James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2017)
50 slides from James Hardie Industries's investor presentation, Sep 7, 2017
Slide 1: Investor Presentation September & October 2017
For personal use only INVESTOR PRESENTATION SEPTEMBER & OCTOBER 2017
Slide 2: Cautionary Note on Forward-Looking Statements
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS For personal use only This Investor Presentation contains forward-looking statements. James Hardie Industries plc (the “Company”) may from time to time make forward-looking statements in its periodic reports filed with or furnished to the Securities and
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (continued) For personal use only Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook” and sim
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
USE OF NON-GAAP FINANCIAL INFORMATION; AUSTRALIAN EQUIVALENT TERMINOLOGY For personal use only This Investor Presentation includes financial measures that are not considered a measure of financial performance under generally accepted accounting principles in the United States (US GAAP). These financ
Slide 5: Agenda
AGENDA For personal use only • Strategic Focus and Business Overview • North America Fiber Cement • International Fiber Cement • Capital Management Framework • Appendix PAGE 5
Slide 6: Our Strategic Focus
OUR STRATEGIC FOCUS For personal use only PEOPLE Continue to invest in the safety, development and promotion of our people DRIVING PROFITABLE GROWTH BRAND PROMISE DELIVERING MARKET POSITION Build on industry leadership SUPERIOR Grow fiber cement market through unrivalled commitment to manufacturing,
Slide 7: A Growth Focused Company
A GROWTH FOCUSED COMPANY For personal use only • Annual net sales US$1.9b • Total assets US$2.0b • Strong operational cash generation • Operations in North America, Asia Pacific and Europe • 3,577 employees • Market cap US$6.2b • S&P/ASX 100 company • NYSE ADR listing Market capitalization per Bloom
Slide 8: World Leader in Fiber Cement
WORLD LEADER IN FIBER CEMENT For personal use only Geographic Mix¹ Net Sales International 22% North America 78% EBIT ² International 22% North America 78% 1 All percentages are for the fiscal year ended 31 March 2017 ² EBIT – excludes research and development and asbestos-related expenses and adjus
Slide 9: Group Overview 1st Quarter FY18 Results
GROUP OVERVIEW 1st QUARTER FY18 RESULTS For personal use only Adjusted Net Operating Profit1 Adjusted Diluted EPS1 1st Qtr 1st Qtr US$61.7M 7% US14 cents 7% Adjusted EBIT 2 Net Operating Cash Flow 1st Qtr 1st Qtr US$88.3M 10% US$102.9M 11% Adjusted EBIT Margin % 2 1st Qtr 17.4% 3.0 pts 1 Excludes As
Slide 10: Key Themes 1st Quarter FY18 Results
KEY THEMES 1st QUARTER FY18 RESULTS For personal use only • North America Fiber Cement top line growth below our market index due to capacity constraints • North America Fiber Cement margins compressed by manufacturing inefficiencies and higher production costs • International Fiber Cement net sales
Slide 11: Creating a Sustainable and Differentiated Advantage
CREATING A SUSTAINABLE AND DIFFERENTIATED ADVANTAGE For personal use only Research & Development: Significant and consistent investment • US$30.3m spent on Research & Development in FY17 and US$7.6m in 1Q FY18 • US$477.1m spent on Research & Development since 2000 James Hardie Siding Products Histor
Slide 12: Driving Category and Market Share Gains
DRIVING CATEGORY AND MARKET SHARE GAINS For personal use only North America External Cladding Share¹ 8% 19% 8% Fiber Cement Vinyl 8% Wood (including engineered wood) Stucco Brick Stone 10% Other (aluminium etc) 26% 21% 35/90 Plan • Grow fiber cement share to 35% of the exterior cladding market again
Slide 13: Delivering Superior Product Performance
DELIVERING SUPERIOR PRODUCT PERFORMANCE For personal use only Fiber cement is more durable than wood and engineered wood, looks and performs better than vinyl, and is more cost effective and quicker to build with than brick Fiber Cement Vinyl Engineered Wood ! Fire resistant ? ? ! Hail resistant ? ?
Slide 14: Building a Portfolio of Products and Brands
BUILDING A PORTFOLIO OF PRODUCTS AND BRANDS For personal use only Primary Products Trim / Commercial Interior Walls / Soffit Backerboard Siding Flooring Fascia Exteriors Ceilings U.S. & Europe Asia Pacific Brand Portfolio PAGE 14
Slide 15: North America Fiber Cement Segment
NORTH AMERICA FIBER CEMENT SEGMENT For personal use only North America Plant Locations • Largest fiber cement producer in North America • 2,390 employees1 Tacoma, WA • 9 manufacturing plants2 • 2 research and development Peru, IL Reno, NV facilities Pulaski, VA Fontana, CA Summerville, 3 mths FY18 3
Slide 16: North America Manufacturing Capacity
NORTH AMERICA MANUFACTURING CAPACITY For personal use only Capacity Since Housing Downturn 0.7 3.4 0.2 0.1 2.4 • Fontana 2 • Fontana 1 • Waxahachie 1 • Plant City 4 • Cleburne 3 FY10 FY13 FY14 FY17 FY17 Nameplate Wax Restart Fontana Restart Start Ups Nameplate Future capacity additions: • FY18 brown
Slide 17: North America Manufacturing Capacity
NORTH AMERICA MANUFACTURING CAPACITY For personal use only North America Owned / Leased Design Capacity Plant Locations (mmsf)¹ Cleburne, Texas Owned 666 Peru, Illinois Owned 560 Plant City, Florida Owned 500 Pulaski, Virginia Owned 600 Reno, Nevada Owned 300 Tacoma, Washington2 Owned 200 Waxahachie
Slide 18: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY For personal use only Volume Q1'18 • Growth below our market index due to capacity constraints Net Sales US$393.1M 6% Price Sales Volume 561.5 mmsf • Favorably impacted by our annual changes in strategic 2% pricing effective April 2017 Average Price US$693 per msf
Slide 19: Aggressively Growing Demand for Our Products
AGGRESSIVELY GROWING DEMAND FOR OUR PRODUCTS For personal use only North America Fiber Cement Top Line Growth1 3,000 $1,600 JH Volume (mmsf), Starts (000s Units) 2,500 $1,200 Revenue (US$M) 2,000 1,500 $800 1,000 $400 500 0 $0 '12 '13 '14 '15 '16 '17 JH Volume Housing Starts JH Revenue • 1Q FY18 rev
Slide 20: Achieving the Right Value for Our Products
ACHIEVING THE RIGHT VALUE FOR OUR PRODUCTS For personal use only North America Fiber Cement Average Net Sales Price 710 693 669 666 665 670 641 US$ per MSF 630 630 616 590 550 FY12 FY13 FY14 FY15 FY16 FY17 Q1'18 • Strategic price increase effective April 2017 • Satisfied with tactical pricing and pr
Slide 21: North America Delivering Strong Returns
NORTH AMERICA DELIVERING STRONG RETURNS For personal use only Quarterly EBIT and EBIT Margin1 100 30 90 25 80 70 20 EBIT Margin 60 EBIT US$M 50 15 40 10 30 20 5 10 0 0 FY13 FY14 FY15 FY16 FY17 FY18 EBIT EBIT/Sales Q1 FY18 EBIT Margin % down 520 bps to 20.3% compared to pcp, but remains within target
Slide 22: International Fiber Cement Summary
INTERNATIONAL FIBER CEMENT SUMMARY For personal use only Q1'18 Volume • Growth in Australia, New Zealand and Philippines Net Sales US$110.8M 8% • Partially offset by volume declined in Europe Sales Volume 128.7 mmsf 3% Higher average selling price compared to pcp Average Price US$766 per msf • Favor
Slide 23: International Fiber Cement (USD)
INTERNATIONAL FIBER CEMENT (USD) For personal use only Australia • Flat market growth compared to pcp • Growth above market index + PDG • EBIT favorably impacted by price and product mix New Zealand • Higher average net sales price and volume Philippines • Net sales and EBIT unfavorably impacted b
Slide 24: International Delivering Strong Returns
INTERNATIONAL DELIVERING STRONG RETURNS International Fiber Cement Segment For personal use only 1 Quarterly EBIT and EBIT Margin 30 25 20 15 10 5 0 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 FY2012 FY2013 FY2013 FY2014 FY2014 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 EBIT EBIT Margin 1 EBIT and EBI
Slide 25: International Manufacturing Capacity
INTERNATIONAL MANUFACTURING CAPACITY For personal use only International Owned / Design Plant Locations Leased Capacity (mmsf)¹ Australia Rosehill, New South Wales Owned 180 Carole Park, Queensland Owned 160 New Zealand Auckland Leased 75 Philippines Cabuyao City2 Owned 145 Total 560 ¹ Nameplate cap
Slide 26: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital For personal use only Liquidity and Funding Management Allocation • Invest in R&D and capacity • Conservative leveraging of • Strong margins and operating balance sheet at a target within cash flows expansion to support orga
Slide 27: FY2018 Guidance
FY2018 GUIDANCE For personal use only • Management expects full year Adjusted net operating profit to be between US$240 million and US$280 million assuming, among other things, housing conditions in the United States continue to improve in line with our assumed forecast of new construction starts be
Slide 28: Appendix
For personal use only APPENDIX
Slide 29: USA Marketplace
USA MARKETPLACE For personal use only PAGE 29
Slide 30: Australia & New Zealand Marketplace
AUSTRALIA & NEW ZEALAND MARKETPLACE For personal use only PAGE 30
Slide 31: Australia, New Zealand & Philippines Core Markets
AUSTRALIA, NEW ZEALAND & PHILIPPINES CORE MARKETS For personal use only Ceilings and partitions Exterior cladding Philippines Australia General purpose flooring Interior walls New Zealand Australia PAGE 31
Slide 32: Financial Summary
FINANCIAL SUMMARY For personal use only Three Months Ended 30 June US$ Millions Q1'18 Q1'17 % Change Net Sales North America Fiber Cement $ 393.1 $ 370.3 6 International Fiber Cement 110.8 102.9 8 Other Businesses 3.8 4.5 (16) Total Net Sales $ 507.7 $ 477.7 6 EBIT North America Fiber Cement $ 79.8
Slide 33: North America Fiber Cement – Year Results Overview
NORTH AMERICA FIBER CEMENT – 5 YEAR RESULTS OVERVIEW For personal use only FY13 FY14 FY15 FY16 FY17 Net Sales 914 1,084 1,225 1,335 1,493 US$m Sales Volume 1,468 1,673 1,822 1,969 2,215 mmsf EBIT US$m¹ 166 235 290 352 344 EBIT Margin %¹ 18 22 24 26 23 1 Excludes asset impairment charges of US$16.9 m
Slide 34: International Fiber Cement – Year Results Overview
INTERNATIONAL FIBER CEMENT – 5 YEAR RESULTS OVERVIEW For personal use only FY13 FY14 FY15 FY16 FY17 Net Sales 399 398 418 379 412 US$m Sales Volume 414 441 484 481 487 mmsf EBIT US$m¹ 75 86 90 78 95 EBIT Margin %¹ 19 22 22 21 23 1 Excludes New Zealand weathertightness claims PAGE 34
Slide 35: Results – 1st Quarter FY18
RESULTS – 1st QUARTER FY18 For personal use only Net sales increased 6% Three Months Ended 30 June • Higher average net sales price and volume in North US$ Millions Q1'18 Q1'17 % Change America Fiber Cement and International Fiber Cement Net sales 507.7 477.7 6 segments Gross profit 169.0 176.8 (4)
Slide 36: North America Input Costs
NORTH AMERICA INPUT COSTS For personal use only Quarterly US Input Costs • The price of NBSK pulp increased 12% 1,200 10 9 compared to pcp Cement, Gas, Electric and Freight Prices 1,000 8 7 • Cement prices continue to rise, up 6% 800 6 compared to pcp Pulp Prices 600 5 4 • Freight market prices incr
Slide 37: Segment EBIT – 1st Quarter FY18
SEGMENT EBIT – 1st QUARTER FY18 For personal use only North America Fiber Cement North America Fiber Cement EBIT summary 100 94.6 91.0 • EBIT decreased 16% compared to pcp 79.8 80 • Primarily driven by higher production costs and US$ Millions 60 increased SG&A expenses Q1 EBIT 40 • Partially offset
Slide 38: Segment EBIT – 1st Quarter FY18
SEGMENT EBIT – 1st QUARTER FY18 Other Businesses For personal use only (5) Other Businesses US$ Millions • Continue to incur losses from continued investment in (2.0) (1.4) (1.8) business development opportunities Q1 EBIT 0 FY16 FY17 FY18 Research and Development (10) R&D US$ Millions • On strategy
Slide 39: Income Tax
INCOME TAX For personal use only Three Months Ended 30 June 24.1% estimated adjusted effective tax rate for the year US$ Millions Q1’18 Q1’17 • Adjusted income tax expense for the quarter decreased Operating profit before taxes 77.1 111.0 due to changes in geographical mix of earnings, and a 1 Asbes
Slide 40: Cashflow
CASHFLOW For personal use only Decrease in net operating cash flow US$ Millions Q1'18 Q1'17 Change (%) • Decrease in net income, primarily due to underlying Net Income 1 57.4 87.1 (34) business unit performance Adjustment for non-cash items 33.9 7.5 1 10.0 29.0 (66) • Rebuilding inventory levels, an
Slide 41: Capital Expenditures
CAPITAL EXPENDITURES For personal use only CAPEX Spend • Q1 FY18 CAPEX spend of US$48.1 million increased US$30.3 million compared to pcp 60 • North America capacity projects: 50 Recommissioned a 4th sheet machine at our Plant 40 City facility which continues to start-up as planned US$ Millions 30
Slide 42: Changes in AUD vs. USD
CHANGES IN AUD vs. USD For personal use only 0.80 AUD/USD Exchange Rate 0.70 0.60 30 Jun 15 30 Sep 15 31 Dec 15 31 Mar 16 30 Jun 16 30 Sep 16 31 Dec 16 31 Mar 17 30 Jun 17 Excluding Translation As Reported 1 Translation Impact 2 Impact US$ Millions Q1 FY18 Q1 FY17 % Change Q1 FY18 % Change $ (Unfav)
Slide 43: Liquidity Profile
LIQUIDITY PROFILE For personal use only Debt Profile Strong balance sheet US$ Millions US$112.3 million cash US$427.8 million net debt³ at 30 June 2017 1 $250 70% liquidity on bank debt at 30 June 2017 $500 Corporate debt structure $150 US$500 million unsecured revolving credit facility, $40
Slide 44: Asbestos Claims Data
ASBESTOS CLAIMS DATA For personal use only Claims Received • Claims received were 1% above actuarial estimates and 5% lower than pcp 154 146 144 • Claims reporting for mesothelioma: • 8% higher than actuarial estimates • 1% higher than pcp Q1'18 Q1'18 Q1'17 Actuals Actuarial Estimates Actuals Averag
Slide 45: Non-US GAAP Financial Measures and Terms
NON-US GAAP FINANCIAL MEASURES AND TERMS For personal use only This Investor Presentation includes information about the company’s results. It should be read in conjunction with the Q1 FY18 Management Presentation, Management’s Analysis of Results, Media Release and Condensed Consolidated Financial
Slide 46: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES For personal use only Financial Measures – US GAAP equivalents This document contains financial statement line item descriptions that are considered to be non-US GAAP, but are consistent with those used by Australian companies. Because the company prepares its Condense
Slide 47: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES For personal use only Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months Ended 30 June FY18 FY17 EBIT $ 84.0 $ 117.8 Asbestos: Asbestos adjustments 3.9 (20.6) AICF SG&A expenses 0.4 0.4 Adjusted EBIT $ 88.3 $ 97.6 Net sales $ 507.7 $ 477.7
Slide 48: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES For personal use only Adjusted diluted earnings per share Three Months Ended 30 June FY18 FY17 Adjusted net operating profit (US$ Millions) $ 61.7 $ 66.7 Weighted average common shares outstanding - 441.6 447.3 Diluted (millions) Adjusted diluted earnings per share (US
Slide 49: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos For personal use only US$ Millions Three Months Ended 30 June FY18 FY17 EBIT $ 84.0 $ 117.8 Depreciation and amortization 21.8 19.5 Adjusted EBITDA $ 105.8 $ 137.3 Asbestos: Asbestos adjustments 3.9 (20.6) AICF SG&A expenses 0.4 0.4 A
Slide 50: September & October 2017
For personal use only INVESTOR PRESENTATION SEPTEMBER & OCTOBER 2017
James Hardie Industries — Investor Presentation (September 2017) on 6ix