James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Hardie James Industries — Q2 FY2005 Earnings Presentation
56 slides from James Hardie Industries's earnings presentation, Nov 24, 2004
Slide 1: 2nd Quarter and Half Year – 30 September 2004
2 nd Quarter and Half Year – 30 September 2004 2 nd QTR FY05 HY05 James Hardie Net Sales Up % to US$ 300.9 Up % to US$ 607.0 EBIT 1 Down % to US$ 40.0 Up % to US$ 98.3 Operating Profit from Continuing Operations 1 Down % to US$ 24.7 Down % to US$ 61.8 Net Operating Profit Including Discontinued Oper
Slide 2: Results for the 2nd Quarter Ended 30 September 2004
22 November 2004 Analyst and Media enquiries about results, please contact Steve Ashe on Tel: 61 2 8274 5246 Mob: 0408 164 011 James Hardie Industries N.V. Results for the 2nd Quarter Ended 30 September 2004 Three Months Ended 30 September USGAAP - US$ Millions FY 2005 FY 2004 % Change Net Sales USA
Slide 3: Results for the First Half Ended 30 September 2004
22 November 2004 Analyst and Media enquiries about results, please contact Steve Ashe on Tel: 61 2 8274 5246 Mob: 0408 164 011 James Hardie Industries N.V. Results for the First Half Ended 30 September 2004 First Half Ended 30 September USGAAP - US$ Millions FY 2005 FY 2004 % Change Net Sales USA Fi
Slide 4: FY05 2nd Quarter and Half Year Results November 2004
FY05 2nd Quarter and Half Year Results 22 November 2004 Unless otherwise stated, results are for continuing operations only and comparisons are of the 2nd quarter of the current fiscal year versus the 2nd quarter of the prior fiscal year.
Slide 5: Agenda
Introduction - Meredith Hellicar, Chairman Overview - Louis Gries, Interim CEO Financial Review - Russell Chenu, Interim CFO Operating Review - Louis Gries, Interim CEO Special Commission of Inquiry and Other Associated Developments - Meredith Hellicar, Chairman Questions and Answers Agenda
Slide 6: Overview
Overview Lower than expected quarterly result Sub-standard US manufacturing performance - issues largely behind us High input costs Ramp-up costs of growth initiatives High corporate costs (SCI related) Remain on track to meet business growth targets
Slide 7: Overview: 2nd Quarter and Half Year FY05
* Including Discontinued Operations 2nd Quarter and Half Year FY05 Q2'05% HY'05% Net Sales up 20 up 23 Gross Profit up 5 up 15 EBIT1 down 16 up 2 Operating Profit1 down 25 down 6 Net Operating Profit1 * down 24 down 9 Overview
Slide 8: Operations Overview
Operations Overview 2nd Quarter Strong sales growth in USA Fibre Cement EBIT down 9% due to increased costs Solid performance in Asia Pacific Fibre Cement ANZ Fibre Cement EBIT up 28% Philippines - small positive EBIT Other Fibre Cement segment continuing to develop Chile Fibre Cement - small positi
Slide 9: Financial Review
Financial Review Russell Chenu, Interim CFO
Slide 10: Results - Q2
US$ Million Q2 '05 Q2'04 % Change Net Sales 300.9 251.6 20 Gross Profit 97.1 92.4 5 SG&A (45.5) (38.9) 17 Research & Development (5.3) (5.6) (5) SCI and Related Expenses (5.6) - - Other Operating Expense (0.7) - - EBIT1 40.0 47.9 (16) Net Interest Expense (1.3) (2.4) (46) Other Expense, Net (1.9) (3
Slide 11: Results - Half Year
Results - Half Year US$ Million HY '05 HY'04 % Change Net Sales 607.0 493.1 23 Gross Profit 208.4 181.7 15 SG&A (90.6) (75.1) 21 Research & Development (10.3) (10.4) (1) SCI and Related Expenses (8.5) - - Other Operating Expense (0.7) - - EBIT1 98.3 96.2 2 Net Interest Expense (3.8) (4.7) (19) Other
Slide 12: Results Q2 and Half Year Before SCI & Non Recurring Items
Results Q2 and Half Year Before SCI & Non Recurring Items US$Million Q2'05 Q2'04 HY'05 HY'04 SCI and Related Costs 5.6 - 8.5 - Other Operating Expenses 0.7 - 0.7 - Other Expenses, Net 1.9 3.3 1.9 3.3 Operating Profit1 24.7 32.8 61.8 65.7 Net Operating Profit1 Before SCI and Non Recurring Items 32.9
Slide 13: Segment Net Sales - Q2
Segment Net Sales - Q2 US$ Million Q2 '05 Q2 '04 % Change USA Fibre Cement 231.0 191.4 21 Asia Pacific Fibre Cement 62.5 54.8 14 Other Fibre Cement 7.4 5.4 37 Total 300.9 251.6 20
Slide 14: Segment Net Sales - Half Year
Segment Net Sales - Half Year US$ Million HY '05 HY '04 % Change USA Fibre Cement 471.7 378.2 25 Asia Pacific Fibre Cement 119.8 104.9 14 Other Fibre Cement 15.5 10.0 55 Total 607.0 493.1 23
Slide 15: Segment EBIT - Q2
Segment EBIT1 - Q2 US$ Million Q2 '05 Q2'04 % Change USA Fibre Cement 49.0 53.7 (9) Asia Pacific Fibre Cement 12.3 9.4 31 Other Fibre Cement (4.2) (4.3) 2 R & D (3.4) (4.1) 17 Total Segment EBIT 53.7 54.7 (2) General Corporate (13.7) (6.8) (101) Total EBIT 40.0 47.9 (16) R&D includes "core" R&D expe
Slide 16: Segment EBIT - Half Year
Segment EBIT1 - Half Year US$ Million HY '05 HY'04 % Change USA Fibre Cement 112.1 107.8 4 Asia Pacific Fibre Cement 24.3 18.0 35 Other Fibre Cement (7.5) (8.0) 6 R & D (7.5) (7.4) (1) Total Segment EBIT 121.4 110.4 10 General Corporate (23.1) (14.2) (63) Total EBIT 98.3 96.2 2
Slide 17: Corporate Costs - Q2
Corporate Costs - Q2 US$ Million Q2 '05 Q2 '04 HY '05 HY '04 Stock Options Expense 0.5 1.0 0.7 3.2 Inquiry Costs 5.6 - 8.5 - Corporate Costs 7.6 5.8 13.9 11.0 Total 13.7 6.8 23.1 14.2
Slide 18: Net Interest Expense
Net Interest Expense US$ Million Q2'05 Q2'04 %Change Net Interest Expense (1.3) (2.4) (46) HY'05 HY'04 %Change Net Interest Expense (3.8) (4.7) (19)
Slide 19: Income Tax Expense
Income Tax Expense US$ Million Q2'05 Q2'04 %Change Income Tax Expense (12.1) (9.4) 29 Rate 32.9% 22.3% HY'05 HY'04 %Change Income Tax Expense (30.8) (22.5) 37 Rate 33.3% 25.5%
Slide 20: Tax Netherlands - US Protocol
Tax Netherlands - US Protocol Treaty Protocol significantly tightens requirements Limitation of Benefits provisions Protocol approved by US Senate - pending ratification If ratified in November - would take effect January 2006 Evaluation of implications and options underway
Slide 21: EBITDA - Q2
EBITDA1 - Q2 Q2'05 Q2'04 % Change EBIT1 USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R & D General Corporate 49.0 12.3 (4.2) (3.4) (13.7) 53.7 9.4 (4.3) (4.1) (6.8) (9) 31 2 17 (101) Depreciation and Amortisation USA Fibre Cement Asia Pacific Fibre Cement Other 5.8 2.4 0.8 6.3 2.3 0
Slide 22: EBITDA - Half Year
EBITDA1 - Half Year HY'05 HY'04 % Change EBIT1 USA Fibre Cement Asia Pacific Fibre Cement Other Fibre Cement R & D General Corporate 112.1 24.3 (7.5) (7.5) (23.1) 107.8 18.0 (8.0) (7.4) (14.2) 4 35 6 (1) (63) Depreciation and Amortisation USA Fibre Cement Asia Pacific Fibre Cement Other 11.6 4.7 1.6
Slide 23: Capital Expenditure - Half Year
Capital Expenditure - Half Year Capital Expenditure Capital Expenditure Depreciation Depreciation US$ Million HY '05 HY '04 HY '05 HY '04 USA Fibre Cement 77.1 32.0 11.6 10.7 Asia Pacific Fibre Cement 2.4 4.2 4.7 4.6 Other Fibre Cement 1.6 7.9 1.6 0.3 Total Segments 81.1 44.1 17.9 15.6
Slide 24: Key Ratios
Key Ratios HY'05 FY '04 FY '03 EPS (Diluted) 13.4c 27.2c 18.2c Dividend - 5.5c 5.0c Return on Shareholders Funds*# 23.2% 27.6% 42.3% Return on Capital Employed# 26.0% 23.4% 20.9% EBIT1/Sales 16.2% 17.5% 16.4% Gearing Ratio1 10.0% 17.0% 21.4% Net Interest Cover 25.5x 17.2x 6.5x * Total Company # Annu
Slide 25: Operating Review
Operating Review Louis Gries, Interim CEO
Slide 26: Business Unit Management
Business Unit Management Don Merkley - Executive Vice President R&D, Business Development and Roofing Dave Merkley - Executive Vice President Engineering, Process Development and Construction Jamie Chilcoff - Vice President International Robert Russell - Vice President Established Markets - USA FC N
Slide 27: USA Fibre Cement
USA Fibre Cement
Slide 28: USA Fibre Cement 2nd Quarter Result
2nd Quarter Result Net Sales up 21% to US$231.0 million Sales Volume up 18% to 459.7 mmsf1 Average Price up 3% to US$503 per msf1 EBIT1 down 9% to US$49.0 million EBIT Margin1 down 6.9 pts to 21.2% USA Fibre Cement
Slide 29: USA Fibre Cement 2nd Quarter Trading Conditions
USA Fibre Cement 2nd Quarter Trading Conditions Continued strength in housing construction Strong consumer demand Low interest rates Strong house prices Low housing inventory levels
Slide 30: USA Fibre Cement Key Points
USA Fibre Cement Key Points Continued strong demand for fibre cement Further penetration of established and emerging markets Strong sales growth in exterior and interior product markets Growth in differentiated, higher-priced products Operating issues at several plants Higher manufacturing and freig
Slide 31: USA Fibre Cement Plant Performance Issues
USA Fibre Cement Plant Performance Issues Ramp up and management issues at Blandon, Pennsylvania; Summerville, South Carolina and Waxahachie, Texas Capacity constrained Increased operating costs - US$8M impact: Freight Labour Maintenance Issues addressed and largely behind us
Slide 32: USA Fibre Cement EBIT/Sales Margin
USA Fibre Cement Q2'05 US$m HY'05 US$m 4.7 8.2 6.2 11.3 4.6 11.6 EBIT/Sales Margin Higher costs Higher raw material prices Freight (capacity constraint related and higher fuel cost impact) SG&A (growth initiatives) Long term band 20-25%
Slide 33: USA Fibre Cement Revenue Growth Continuing to Outstrip Volume Growth
USA Fibre Cement Revenue Growth Continuing to Outstrip Volume Growth 0 200 400 600 800 1000 1200 1400 1600 1800 2000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Volume (mmsf1) / Starts (000's Units) $0 $100 $200 $300 $400 $500 $600 $700 $800 Revenue (USDM) JH Volume JH Revenue Housing Starts 05
Slide 34: USA Fibre Cement Average Selling Price
USA Fibre Cement Average Selling Price US$ per MSF1
Slide 35: USA Fibre Cement EBIT and EBIT Margin
USA Fibre Cement *Excludes restructuring and other operating expenses EBIT and EBIT Margin*,1
Slide 36: USA Fibre Cement Strategy
USA Fibre Cement Strategy Aggressively grow market for fibre cement Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors, introducing differentiated products to reduce direct price competition
Slide 37: USA Fibre Cement Outlook
USA Fibre Cement Outlook Continued strong demand for fibre cement Housing construction to remain strong over short term Low interest rates New starts, permits and builder confidence at healthy levels Sales growth to continue Further penetration in established and emerging markets and across product
Slide 38: Asia Pacific Fibre Cement
Asia Pacific Fibre Cement
Slide 39: Asia Pacific Fibre Cement 2nd Quarter Result
Asia Pacific Fibre Cement 2nd Quarter Result Net Sales up 14% to US$62.5 million Sales Volume up 9% to 102.6 mmsf1 EBIT1 up 31% to US$12.3 million EBIT Margin1 up 2.5 pts to 19.7%
Slide 40: Asia Pacific Fibre Cement Strategy
Strategy Grow primary demand for fibre cement Vigorously protect and grow category share in existing market segments Leverage our superior technology to offer differentiated products and systems with superior value to those of competitors Asia Pacific Fibre Cement
Slide 41: Australia and New Zealand - Key Points
Australia and New Zealand - Key Points New residential and renovations activity slower in Australia Negative customer sentiment in Australia from SCI and related publicity New Zealand housing activity strong Net sales up 16% - up 7% in A$ Volumes up 6% Average selling price up 1% EBIT up 28% - 18% i
Slide 42: Australia and New Zealand - Outlook
Asia Pacific Fibre Cement Australia and New Zealand - Outlook Further softening of new housing and renovations activity in Australia New Zealand housing activity to reduce from peak levels Product boycotts and negative customer sentiment from SCI and related matters will impact Australian sales and
Slide 43: Philippines Key Points
Asia Pacific Fibre Cement Philippines Key Points Increased building and construction activity Net sales up 19% - up 22% in local currency Positive EBIT Outlook Stronger building and construction activity Continued improvement in business results
Slide 44: Chile Fibre Cement Key Points
Other Fibre Cement Chile Fibre Cement Key Points Improved domestic and regional construction activity Strong sales growth Higher domestic pricing Outlook Further improvement in domestic and regional construction activity Continued improvement in business results
Slide 45: USA Hardie Pipe Key Points
Other Fibre Cement USA Hardie(r) Pipe Key Points Higher prices and volumes Improved manufacturing performance EBIT losses reduced Outlook Further market penetration and sales growth Continued improvements to plant operating efficiency Further EBIT improvement
Slide 46: Europe Fibre Cement
Europe Fibre Cement Awareness growing among distributors, builders and contractors Sales continuing to build steadily
Slide 47: Artisan Roofing
Artisan Roofing Sales commenced in October Customer interest remains strong Manufacturing ramp up in early stages
Slide 48: Research and Development
Research and Development Key driver of growth Core projects engineered raw materials product formulations engineering and process technologies lightweight and durable products for all climates Sustainable competitive advantage continuing to be built
Slide 49: Outlook
Outlook Top line growth momentum of first half continuing into 3rd quarter Improved manufacturing performance in North America business Several start-ups planned for the 2nd half Reno Peru XLD Trim Peru ColorPlus Expected operating profit US$135M to US$145M* *Expected operating profit from continuin
Slide 50: Summary
Summary Lower than expected quarterly result Sub-standard US manufacturing performance - issues largely behind us High input costs Ramp-up costs of growth initiatives High corporate costs (SCI related) Remain on track to meet business growth targets
Slide 51: SCI and Other Associated Developments
SCI and Other Associated Developments SCI reported 21 September 2004 Establishment of MRCF legally effective No legal liability for MRCF funding shortfall James Hardie's proposal for funding future claims "an appropriate starting point for negotiations"
Slide 52: SCI and Other Associated Developments
Currently in discussions with various stakeholders - progress being made NSW Government to review ways to cut unnecessary legal and administrative costs in current compensation system 22 September 2004, ASIC announced investigation into creation of MRCF - James Hardie co-operating with ASIC Substant
Slide 53: Updated Actuarial Estimate - MRCF Liabilities
Updated Actuarial Estimate - MRCF Liabilities KPMG estimate updated to 30 June 04 Central Estimate of MRCF liabilities A$1.536 billion at 30 June 2004 Underlying increase in liabilities 5% Sustained trend or aberration not clear - but factored in SCI and Other Associated Developments
Slide 54: Disclaimer
Disclaimer This presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with the Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering circulars and prospectuses, i
Slide 55: 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 Management's Analysis of Results, a Media Release, a Financial Report and Results at a Glance document. 1Definiti
Slide 56: FY05 2nd Quarter and Half Year Results November 2004
FY05 2nd Quarter and Half Year Results 22 November 2004 Unless otherwise stated, results are for continuing operations only and comparisons are of the 2nd quarter of the current fiscal year versus the 2nd quarter of the prior fiscal year.
Hardie James Industries — Q2 FY2005 Earnings Presentation on 6ix