Boral — H1 2003 Earnings Presentation
47 slides from Boral's earnings presentation, Feb 12, 2003
Slide 1: 2003 Interim Results Presentation
2003 Interim Results by Presentation Rod Pearse 12 February 2003 Underlying half year profit increases by 57% to $144 million
Slide 2: Overview of results presentation
Overview of results presentation • Financial highlights • Markets review • Financial results • Segment overview x Building Products, Australia x Construction Materials, Australia x USA x Asia • Perform & grow strategy • Outlook Building on our strong resource and market positions Interim Results FY2
Slide 3: Financial highlights: profit up 57% to $144m
Financial highlights: profit up 57% to $144m • PAT up 57% to $144m, driven by: • strong performance in Australia • good results in USA and Asia • turnarounds/growth • effective price management • Sales revenue up 12% to $1.9 billion • EBIT up 49% to $240m • EBIT/Sales margins up from 9.3% to 12.4% •
Slide 4: Financial highlights
Financial highlights • Earnings per share up 55% to 25.1 cents • 11.0 cents per share interim dividend declared; 75% franking (compared with 9 cents/ 35% franked in 1H01) • 40% increase in grossed up dividend compared with interim dividend for FY2002 • Payout ratio of 44% • Share price up 32% to $4.
Slide 5: Markets Review
Markets Review
Slide 6: Strong Australian activity levels
Strong Australian activity levels AUSTRALIA - VALUE OF WORK DONE (BUILDING & CONSTRUCTION) $98 Billion. Half Years. Seasonally Adjusted. 25 Roads, Highways, 20 Subs & Bridges Non Dwelling 15 10 Dwelling (incl A&A) 5 0 Dec-02 f Dec-99 Dec-00 Dec-01 Dec-97 Dec-98 Jun-99 Jun-00 Jun-01 Jun-97 Jun-98 Jun
Slide 7: Dwelling approvals remained high in the Dec-02 half
Dwelling Approvals remained high in the Dec-02 half AUSTRALIA DWELLING APPROVALS Quarterly. Seasonally Adjusted. 20,000 16,000 Total Dwellings 12,000 Houses 8,000 Other Dwellings 4,000 0 Dec-95 Dec-97 Dec-01 Dec-02 Dec-96 Dec-00 Dec-99 Dec-92 Dec-98 Dec-93 Dec-94 Source: ABS 8731 Building on our str
Slide 8: Australian dwelling value of work done has been strong
Australian dwelling value of work done has been strong AUSTRALIA DWELLING ACTIVITY Quarterly. Seasonally Adjusted. FY2001 FY2002 HY03 50,000 10 Total Dwelling Approvals Value of Work Done (A$97/98 Billion) 40,000 8 Starts & Approvals - Units Total Dwelling Starts 30,000 6 20,000 Dwelling Value of Wo
Slide 9: Australian non-dwelling value of work done increasing from a low base
Australian non-dwelling value of work done has been increasing from a low base AUSTRALIA - NON DWELLING VALUE OF WORK DONE $01 Billion. Half Year, Original. 10,000 8,000 Other Business Premises Factories 6,000 Hotels Shops 4,000 Offices 2,000 Social & Institutional 0 Dec-92 Dec-94 Dec-96 Dec-98 Dec-
Slide 10: US activity in the Brick States remains strong
US activity in the Brick States* remains strong USA BRICK STATES* - VALUE OF WORK COMMENCED US$92 Value, Billions 90 80 70 NON-DWELLING 60 50 40 30 DWELLING 20 10 0 Dec-99 Dec-00 Dec-01 Dec-97 Dec-98 Dec-02 Jun-00 Jun-99 Jun-01 Jun-97 Jun-98 Jun-02 * "Brick States" - Alabama, Arkansas, Florida, Geor
Slide 11: Financial Results
Financial Results
Slide 12: Underlying profit increased by 57% to $144m
Underlying profit increased by 57% to $144m 6-months to: Dec-02 Jun-02 Dec-01 Dec-Dec % A$ million change Sales revenue 1,931 1,757 1,732 12 EBITDA 337 275 256 32 EBIT 240 182 161 49 Interest 35 31 32 12 Profit before tax 205 150 130 58 Tax 60 50 37 61 Profit after tax 144 100 92 57 Building on our
Slide 13: Boral's balance sheet continues to strengthen
Boral’s balance sheet continues to strengthen 6-months to: Dec-02 Dec-01 % change A$ million Net debt 864 1,056 (18) Interest 35 32 12 Debt / (Debt + Equity), % 29 35.5 (18) Debt / Equity, % 41 55 (25) Interest cover, times 6.8 5.1 33 Funds employed, $m 2,968 2,972 - ROFE, % (MAT) 14.6 9.3 57 NTA /
Slide 14: Sales have returned to stronger levels; EBIT strengthened
Sales have returned to stronger levels; EBIT has strengthened substantially Sales revenue, $million EBIT, $million 2500 250 2000 200 1500 150 1000 100 500 50 0 0 1H02 2H02 1H03 2H01 1H97 2H97 1H98 1H99 1H00 1H01 2H98 2H99 2H00 1H97 2H97 1H98 2H98 1H99 1H01 1H02 2H02 1H03 2H01 2H99 1H00 2H00 Results
Slide 15: Margins have continued to improve
Margins have continued to improve EBIT/Sales EBITDA/Sales 14% 18% 16% 12% 14% 10% 12% 8% 10% 6% 8% 6% 4% 4% 2% 2% 0% 0% HY03 HY03 FY02 FY97 FY99 FY00 FY97 FY98 FY99 FY01 FY02 FY98 FY01 FY00 Results for reported building and construction materials businesses each year Building on our strong resource
Slide 16: Returns have significantly improved
Returns have significantly improved ROFE, % ROE, % 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 (MAT) (MAT) HY03 FY02 FY99 FY00 FY01 HY03 FY99 FY00 FY01 FY02 Building on our strong resource and market positions Interim Results FY2003
Slide 17: Stronger volumes and prices underpin improved EBIT result
Stronger volumes & prices together with underlying improvements underpin the improved EBIT result $240 m $161 m Cost Acq/Growth FX/POSA/ Volume inflation /Divest Other HY02 Price Operational Offshore HY03 Improvement operations Building on our strong resource and market positions Interim Results FY2
Slide 18: Strong lift in Australian returns
Strong lift in Australian returns Revenue A$ million Dec-02 Dec-01 % change Building Products, Australia 592 487 22 Construction Materials, Australia 919 802 15 USA 379 413 (8) Asia 40 28 46 Discontinued 1 2 Total 1,931 1,732 12 EBIT A$ million Dec-02 Dec-01 % change Building Products, Australia 65
Slide 19: Stronger results from Building Products, Australia
Stronger results from Building Products, Australia • Sales up 22% to $591m EBIT / Revenue ROFE* • EBIT up 80% to $65m 12% 16% • EBIT/Sales margin up 10% 14% 12% from 7.5% to 11.1% 8% 10% • EBITDA/Sales margin 6% 8% up from 11.8% to 14.9% 6% 4% • Funds employed down 4% 2% 2% 2% to $809m 0% 0% • ROFE*
Slide 20: Building Products, Australia benefited from 22% uplift in housing
Building Products, Australia benefited from 22% uplift in housing • Strong uplift in Australian Australian Plasterboard housing activity (VWD +22%) Bricks • Significant gains in Bricks; price softening due to product mix • Strong performance from Masonry Roofing • Improved Roofing result Timber • Co
Slide 21: Boral Masonry won High Court appeal in predatory pricing case
Boral Masonry won High Court appeal in predatory pricing case • Landmark decision • Trial judge’s decision correct - Boral did not have market power • Boral set prices by reference to the market • Good for consumers – promotes vigorous price competition • Boral’s conduct was lawful, vigorous & compe
Slide 22: Construction Materials, Australia returns back to strong levels
Construction Materials, Australia returns are back to strong levels • Sales up 15% to $919m EBIT / Revenue ROFE* • EBIT up 84% to $113m 14% 16% 14% • EBIT/Sales margin up 12% 12% from 7.7% to 12.3% 10% 10% 8% • EBITDA/Sales margin 8% 6% up from 13.6% to 17.5% 6% 4% 4% • Funds employed up 3% 2% 2% to
Slide 23: Improved pricing and volume uplifts benefited Construction Materials
Improved pricing and volume uplifts benefited Construction Materials, Australia • Improved Cement, Quarry & Quarries Concrete pricing Cement division** • Stronger Concrete & Quarry volumes Contracting • Growth in Cement volumes & Transport lime sales QEU • Cement capacity constraint • Improved Aspha
Slide 24: Stronger readymix concrete prices
Stronger readymix concrete prices AUSTRALIA - READY MIX CONCRETE QUARTERLY 130 120 110 Price Index* (100=1990) 100 90 80 70 60 50 40 Dec-90 Dec-92 Dec-94 Dec-96 Dec-00 Dec-02 Dec-80 Dec-88 Dec-98 Dec-82 Dec-84 Dec-86 Source: ABS Price Index for Material Used in Other than House Building – Readymix C
Slide 25: Strong US results maintained in US$
Strong US results maintained in US$; A$5m negative exchange rate impact on translation • Sales steady at US$210m EBIT / Revenue ROFE* (exc. MonierLifetile) • EBIT steady at US$30m 16% 20% 14% 18% • EBIT/Sales margin 16% 12% steady at 14.2% 14% 10% 12% • EBITDA/Sales margin 8% 10% 8% up from 19.9% to
Slide 26: Strong market conditions underpin strong United States contribution
Strong market conditions underpin strong contribution from United States Bricks • Housing market remains strong • Softer result from Bricks due to some price softening • Turnaround of BMTI business Clay • Steady turnaround in Monier- rooftiles Lifetile’s underlying EBIT Flyash & • Softer Clay Tile v
Slide 27: Strong turnaround sustained in Asia
Strong turnaround sustained in Asia ASIA EBIT (including Plasterboard and Construction Materials) A$ million 15 10 5 0 1H99 2H99 1H00 2H00 1H01 2H01 1H02 2H02 1H03 -5 -10 -15 -20 Building on our strong resource and market positions Interim Results FY2003
Slide 28: Steady improvement from Asian operations
Steady improvement from Asian operations • Sales up 46% to $40m EBIT / Revenue** • EBIT up 32% to $14m 15% • Underlying Plasterboard market 10% growth of around 10% 5% • South Korea slow in first quarter but 0% HY03 FY97 FY98 FY00 FY01 FY02 FY99 regained momentum in Dec-quarter -5% • Stronger result
Slide 29: Boral's Strategic Intent
Boral’s Strategic Intent “Boral intends to be a value-driven, focused building and construction materials supplier operating in Australia and increasingly offshore” CEO (Elect), October 1999 Building on our strong resource and market positions Interim Results FY2003
Slide 30: Perform & Grow Strategy
Perform & Grow Strategy Operational Improved Improvement Operating margins up operating from 9.0% to 12.3% Selling, general margins & admin Property Value $25m pa EBIT from QEU Add SIB capex at around 63% Focused Capital of depreciation since balance expenditure demerger D/E from sheet Working Reduc
Slide 31: We will grow around our leading reserve and market positions
“We will grow around our leading reserve and market positions” CEO Elect, Oct-99 ASIA Plasterboard* Indonesia #1 Malaysia #1 The Philippines #1 China (east) #1 Korea #1 USA Thailand #1 Fly ash #2 Indonesia Concrete #1 Bricks #1 Clay Roof tiles #1 Concrete Roof tiles #1 AUSTRALIA Bricks #1 Masonry #1
Slide 32: Over $725m of capital allocated to growth since demerger
Over $725m of capital allocated to growth in Australia and offshore since demerger Australia COMPLETED AND PLANNED Oberon Softwood JV, Koolkhan upgrade, GROWTH EXPENDITURE Concrite & Alsafe Concrete, Transfield Asphalt, Marulan lime upgrade, Compton Australia Park Quarry, Go-Crete, Canberra Minimix,
Slide 33: Boral has leading cement positions in NSW & Victoria
Boral has leading cement positions in NSW & Victoria Clinker / Cement plant Grinding Mill Limestone / Lime Flyash Sunstate Cement Port Augusta Collie Eraring Mt Piper Kooragang Island Marulan Maldon Berrima Waurn Ponds Building on our strong resource and market positions Interim Results FY2003
Slide 34: Our cement upgrade program will strengthen our cost position
Our cement upgrade program will strengthen our cost position and enhance our capacity flexibility • Cement upgrade program: • $131m capital at Waurn Ponds (Vic) & Berrima (NSW) • $25m cost savings (end of FY04) – lower energy & freight costs; reduced greenhouse gas emissions • Avoid $30m of SIB cape
Slide 35: The Franklin Brick acquisition will strengthen our #1 position in USA
The Franklin Brick acquisition will strengthen our #1 position in Bricks in the USA • US$66m acquisition; trailing EBITDA multiple of 6.1 times • Following the acquisition Boral will have 48 distribution centres in 13 US states • Move further into direct sales to end customers • Improved operating m
Slide 36: Franklin facilities complement existing brick operations
Franklin facilities complement existing brick operations Gleason Salisbury Van Wyck Lexington Atlanta Muskogee Augusta Macon Henderson Macon Marshall Bessemer Phoenix 20 Franklin Brick locations City 28 Boral Brick Studios 21 Boral Brick plants at 13 Boral manufacturing locations Building on our str
Slide 37: We are delivering on our Financial Objectives
We are delivering on our Financial Objectives FINANCIAL OBJECTIVES: • Exceed the weighted average cost of capital (WACC) on a sustainable basis through the building cycle • Beat the competition in comparable markets • Deliver superior total shareholder returns (TSR) Building on our strong resource a
Slide 38: Boral's share price up 16% for six months to Dec-02
Boral’s share price up 16% for six months to Dec-02 $5.00 + 16% $4.00 Boral versus ASX 100 index Boral’s Share Price $3.00 $2.00 ASX100 indexed $1.00 Jun-01 Jun-02 Feb-00 Dec-00 Dec-01 Dec-02 Jun-00 * Start price = $2.28 (Weighted average of first trading week, Closing share price 11 February 03 = $
Slide 39: Boral continues to deliver top quartile TSR performance
Boral continues to deliver top quartile TSR performance TSR PERFORMANCE OF ASX100 - March 2000 to December 2002* 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile 30.9% BORAL * Start price 1 March 2000: $2.32, Closing share price 31 December 2002: $4.35 Source: Bloomberg Building on our strong res
Slide 40: FY2003 Outlook
FY2003 Outlook
Slide 41: Australian dwelling activity should soften by Dec-03
Australian dwelling activity should soften by Dec-03 AUSTRALIA DWELLING VALUE OF WORK DONE Forecast $97/98 Billion. Quarterly. Seasonally Adjusted. 8 6 Dwelling Value of Work Done 4 2 0 Dec-99 Dec-01 Dec-00 Dec-96 Dec-98 Dec-03 Dec-97 Dec-02 Source: ABS 8752, BIS Shrapnel Dec 02 forecast Building on
Slide 42: Australian non-dwelling activity is lifting
Australian non-dwelling activity is lifting AUSTRALIA NON-DWELLING ACTIVITY Quarterly. Seasonally Adjusted. $00/01, millions. Forecast $5,000 BIS Shrapnel VWD Forecast Value of Work Done $4,000 $3,000 Value of Approvals $2,000 $1,000 $0 Dec-94 Dec-95 Dec-97 Dec-99 Dec-00 Dec-02 Dec-90 Dec-96 Dec-98
Slide 43: Overall Australian VWD expected well above FY2002
Overall Australian VWD in FY2003 and FY2004 is expected to be well above FY2002 AUSTRALIA - VALUE OF WORK DONE (BUILDING & CONSTRUCTION) $98 Billion. Seasonally adjusted. 50 45 Roads, Highways, 40 Subdivisions & Bridges 35 30 Non Dwelling 25 20 15 Dwelling (incl A&A) 10 5 0 1998 1991 1993 1994 1996
Slide 44: US residential activity is expected to remain strong
US residential activity is expected to remain strong USA BRICK STATES* - VALUE OF WORK COMMENCED US$92 Value, Billions 180 Forecast 160 140 120 NON-DWELLING 100 80 60 DWELLING 40 20 0 1996 1997 1999 2000 2001 2002 2003 f 2004 f 1990 1991 1993 1994 1998 2006 f 2007 f 1992 1995 2005 f * "Brick States"
Slide 45: Asian construction demand continues to grow
Asian construction demand continues to grow Korea Thailand Indonesia China - Shanghai Value of construction orders Gross fixed capital Value of completion. Value of construction received. Trillion Won formation. Billion bhat Trillion Rp work done. Billion yuan 40 600 40 70 30 30 400 20 20 35 200 10
Slide 46: Outlook for FY2003
Outlook for FY2003 • Easing of dwelling approvals and VWD in Jun-03 half • Stronger Australian non-dwelling demand in H2 • H2 typically seasonally weaker • Stronger construction materials prices in H2 • Solid USA earnings; strong A$ • Performance improvement in Asia • Anticipate stronger QEU contrib
Slide 47: Interim Results 2003 BORAL
2003 Interim Results BORAL