James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (March 2010)
57 slides from James Hardie Industries's investor presentation, Mar 1, 2010
Slide 1: Investor Presentation February 2010
Investor Presentation February 2010
Slide 2: Forward-looking statements
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 United States Securities and Exchange Commission on Forms 20-F and 6-K, in the annual reports to shareholders, i
Slide 3: Agenda
3 Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP fina
Slide 4: Operations, strategy and performance
4 Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 5: James Hardie: a growth focused company
5 Annual net sales US$1.2b Total operating assets US$1.0b Total assets US$1.9b Net debt as at 31 December 2009 US$141m Operations in North America, Asia Pacific and Europe 2,300 employees Market cap US$3.26b S&P/ASX 100 company NYSE listing Note: Net sales, total operating assets and total assets ar
Slide 6: Investment attributes
6 Growth focused Sustainable competitive advantage Unique proprietary technology Strong financial performance, cash flows and balance sheet1 Track record of outperforming US housing market Focused on fibre cement 1 Excluding asbestos-related items 1 Excluding asbestos-related items Investment attrib
Slide 7: Global strategy
7 Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors Introduce differentiated products to deliver a sustainable competitive advantag
Slide 8: Business portfolio
8 Business portfolio At and for the nine months ended 31 December 2009 * EBIT - Excludes Research and Development EBIT and Asbestos-related items USA and Europe Fibre Cement Asia-Pacific Fibre Cement 74% 80% 20% 26% 23%
Slide 9: USA and Europe Fibre Cement
9 Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 10: Brief history 1990-2000
10 1990 - 1995 Entered US in 1990 to manufacture and market roofing shakes (one line, one plant) Shifted target market from roofing to siding Moved to high throughput, low unit cost manufacturing strategy Revenue growth led to investment in new capacity 1995 - 2000 Entry of direct fibre cement compe
Slide 11: Brief history continued 2000-2006
11 2000 - 2006 A number of cladding competitors exit Business continued to grow strongly in buoyant housing market Product leadership strategy helps revenue outstrip volume growth Business model is proven - continues to deliver good returns and operating cash flow in housing downturn New manufacturi
Slide 12: Staying on strategy: 2006 to present
12 2006 - present The business focus turned to: Sustaining earnings in a low demand environment Ensuring output matches demand Driving Repair and Remodel as core segments Maintaining product leadership Building the operational strength and flexibility to deliver a superior performance should a recov
Slide 13: Sustainable competitive advantage
13 Sustainable competitive advantage Unique plant engineering and proprietary process technology and product formulations - significant investment in R&D Superior capital cost efficiency Low cost manufacturer Only national producer of fibre cement in each key geographic market Excellent plant econom
Slide 14: Revenue growth streams: exterior and interior products
14 Exterior products Siding Soffit Fascia Trim Interior products 1/4 inch backerboard Hardiebacker 500(r) USA and Europe Fibre Cement - revenue growth streams
Slide 15: Sales mix
15 USA and Europe Fibre Cement - sales mix New Construction vs. Repair and Remodel New Construction R&R Total Sales 35% 65% Exterior Products 39% 61% Interior Products 25% 75% Exterior vs. Interior Products Exteriors Interiors Volume 72% 28% Revenue 80% 20% All market and market share figures are ma
Slide 16: Exterior products - US siding market
16 Exterior products - US siding market Large growth opportunity Estimated fibre cement terminal share 35% Note: 1). Market and share figures reflect siding only; exclude fascia, soffits & trim; data reflects Repair & Remodel and New Construction markets, combined. 2). Siding volumes exclude waste f
Slide 17: Understanding the Repair and Remodel market
17 Understanding the Repair and Remodel market Repair and Remodel siding market - 5.7 billion square feet (2008 est) Replace SF 48% Add & Alts 7% Repairs 27% Replace MF 16% All market and market share figures are management estimates and cannot be accurately measured MF = Multi Family; SF = Single F
Slide 18: Superior product performance
18 Fibre cement is more durable than wood and engineered wood, and looks and performs better than vinyl Vinyl Fire resistant Hail resistant Resists warping Resists buckling Colour lasts longer Dimensional stability Can be repainted ? ? ? ? ? ? ? ? ? ? ? ? ? ? Fibre cement USA and Europe Fibre Cement
Slide 19: Interior products
19 Interior products Net sales growing strongly CAGR* 17% (FY00-FY09) Leading position in 1/4" segment technology advantage for floor applications Hardiebacker 500(r) is driving penetration on wall applications High terminal market share * Compound Annual Growth Rate Hardiebacker FY 1997 657mmsf (Ma
Slide 20: Interior products - continued
20 Attributes Protection against moisture damage and mould growth (total wet area solution) Strength Highest compressive and flexural strength available Workability Cleaner and less abrasive than glass mesh Low density formulation - lightest cement board on the market Interior products - continued U
Slide 21: Largest fibre cement producer in North America
21 Flat Sheet Plants Capacity (mmsf) Plants operating at December 2009 Cleburne, Texas 500 Peru, Illinois 560 Plant City, Florida 300 Pulaski, Virginia 600 Reno, Nevada 300 Tacoma, Washington 200 Waxahachie, Texas 360 Plants suspended at December 2009 Blandon, Pennsylvania1 200 Fontana, California1
Slide 22: Asia Pacific Fibre Cement
22 Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 23: Asia Pacific Fibre Cement
23 Five manufacturing plants in Asia Pacific FY09 net sales US$273m FY09 EBIT US$47.1m Higher value differentiated products Lower delivered cost Shift to growth model Philippines focus on profitability Asia Pacific Fibre Cement
Slide 24: Organisational focus
24 Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 25: Organisational focus: product leadership
25 Product leadership Continued investment in new product development and commercialisation Value-added, differentiated products Benefits: Grow the fibre cement category Grow revenue Sustain good margins Defend and strengthen our competitive position Organisational focus
Slide 26: ColorPlus Collection
26 Product leadership - examples in USA and Europe Fibre Cement: ColorPlus(r) Collection (pre-painted siding and trim): Driving growth against vinyl in Northern Division Launched in Western and Southern Divisions FY07 Organisational focus - ColorPlus(r)
Slide 27: ColorPlus Model
27 Higher quality products with higher revenue stream Strategy designed to reduce 'on the wall' cost and close gap with vinyl siding Supply of pre-painted exterior products Reduce supply chain costs Best practice installation Channel increases revenue base and gains incremental volume End-user gets
Slide 28: HardieZone System
28 28 7th Generation versus 2nd Generation generic fibre cement The HardieZone(tm) System represents a logical extension of Hardie technology Organisational focus - HardieZone(tm) System
Slide 29: HardieZone System: Engineered for Climate
29 29 Our finest siding ever Engineered for Climate(tm) Highest protection from the elements Sustained beauty with less maintenance Higher customer satisfaction Differentiation from generic fibre cement Seven strategically located manufacturing facilities The warranty homebuyers have been asking for
Slide 30: Scyon range - Asia Pacific
30 Product leadership - examples Asia Pacific Fibre Cement ScyonTM range of value-added, differentiated products launched 2007 ScyonTM wet area flooring ScyonTM Trim and ScyonTM LineaTM weatherboards ScyonTM Matrix cladding Organisational focus - continued
Slide 31: Changing US product mix
31 Today Tomorrow HardiePlank ColorPlus Cemplank Next Generation Cemplank HardieZone Hardieplank/ ColorPlus Changing US product mix Product mix will evolve significantly in the medium term to continue to drive revenue Organisational focus - continued
Slide 32: Total USA Housing Starts - NAHB
Total USA Housing Starts - NAHB NAHB forecast of 2010 Housing Starts has declined slightly since October's release. Source: NAHB Executive Level Forecasts - Total US Housing Starts (incl. SF, MF-low and MF-high) 32
Slide 33: Response to US housing downturn
33 Focus on primary demand growth and cost management Business re-sets in late 2006/early 2007; in April 2008; and in November 2008: production re-scheduled to balance supply and demand production suspended at Blandon PA, Summerville SC plants and Fontana CA corporate-wide review of activities, proj
Slide 34: US Fibre Cement volume, revenue and housing starts
Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau JH Volume (mmsf), Starts (000s Units) Revenue (US$M) 34 US Fibre Cement
Slide 35: Primary growth performance
Primary Growth Performance Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $ expenditures less CPI Note: • US Census discontinued their R&R $ expenditures report in 2007 • After 2007 R&R = avg. published Home Depot & Lowe's same store sales less CPI 35 US and Europe Fibre Cement
Slide 36: Average Net Selling Price
Average Net Selling Price US$ per MSF US$612 36 US and Europe Fibre Cement
Slide 37: EBIT and EBIT Margin
* Excludes impairment charges of US$45.6 million in Q4 FY08 EBIT and EBIT Margin* Q3 US and Europe Fibre Cement 37
Slide 38: Financial history
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda 38
Slide 39: Long term financial targets
Actual FY10** Actual FY09 Actual FY08 Actual FY07 Actual FY06 Actual FY05 Actual FY04 Revenue Growth - (18)% (5)% 4% 23% 23% 25% EBIT Margin* 27.5 14% 20% 22% 21% 19% 18% Return on Capital Employed* 19.9 17% 25% 28% 32% 27% 23% 1Long term targets exclude asbestos-related items * Excludes asbestos ad
Slide 40: Q3 FY10 - results overview
Operating results reflect the benefits of lower input and freight costs, improved plant performance, a higher average net sales price, and lower SG&A expenses compared to FY09 The net operating result including asbestos, ASIC expenses and tax adjustments for nine months was primarily affected by an
Slide 41: Q3 FY10 - results summary
USA and Europe Fibre Cement business results benefited from: Lower input costs, primarily pulp, energy and freight Higher average net sales price Improved plant performance Product mix shift and primary demand growth Asia Pacific Fibre Cement business results reflected: Appreciation of Asia Pacific
Slide 42: Q3 FY10 - Group Outlook
United States The outlook for residential construction remains uncertain with recent data presenting mixed indications as to the extent and sustainability of the anticipated recovery Challenges remain, including: Restricted access to credit for prospective home owners Weak and deteriorating employme
Slide 43: Q3 FY10 - Group Outlook (Australia, NZ, Philippines)
Australia The residential housing market is expected to improve modestly during calendar 2010, supported by increases in housing approvals, robust employment numbers, high levels of immigration and heightened competition amongst mortgage lenders Some negatives have emerged, including recent rises in
Slide 44: Q3 FY10 - Group Outlook
The company remains focused on: Delivering primary demand growth Increasing the rate of product mix shift Achieving its zero to landfill objective Building the operational strength and flexibility to deliver a superior performance All business segments are expected to continue to perform strongly, d
Slide 45: Q3 FY10 - Key Ratios
1 Excludes asbestos adjustments, AICF SG&A expenses, AICF interest income, gain on AICF investments, ASIC expenses and tax adjustments 2 Excludes asbestos adjustments, AICF SG&A expenses and ASIC expenses 3 Excludes payments under the Amended FFA 9 Months FY10 FY09 FY08 EPS (Diluted)1 25.3c 22.3c 38
Slide 46: Corporate issues
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda 46
Slide 47: Legacy Issue Update
Asbestos On 7 November 2009, the Australian and NSW Governments announced an A$320m standby loan facility for Asbestos Injuries Compensation Fund ATO - 1999 Disputed Amended Assessment Federal Court hearing completed September 2009, judgement expected mid 2010 ATO deposit at 31 December 2009 was A$2
Slide 48: Summary
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda 48
Slide 49: Summary
We have a strong, well established, growth focused and high return business We have a sustainable competitive advantage Our model for strong growth is based on: Large market opportunity Superior value proposition Proprietary and/or protected technology Ongoing commitment to Research and Development
Slide 50: Definitions
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 Management's Analysis of Results, a Media Release and a Financial Report. Definitions Financial Measures - US GAAP equival
Slide 51: Financial Ratios
Financial Ratios Gearing Ratio - Net debt (cash) divided by net debt (cash) plus shareholders' equity. Net interest expense cover - EBIT divided by net interest expense. Net interest paid cover - EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payback -
Slide 52: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos and ASIC expenses - EBIT and EBIT margin excluding asbestos and ASIC expenses are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has
Slide 53: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, ASIC expenses and tax adjustments - Net operating profit excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningfu
Slide 54: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments - Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be mo
Slide 55: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos and tax adjustments - Effective tax rate excluding asbestos and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The com
Slide 56: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) 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. N
Slide 57: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) General corporate costs excluding ASIC and domicile change related costs - General corporate costs excluding ASIC and domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be more meaningful th
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