James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q4 FY2014 Earnings Presentation
56 slides from James Hardie Industries's earnings presentation, May 22, 2014
Slide 1: Q4 FY14 Management Presentation
Exhibit 99.4 Q4 FY14 MANAGEMENT PRESENTATION 22 May 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: Group Overview
1 GROUP OVERVIEW Q4 Q4 % % US$ Millions FY 2014 FY 2013 Change FY 2014 FY 2013 Change Net operating profit (186.8) (69.5) 99.5 45.5 Net operating profit excluding asbestos, ASIC expenses, New Zealand product liability expenses 45.3 30.7 48 197.2 140.8 40 and tax adjustments Diluted earnings per shar
Slide 7: USA and Europe Fibre Cement 4th Quarter Summary
1 USA AND EUROPE FIBRE CEMENT 4 th QUARTER SUMMARY 1 USA and Europe Fibre Cement results reflected: • Higher sales volume due to increased activity in new construction market and increased market penetration 2 • Higher average net sales price • Economies of scale achieved through an increase in volu
Slide 8: USA and Europe Fibre Cement 4th Quarter Result
USA AND EUROPE FIBRE CEMENT 1 4th Quarter Result Net Sales up 22% to US$288.2 million Sales Volume up 14% to 433.4 mmsf Average Price2 up 7% to US$653 per msf 3 EBIT up 51% to US$57.2 million 3 EBIT Margin up 3.8 pts to 19.8% th th 1 Comparisons are of the 4 quarter of the current fiscal year versus
Slide 9: USA and Europe Fibre Cement Full Year Result
USA AND EUROPE FIBRE CEMENT 1 Full Year Result Net Sales up 19% to US$1,127.6 million Sales Volume up 14% to 1,696.9 mmsf Average Price 2 up 4% to US$652 per msf 3 EBIT up 46% to US$237.0 million EBIT Margin 3 up 3.9 pts to 21.0% 1 Comparisons are of the full year of the current fiscal year versus t
Slide 10: Quarterly EBIT and EBIT Margin
USA AND EUROPE FIBRE CEMENT Quarterly EBIT and EBIT Margin 1 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 th quarter FY13 10
Slide 11: USA Fibre Cement Top Line Growth
USA FIBRE CEMENT Top Line Growth Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau 11
Slide 12: Average Net Sales Price (US dollars)
USA AND EUROPE FIBRE CEMENT 1 Average Net Sales Price (US dollars) US$652 1 Prior period amounts have been restated to conform with current year refined methodology for calculating average net sales price 12
Slide 13: Asia Pacific Fibre Cement 4th Quarter Summary
1 th ASIA PACIFIC FIBRE CEMENT 4 QUARTER SUMMARY Asia Pacific Fibre Cement results reflected: Higher average net sales price 2, 3 Increased sales volume Lower production costs 3 achieved through economies of scale driven by volume Higher input costs 3 Depreciation of local currencies against US$ cau
Slide 14: Asia Pacific Fibre Cement 4th Quarter Result
ASIA PACIFIC FIBRE CEMENT 1 4th Quarter Result Net Sales down 2% to US$88.2 million Sales Volume up 11% to 106.9 mmsf Average Price 2 up 2% to A$910 per msf 3 EBIT up 10% to US$18.4 million 3 A$ EBIT up 28% to A$20.7 million 3 EBIT Margin up 2.3 pts to 20.9% th 1 Comparisons are of the 4 th quarter
Slide 15: Asia Pacific Fibre Cement Full Year Result
ASIA PACIFIC FIBRE CEMENT 1 Full Year Result Net Sales down 1% to US$366.2 million Sales Volume up 6% to 417.2 mmsf 2 Average Price up 3% to A$930 per msf 3 EBIT up 11% to US$82.9 million 3 A$ EBIT up 21% to A$88.9 million EBIT Margin 3 up 2.3 pts to 22.6% 1 Comparisons are of the full year of the c
Slide 16: Group Outlook
GROUP OUTLOOK USA and Europe Fibre Cement • The company expects continued improvement in the US operating environment, though cautions, it is predicated upon the strength of employment and consumer confidence • The company is proceeding with its previously announced plans to increase production capa
Slide 17: Manufacturing Capacity Expansion
MANUFACTURING CAPACITY EXPANSION USA and Europe Fibre Cement • The company has completed the refurbishment of the Fontana, California location and commenced production in the fourth quarter of fiscal 2014 with nominal capacity of 250 mmsf 1 • A fourth sheet machine and ancillary facilities at the Pl
Slide 18: Financial Review
FINANCIAL REVIEW Matt Marsh, CFO
Slide 19: Highlights
HIGHLIGHTS Earnings impacted by: Higher volumes and average net sales prices in local currencies Higher EBIT and EBIT margins in all major business units compared to prior corresponding periods Unfavourable movement in asbestos adjustments of US$195.8 million during full year ended 31 March 2014, pr
Slide 20: Results – Q4
RESULTS – Q4 US$ Millions Q4 '14 Q4 '13 % Change Highlights: Net sales 376.4 326.8 15 Net sales increased 15% favourably impacted by: Gross profit 125.5 101.8 23 Higher sales volumes; and Higher average net sales prices in local SG&A expenses (61.9) (58.0) (7) currencies Research & development expen
Slide 21: Results – Q4 (continued)
RESULTS – Q4 (CONTINUED) US$ Millions Q4 '14 Q4 '13 % Change Highlights: Net operating profit (186.8) (69.5) Asbestos: Asbestos adjustments were unfavourable due to: Asbestos adjustments 322.0 131.6 $308.2 million change in the Other asbestos 1 0.2 (0.9) underlying actuarial valuation assumptions; a
Slide 22: Results – Full Year
RESULTS – FULL YEAR Highlights: US$ Millions Net sales increased 13% favourably impacted by: FY 2014 FY 2013 % Change Higher sales volumes; and Net sales 1,493.8 1,321.3 13 Higher average net sales prices in local Gross profit 506.4 419.3 21 currencies SG&A expenses (224.4) (218.6) (3) Gross profit
Slide 23: Results – Full Year (continued)
RESULTS – FULL YEAR (CONTINUED) US$ Millions Highlights: FY 2014 FY 2013 % Change Improved headline net operating profit Net operating profit 99.5 45.5 driven by higher net sales and gross profit Asbestos: Unfavourable asbestos adjustments Asbestos adjustments 195.8 117.1 67 driven by changes in the
Slide 24: Segment EBIT – Q4
SEGMENT EBIT – Q4 Highlights: US$ Millions Q4 '14 Q4 '13 % Change USA and Europe Fibre Cement exluding asset 57.2 37.8 51 Adjusted USA and Europe Fibre impairments Cement EBIT margin increased Asia Pacific Fibre Cement, excluding New Zealand product liability expenses 18.4 16.7 10 3.8 percentage poi
Slide 25: Segment EBIT – Full Year
SEGMENT EBIT – FULL YEAR Highlights: US$ Millions FY 2014 FY 2013 % Change USA and Europe Fibre Cement excluding asset Adjusted USA and Europe Fibre impairments 237.0 162.5 46 Cement EBIT margin increased 3.9 Asia Pacific Fibre Cement excluding New Zealand percentage points to 21.0% product liabilit
Slide 26: Changes in A$ versus US$
CHANGES IN A$ VERSUS US$ 1.20 1.10 1.00 0.90 0.80 0.70 0.60 31 Mar 11 30 Jun 11 30 Sep 11 31 Dec 11 31 Mar 12 30 Jun 12 30 Sep 12 31 Dec 12 31 Mar 13 30 Jun 13 30 Sep 13 31 Dec 13 31 Mar 14 Earnings Balance Sheet • Unfavourable impact from translation of Asia Pacific earnings – Q4’14 vs Q4’13 N/A •
Slide 27: Income Tax Expense – Q4
INCOME TAX EXPENSE – Q4 Highlights: US$ Millions Q4 '14 Q4 '13 Income tax expense excluding Operating profit before income taxes (265.6) (107.6) asbestos-related and other tax adjustments for the quarter Asbestos: increased due to higher taxable Asbestos adjustments 322.0 131.6 earnings. 1 Other asb
Slide 28: Income Tax Expense – Full Year
INCOME TAX EXPENSE – FULL YEAR US$ Millions Highlights: FY 2014 FY 2013 Effective tax rate excluding Operating profit before income taxes 54.6 33.7 asbestos related and other tax Asbestos: adjustments remained consistent year over year due to an increase Asbestos adjustments 195.8 117.1 in taxable e
Slide 29: Cashflow
CASHFLOW 1 US$ Millions FY 2014 FY 2013 EBIT 53.1 29.5 Non-cash items: Asbestos adjustments 195.8 117.1 Asset impairments - 16.9 Other non-cash items 65.0 64.7 Net working capital movements 19.0 (34.0) Cash Generated By Trading Activities 332.9 194.2 Tax payments, net (11.6) (83.3) Change in other n
Slide 30: Capital Expenditure
CAPITAL EXPENDITURE US$ Millions FY 2014 FY 2013 % Change USA and Europe Fibre Cement (including 76.5 50.4 52 Research and Development) Asia Pacific Fibre Cement 38.9 10.7 Total 115.4 61.1 89 • In Q1 FY14, the company completed the purchase of the previously-leased land and buildings at Carole Park,
Slide 31: Capital Management Framework
CAPITAL MANAGEMENT FRAMEWORK Objectives • To optimize JHI plc capital structure with a view towards a target net debt position in the range of 1-2 times Adjusted EBITDA Strategy • Reinvest in R&D and capacity expansion projects required for growth; • Provide consistent dividend payments within the o
Slide 32: Capital Management and Dividends
CAPITAL MANAGEMENT AND DIVIDENDS Dividends • The company announced today a FY2014 special dividend of US20.0 cents per security and a second half ordinary dividend of US32.0 cents per security • Declared in US currency and will be paid on 08 August 2014 with a record date of 12 June 2014 • As previo
Slide 33: Debt
DEBT At 31 March 2014: US$ Millions Total facilities 355.0 Gross debt - Cash 167.5 Net cash 167.5 Unutilised facilities and cash 522.5 • The company added US$150.0 million of facilities after year end to replace and augment facilities that expired during FY2014 • Weighted average remaining term of d
Slide 34: NZ Product Liability Claims
NZ PRODUCT LIABILITY CLAIMS New Zealand Product Liability claims: • Since FY02 James Hardie NZ subsidiaries have been joined to product liability claims that relate to buildings primarily constructed from 1998 to 2004 • These claims often involve multiple parties and allege losses due to excessive m
Slide 35: Asbestos Compensation Summary
ASBESTOS COMPENSATION Summary • Updated actuarial report completed as at 31 March 2014 • Undiscounted and uninflated central estimate increased to A$1.547 billion from A$1.345 billion • Total contributions of US$184.1 million were made to AICF during FY2013 from the company’s FY2012 free cashflow. N
Slide 36: Funding Arrangements
FUNDING ARRANGEMENTS A$ millions (except where stated) Summary 31-Mar-14 31-Mar-13 Change in estimate – NPV is now A$1,870M. Increased from A$1,694M at Central Estimate – Undiscounted and Uninflated 1,546.6 1,345.0 31 March 2014 Provision for claims handling costs of AICF 35.2 36.2 Other US GAAP adj
Slide 37: Updated Actuarial Estimate
UPDATED ACTUARIAL ESTIMATE 37
Slide 38: Net Claims
NET CLAIMS Net claims paid full year FY2014: KPMG AICF AICF Actuarial A$ Millions Full Year Full Year Estimate For 2014 2013 FY 2014* Claims Paid 131.4 117.3 112.6 Legal Costs 9.0 14.1 8.7 Insurance and cross claim recoveries (27.5) (17.6) (35.7) Total net claims costs 112.9 113.8 85.6 • While total
Slide 39: Summary
SUMMARY • Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments was US$45.3 million and US$197.2 million, for the quarter and full year ended 31 March 2014, respectively • The full year results reflected: • Higher sales volumes a
Slide 40: Questions
QUESTIONS ie
Slide 41: Appendix
(7) James Hardie | ¢ APPENDIX
Slide 42: Financial Summary
FINANCIAL SUMMARY US$ Millions Q4 '14 Q4 '13 % Change FY 2014 FY 2013 % Change Net Sales USA and Europe Fibre Cement $ 288.2 $ 236.8 22 $ 1,127.6 $ 951.4 19 Asia Pacific Fibre Cement 88.2 90.0 (2) 366.2 369.9 (1) Total Net Sales $ 376.4 $ 326.8 15 $ 1,493.8 $ 1,321.3 13 EBIT - US$ Millions USA and E
Slide 43: Key Ratios
KEY RATIOS FY 2014 FY 2013 FY 2012 1 EPS (Diluted) 44c 32c 33c Dividend Paid per share 88c 42c 4c 1, 3 Return on Shareholders’ Funds 16.6% 10.4% 11.2% 2, 3 Return on Capital Employed 28.0% 20.4% 21.0% EBIT/ Sales (EBIT margin) 2 16.9% 13.7% 15.7% Gearing Ratio 1 (19.4)% (12.9)% (24.4)% 2 Net Interes
Slide 44: EBITDA – Full Year
EBITDA – FULL YEAR FY 2014 FY 2013 % Change US$ Millions EBIT USA and Europe Fibre Cement 1 237.0 162.5 46 Asia Pacific Fibre Cement 2 82.9 74.9 11 Research & Development (24.4) (26.0) 6 General corporate excluding asbestos and ASIC expenses (42.7) (30.4) (41) Depreciation and Amortisation USA and E
Slide 45: Asbestos Fund
ASBESTOS FUND A$ millions AICF cash and investments - 31 March 2013 128.1 Insurance and cross-claim recoveries 27.5 Interest and investment income 4.0 Proceeds from loan facility 50.6 Claims paid (140.4) Operating costs (5.0) Other 0.7 AICF cash and investments - 31 March 2014 65.5 1 In accordance w
Slide 46: Endnotes
ENDNOTES 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 Condensed Consolidated Financial Statements Definitions N
Slide 47: Endnotes (continued)
ENDNOTES (CONTINUED) 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 consolidated financial statements under
Slide 48: Endnotes (continued)
ENDNOTES (CONTINUED) 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 foot of
Slide 49: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES EBIT and EBIT margin excluding asbestos, asset impairments, ASIC expenses and New Zealand product liability – EBIT and EBIT margin excluding asbestos, asset impairments, ASIC expenses and New Zealand product liability are not measures of financial performance under US
Slide 50: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments – Net operating profit excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments is no
Slide 51: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Diluted earnings per share excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjustments – Diluted earnings per share excluding asbestos, asset impairments, ASIC expenses, New Zealand product liability and tax adjus
Slide 52: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Effective tax rate excluding asbestos, asset impairments, New Zealand product liability and tax adjustments – Effective tax rate on earnings excluding asbestos, asset impairments, New Zealand product liability and tax adjustments is not a measure of financi
Slide 53: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) 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 liq
Slide 54: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) General corporate costs excluding ASIC expenses, intercompany foreign exchange gain and recovery of RCI legal costs – General corporate costs excluding ASIC expenses, intercompany foreign exchange gain and recovery of RCI legal costs is not a measure of fin
Slide 55: Non-US GAAP Financial Measures (continued)
NON-US GAAP FINANCIAL MEASURES (CONTINUED) Selling, general and administrative expenses excluding New Zealand product liability – Selling, general and administrative expenses excluding New Zealand product liability is not a measure of financial performance under US GAAP and should not be considered
Slide 56: Q4 FY14 Management Presentation
Q4 FY14 MANAGEMENT PRESENTATION 22 May 2014
James Hardie Industries — Q4 FY2014 Earnings Presentation on 6ix