James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q3 FY18 Earnings Presentation
41 slides from James Hardie Industries's earnings presentation, Feb 2, 2018
Slide 1: Q3 FY18 Management Presentation
Q3 FY18 MANAGEMENT PRESENTATION 02 February 2018 Exhibit 99.4
Slide 2: Cautionary Note on Forward-Looking Statements
PAGE CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS This Management 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 Exchange Commis
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
PAGE CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (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
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
PAGE USE OF NON-GAAP FINANCIAL INFORMATION; AUSTRALIAN EQUIVALENT TERMINOLOGY This Management 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 financial measures ar
Slide 5: Agenda
PAGE AGENDA • Fermacell Update – Louis Gries, CEO • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers 5
Slide 6: Fermacell Update
FERMACELL UPDATE Louis Gries, CEO
Slide 7: Fermacell: Integration Update
PAGE Fermacell: Integration Update Manufacturing R&D Headquarters November 2017 • Entered into Purchase Agreement for €473 million (~ US$549 million) December 2017 -March 2018 • Bridge loan facility of €525.0 secured to fund acquisition • Due diligence and integration planning going as planned • Cus
Slide 8: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 9: Group Overview
PAGE GROUP OVERVIEW 9 • Higher volumes and net sales in North America Fiber Cement and International Fiber Cement segments • Higher average net sales price in North America Fiber Cement segment • North America Fiber Cement: YTD EBIT margin of 23.8%; manufacturing stabilizing, volume improving • Inte
Slide 10: North America Fiber Cement Summary
PAGE NORTH AMERICA FIBER CEMENT SUMMARY Volume • FY17 capacity constraint dampened FY18 demand • Marginal volume growth … Exterior volume in line with market index growth for the quarter Price • Favorably impacted by annual change in our strategic pricing effective April 2017; and tactical pricing s
Slide 11: North America Delivered Unit Cost
PAGE NORTH AMERICA DELIVERED UNIT COST 11 Delivered unit cost improved quarter to quarter throughout FY18 • Improvements in manufacturing inefficiencies and production cost • Experiencing higher input costs
Slide 12: North America Fiber Cement Quarterly EBIT and EBIT Margin
PAGE 0 5 10 15 20 25 30 0 20 40 60 80 100 120 FY13 FY14 FY15 FY16 FY17 FY18 EBI T M arg in EBI T U S$M Quarterly EBIT and EBIT Margin1 EBIT EBIT/Sales NORTH AMERICA FIBER CEMENT 12 YTD EBIT Margin % in target range, but down 40 bps to 23.8% compared to pcp 1 Excludes asset impairment charges of US$5
Slide 13: North America Fiber Cement
PAGE NORTH AMERICA FIBER CEMENT 13 • Strategic price increase effective April 2017 • Satisfied with tactical pricing and price positioning • US housing conditions remain favorable • New construction starts continue modest single- digit growth 1 Rolling 12 month average of seasonally adjusted estimat
Slide 14: International Fiber Cement Summary
PAGE 14 Volume • Growth primarily in our Australian and Philippines businesses Lower average selling price compared to pcp • Favorably impacted by modest annual changes in strategic pricing in Australia • Adversely impacted by tactical pricing strategies and volume growth in the Philippines EBIT • S
Slide 15: International Fiber Cement (USD)
PAGE INTERNATIONAL FIBER CEMENT (USD) 15 Australia • Strong market and PDG performance • EBIT favorably impacted by volume, price and manufacturing performance New Zealand • Higher net sales driven by higher volume • Q3 EBIT unfavorably impacted by plant performance Philippines • Tactical pricing an
Slide 16: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 17: Results – 3rd Quarter FY18
PAGE Net sales increased 9% • Higher average net sales price and volume in the North America Fiber Cement segment • Strong volume growth in International Fiber Cement Gross profit increased 18%, gross margin % up 270 bps SG&A expenses increased 4% • SG&A expenses as a percentage of sales decreased 7
Slide 18: Results – Nine Months FY18
PAGE Net sales increased 7% • Higher average net sales price in the North America Fiber Cement segment • Strong volume growth in the International Fiber Cement Gross profit increased 5%, gross margin % down 70 bps SG&A expenses increased 5% • SG&A expenses as a percentage of sales decreased 30 bps A
Slide 19: Changes in AUD vs. USD
PAGE 1 As Reported 9 Months FY18 figures converted using 9 Months FY17 weighted average exchange rates 2 Reflects the difference between 9 Months FY18 As Reported and 9 Months FY18 using 9 Mo ths FY17 weighted average exchange rates CHANGES IN AUD vs. USD 19 $ Favorable (Unfavorable) % 3.4 - 1.5 - 1
Slide 20: North America Input Costs
PAGE NORTH AMERICA INPUT COSTS • Freight market prices increased 21% compared to pcp • The price of NBSK pulp increased 19% compared to pcp • Electricity prices are up 9% compared to pcp • Cement prices continue to rise, up 5% compared to pcp • Gas prices are down 5% compared to pcp 20 The informati
Slide 21: Segment EBIT – 3rd Quarter and Nine Months FY18
PAGE North America Fiber Cement EBIT summary • Q3 EBIT increased 34% and nine months EBIT increased 4% compared to pcp • Quarter increase primarily driven by higher net sales and lower production costs • Nine months increase primarily driven by higher net sales price, partially offset by higher prod
Slide 22: Segment EBIT – Other Businesses, R&D, General Corporate
PAGE Other Businesses • Additional investments in product and manufacturing capabilities R&D • On strategy to invest 2-3% of net sales • Increased spend for Other Businesses segment, and overall increase in number of projects General Corporate Costs • Higher discretionary spend and increase in forei
Slide 23: Income Tax
PAGE 1 Includes Asbestos adjustments, AICF SG&A expenses and net AICF interest (income) expense 2 Excludes tax effects of Asbestos, loss on early debt extinguishment and other tax adjustments 23.1% estimated adjusted effective tax rate for the year • YTD Adjusted income tax expense decrease driven b
Slide 24: US Income Tax Reform
PAGE US INCOME TAX REFORM 24 US Tax Cuts and Jobs Act enacted 22 December 2017 • Provisional charge to income tax expense of US$2.5 million comprising: • Estimated US$32.5 million on deemed repatriated earnings • Partially offset by an estimated US$30.0 million revaluation of our US-based net deferr
Slide 25: Cashflow
PAGE 1 CASHFLOW 25 Decrease in net operating cash flow • Building inventory levels • Increase in the payment to AICF Higher investing activities • Increase in capacity expansion related capital expenditures • Includes proceeds from the sale of a storage building near our Fontana facility Cash provid
Slide 26: Capital Expenditures
PAGE CAPITAL EXPENDITURES • YTD CAPEX spend of US$148.8 million increased US$90.3 million compared to pcp • North America capacity projects during Q3 FY18: Continued the start-up at our Summerville facility Continued construction of a greenfield expansion in Tacoma, expected commissioning Q1 FY1
Slide 27: Financial Management Supporting Growth
PAGE FINANCIAL MANAGEMENT SUPPORTING GROWTH 27 Strong Financial Management Disciplined Capital Allocation Liquidity and Funding • Strong margins and operating cash flows • Strong governance and transparency • Investment-grade financial management • Invest in R&D and capacity expansion to support org
Slide 28: Liquidity Profile
PAGE LIQUIDITY PROFILE 28 Strong balance sheet US$231.3 million cash US$552.6 million net debt 3 at 31 December 2017 100% liquidity on bank debt at 31 December 2017 Corporate debt structure US$400 million 4.75% senior unsecured notes maturing January 2025 US$400 million 5.00% senior unsecu
Slide 29: Redemption of 2023 Senior Unsecured Notes
PAGE REDEMPTION OF 2023 SENIOR UNSECURED NOTES 29 $19.5m 28-Dec-17 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Cumulative interest saved by replacing 5.875% notes with 4.75% Redemption Premium Benefit of 2- Year Tenor Extension
Slide 30: FY2018 Guidance
PAGE FY2018 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2018 is between US$267 million and US$278 million • Management expects full year Adjusted net operating profit to be between US$260 million and US$275 mil
Slide 31: Questions
(@) sames Hardie QUESTIONS
Slide 32: Appendix
(@) sames Hardie APPENDIX
Slide 33: Financial Summary
PAGE FINANCIAL SUMMARY 1 Excludes Asbestos related expenses and adjustments 2 Excludes AICF interest income/expense 33 US$ Millions Q3'18 Q3'17 % Change 9 Months FY18 9 Months FY17 % Change Net Sales North America Fiber Cement 376.8$ 350.9$ 7 1,168.0$ 1,105.7$ 6 International Fiber Cement 114.5 99.5
Slide 34: Asbestos Claims Data
PAGE ASBESTOS CLAIMS DATA 34 • Quarter and nine months claims received were 9% below and in line with actuarial estimates, respectively • Quarter and nine months claims received decreased 8% and increased 1%, respectively, compared to pcp • Mesothelioma claims reported during the nine months: • 8% a
Slide 35: Depreciation and Amortization
PAGE DEPRECIATION AND AMORTIZATION 35 US$ Millions Q3'18 Q3'17 9 Months FY18 9 Months FY17 Depreciation and amortization North America Fiber Cement 18.8$ 17.8$ 54.1$ 48.0$ International Fiber Cement 3.1 3.0 9.5 8.9 Other Businesses 0.5 0.6 1.6 1.7 Research and Development 0.3 0.5 1.1 1.4 General Cor
Slide 36: Non-US GAAP Financial Measures and Terms
PAGE NON-US GAAP FINANCIAL MEASURES AND TERMS 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 Consolidat
Slide 37: Non-US GAAP Financial Measures
PAGE NON-US GAAP FINANCIAL MEASURES 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 Condensed Consolidated Fi
Slide 38: Non-US GAAP Financial Measures – Adjusted EBIT
PAGE Financial Measures – US GAAP equivalents NON-US GAAP FINANCIAL MEASURES 38 Adjusted EBIT US$ Millions Q3'18 Q3'17 9 Months FY18 9 Months FY17 EBIT 143.9$ 108.7$ 325.0$ 315.0$ A b stos: Asbestos adjustments (47.0) (35.6) (36.5) (39.0) AICF SG&A expenses 0.5 0.4 1.3 1.2 Adjusted EBIT 97.4$ 73.5$
Slide 39: Non-US GAAP Financial Measures – Adjusted EPS
PAGE 39 NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Q3'18 Q3'17 9 Months FY18 9 Months FY17 Adjusted net operating profit (US$ Millions) 69.9$ 52.6$ 205.5$ 194.0$ Weighted average common shares outstanding - Diluted (millions) 442.0 441.6 441.7 444.8 Adjusted diluted earnings
Slide 40: Non-US GAAP Financial Measures – Adjusted EBITDA
PAGE NON-US GAAP FINANCIAL MEASURES 40 Adjusted EBITDA excluding Asbestos US$ Millions Q3'18 Q3'17 9 Months FY18 9 Months FY17 EBIT 143.9$ 108.7$ 325.0$ 315.0$ Depreciation and amortization 23.4 22.6 68.6 62.5 Adjusted EBITDA 167.3$ 131.3$ 393.6$ 377.5$ Asbestos: Asbestos adjustments (47.0) (35.6) (
Slide 41: Q3 FY18 Management Presentation
Q3 FY18 MANAGEMENT PRESENTATION 02 February 2018
James Hardie Industries — Q3 FY18 Earnings Presentation on 6ix