recovering from a severe recession
Non-residential recovering from a severe recession Private non-residential construction output, 1994 – 2007E (U.S. billions 1996$) $220 $200 $180 15% growth from $160 2005 to 2007 $140 $120 $100 E E 94 95 96 04 97 98 99 00 01 02 03 05 06 07 19 19 19 19 19 19 20 20 20 20 20 20 20 20 Source: PCA 13
Slide 14: Repair and remodel construction has seen significant growth
Repair and remodel construction has seen significant growth Residential Repair and Remodel Construction 1995 – 2007E U.S. Billions 2000 $ $200 9% growth from 2005 to 2007 $150 $100 E E 95 96 97 98 99 00 01 02 03 04 05 06 07 19 20 19 19 19 19 20 20 20 20 20 20 20 Source: NAHB Remodeling Forecast, Mar
Slide 15: 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 16: Eagle's Wallboard Quarterly Net Sales Price Trend
Eagle’s Wallboard Quarterly Net Sales Price Trend $/MSF Recently implemented June price increase $180 expected to yield approximately $10/msf $167 $160 $155 $144 $140 $132 $119 $120 $115 $110 $109 $101 $100 $95 $86 $80 May-06 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
Slide 17: Eagle's wallboard production and cost
Eagle’s wallboard production and cost Total BSF Produced Production Cost / MSF 3.0 $90 2.5 $75 2.0 $60 ($ / MSF) (BSF) 1.5 $45 1.0 $30 0.5 $15 0.0 $0 E 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 17
Slide 18: Eagle's Wallboard Performance
Eagle’s Wallboard Performance $250 Operating Earnings $230 $225 ($ in millions) $200 $175 $154 $150 $125 $108 $100 $82 $75 $56 $50 $36 $36 $27 $27 $21 $25 $12 $7 $5 $0 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Operating margins per msf sold $12.41 $18.05 $28.33 $32.86 $48.98
Slide 19: Eagle's Cement Operations
Eagle’s Cement Operations Cement 30% 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 f
Slide 20: Primary Driver of U.S. Cement Consumption
Primary Driver of U.S. Cement Consumption Public construction is expected to remain strong Public Construction put-in-place with cement consumption Public Construction Public Cement Consumption Billions of ’96 $ (L) Millions of Tons (R) $200.0 Increased cement intensities due to 60,000 concrete dura
Slide 21: Improved highway spending
Improved highway spending SAFETEA provides a six-year $286 billion federal highway bill, 42% greater than previous bill ISTEA TEA-21 SAFETEA-LU 45 40 35 30 25 $bn 20 15 10 5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E Annual spending levels Source:
Slide 22: U.S. Cement Industry Overview Capacity vs. Consumption
U.S. Cement Industry Overview Capacity vs. Consumption (Millions of Short Tons) Capacity Consumption 150 125 Imports 100 75 50 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 E 07 E 08 E (Calendar Year) Source: PCA Data and Company estimates 22
Slide 23: Eagle's Cement Quarterly Net Sales Price Trend
Eagle’s Cement Quarterly Net Sales Price Trend $/Ton $100 $90 $91 $90 $83 $83 $80 $79 $74 $72 $70 $70 $68 $66 $65 $60 $50 6 4 4 4 5 5 5 6 3 4 5 -0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 ay 31 30 30 31 30 30 31 1 1 1 /3 /3 /3 M 3/ 6/ 9/ 3/ 6/ 9/ 3/ 12 12 12 23
Slide 24: 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. (L) Total Manufactured Tons Produced (R) Average Manufactured Production Cost
Slide 25: Eagle's Cement Performance
Eagle’s Cement Performance $100 Operating Earnings $90 ($ in millions) $78 $75 $60 $60 $57 $58 $53 $54 $50 $48 $50 $40 $35 $26 $25 $0 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Operating margins per ton sold $13.00 $17.00 $19.00 $22.00 $26.00 $23.00 $25.00 $25.00 $23.00 $20.00
Slide 26: Eagle's Gypsum Paperboard
Paper 8% Eagle’s Gypsum Paperboard Gypsum Paper Industry Overview – 7 out of 8 wallboard producers are vertically integrated – Non-gypsum paper markets are struggling Eagle’s Operations Overview – Original design capacity of 220,000 tons has been exceeded - now 320,000 tons – Increased paperboard ca
Slide 27: Eagle's Concrete and Aggregates Operations
Concrete/ Eagle’s Concrete and Aggregates 3% Aggregates Operations Concrete/Aggregates Industry Overview – Both industries are highly fragmented – Over 7,000 independently operated quarries – Top 2 aggregates producers control 13% of the market – 2,700 concrete companies owning 6,000 plants Eagle’s
Slide 28: Eagle Materials Inc.
Eagle Materials Inc. 1. Eagle Materials 2. Growth Initiatives 3. Conclusion 28
Slide 29: Current and planned growth initiatives
Current and planned growth initiatives ($ in millions) 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 Moderni
Slide 30: Growing the Wallboard business
Growing the Wallboard business 30% growth in Wallboard capacity by FY 2009 5 4 3.7 Billion Square Feet 2.8 2.9 3 2 1.4 1 0.6 0 FY1995 FY2000 FY2006 FY2007E FY2009E BSF Capacity BSF Capacity after Georgetown, SC U.S. Market Share 3% 5% 7.5% 7.5% 9% 30
Slide 31: 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 approximat
Slide 32: Growing the wallboard business
Growing the wallboard business We have announced plans for growth in the Southeast and are in the process of locating additional sources of gypsum for future growth EXISTING PLANTS GEORGETOWN, SC 32
Slide 33: Growing our Cement Business
Growing our Cement Business Approximately 50% growth in manufactured Cement capacity 4.5 4.0 4.0 3.5 3.1 Million Tons 3.0 2.7 2.5 2.1 2.0 1.8 1.5 1.0 0.5 FY1995 FY2000 FY2006 FY2008E FY2010E Tons of capacity Tons of capacity after expansion U.S. Market Share 2% 2% 2.6% 3.0% 3.4% 33
Slide 34: 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 schedul
Slide 35: Nevada Cement Modernization
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
Slide 36: Mountain Cement Modernization
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 m
Slide 37: Nothing but 1st Class Assets at Eagle Materials
Nothing but 1st Class Assets at Eagle Materials American Gypsum Company Cement – Georgetown, South Carolina – Illinois Cement Company – High speed board line – 5 stage preheater/precalciner – Modern dryer and steam – Duke – Texas Lehigh Cement Company – High speed board line – 4 stage preheater/prec
Slide 38: Eagle Materials Growth
Eagle Materials Growth Clear line of sight – Sensible and well-defined plans Balance and discipline – “Smart-sized” cement plants • Energy efficient – Modern and efficient wallboard plants • Improved logistics Improved operational excellence – Simple operations • Modernization and expansion projects
Slide 39: Increased Earnings Set In Motion
Increased Earnings Set In Motion Defined Capital Spending Program $535 million Additional Capital Available (Share Repurchases, Acquisitions or Expansions) $500 million TOTAL Approximately $1 billion Eagle’s Growing Manufacturing Capacities Before Expansions After Expansions Increase Wallboard (BSF)
Slide 40: Eagle Materials Inc.
Eagle Materials Inc. 1. Eagle Materials 2. Growth Initiatives 3. Conclusion 40
Slide 41: 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 42: Currently, Eagle has the highest operating margins of the group
Currently, Eagle has the highest operating margins of the group 30% 28.8% EBIT Margins (TTM) 23.1% 20% 17.2% 17.4% 16.3% 15.1% 15.4% 13.5% 10.5% 10.0% 10% 6.8% 0% US Concrete TXI CRH Hanson LaFarge SA Cemex USG Martin Marietta Vulcan Florida Rock Eagle Source: Company filings through March 31, 2006.
Slide 43: Dividend yield and payout ratio
Dividend yield and payout ratio Eagle’s annual dividend is $0.70 per share Yield Payout 1.7% 33.3% 1.5% 23.2% Eagle's Industry Eagle's Industry Dividend (1) Average* FY06 TTM * (1) Based on $42 per share stock price *Industry average includes Vulcan Materials, Rinker Group, Florida Rock, Martin Mari
Slide 44: FY 2007 Guidance
FY 2007 Guidance ($ in Millions, except per share data) 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 44
Slide 45: Question & Answer
Eagle Materials Inc. Question & Answer 45
Slide 46: 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 47: Appendix
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Slide 48: Mapping a Strong Future
MAPPING A STRONG FUTURE MAJOR FACILITIES CEMENT PLANTS ILLINOIS CEMENT COMPANY LLC - LaSalle, illinois * MOUNTAIN CEMENT COMPANY - Laren, Homing ‘+ NEVADA CEMENT COMPANY « Ferniey, TEIAS-CCHIGH CEMENT COMPANY LD” Buc, Texas (SO% Joint venture GYPSUM WALLBOARD PLANTS . GYPSUM COMPANY - ‘enicor Gypsum
Slide 49: 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 Carol
Slide 50: 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
Slide 51: 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