James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q4 FY2018 Earnings Presentation
50 slides from James Hardie Industries's earnings presentation, May 22, 2018
Slide 1: Q4 FY18 Management Presentation
Exhibit 99.4 Q4 FY18 MANAGEMENT PRESENTATION 22 May 2018
Slide 2: Cautionary Note on Forward-Looking Statements
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 Commission,
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
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 are i
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
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 are des
Slide 5: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • James Hardie Europe – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers PAGE 5
Slide 6: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 7: Group Overview
GROUP OVERVIEW Adjusted Net Operating Profit 1 Adjusted Diluted EPS 1 4th Qtr Full Year 4th Qtr Full Year US$81.1 M 49% US$291.3 M 17% US18 cents 50% US66 cents 18% Adjusted EBIT 2 Net Operating Cash Flow 4th Qtr Full Year Full Year US$103.0 M 34% US$397.5 M 12% US$295.0 M 1% Adjusted EBIT Margin %
Slide 8: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY Q4'18 Full Year Volume Net Sales US$410.1 M US$1,578.1 M • FY17 capacity constraint dampened 1H FY18 demand • 2H FY18 exterior volume growth in line with market index 6% 6% Price Sales Volume 586.8 mmsf 2,238.8 mmsf • Favorably impacted by annual change in our stra
Slide 9: North America Delivered Unit Cost
NORTH AMERICA DELIVERED UNIT COST Delivered unit cost improved in 2H FY18 • Manufacturing performance within expected performance band • Continuing to experience higher input costs PAGE 9
Slide 10: North America Fiber Cement Quarterly EBIT and EBIT Margin
NORTH AMERICA FIBER CEMENT Quarterly EBIT and EBIT Margin 1 120 30 100 25 80 20 60 15 EBIT EBIT US$M 40 10 EBIT Margin 20 5 0 0 FY13 FY14 FY15 FY16 FY17 FY18 EBIT EBIT/Sales YTD EBIT Margin % up 120 bps to 24.2% compared to pcp 1 Excludes asset impairment charges of US$5.8 million in Q3 FY13 and US$
Slide 11: North America Fiber Cement Top Line Growth
NORTH AMERICA FIBER CEMENT Top Line Growth 1 3,000 $1,600 2,500 $1,200 2,000 1,500 $800 1,000 Revenue(US$M) $400 500 JH Volume (mmsf), Starts Units) (000s (mmsf), JH Volume 0 $0 '13 '14 '15 '16 '17 '18 JH Volume Housing Starts JH Revenue • FY18 strategic price increase effective April 2017 • US hous
Slide 12: International Fiber Cement Summary
INTERNATIONAL FIBER CEMENT SUMMARY Volume Q4'18 Full Year • Growth primarily in our Australian and Philippines Net Sales US$112.5 M US$461.7 M businesses 9% 12% Price • Favorably impacted by modest annual changes in Sales Volume 128.9 mmsf 528.7 mmsf strategic pricing in Australia and product mix fo
Slide 13: International Fiber Cement (USD)
INTERNATIONAL FIBER CEMENT (USD) Australia • Good market and strong PDG performance • EBIT favorably impacted by volume and price New Zealand • Higher net sales for the full year driven by higher volume and favorable product mix • EBIT unfavorably impacted by plant performance and higher input costs
Slide 14: James Hardie Europe
James Hardie Europe Louis Gries, CEO
Slide 15: Overview
OVERVIEW Before Acquisition Post Acquisition Workforce • 70 employees • 900+ employees Presence • UK, FR, DK, DE • 12+ countries • Residential New • Residential New Construction Segments Construction • Repair and Renovation • Repair and Renovation • Commercial • Fiber Cement Products • Fiber Cement
Slide 16: Brand Architecture
BRAND ARCHITECTURE James Hardie | @ Fiber Fiber Cement Fire Gypsum Protection fermacell” @ sJamesHardie® AESTUVER® (GJoames Harae PAGE. 16
Slide 17: Key Locations and Organization
KEY LOCATIONS AND ORGANIZATION Head Office and Manufacturing Footprint Organization • Jack Truong - President, International • Jörg Brinkmann JH Europe Managing Director • 7 years experience at Fermacell • 13 years industry experience • 7 person management team • 5 from Fermacell • 2 from James Hard
Slide 18: Financials and Future Growth
FINANCIALS AND FUTURE GROWTH FY 18 Financials 1 10 year objective € 1 billion in Revenue • JH Europe Revenue ~ € 300 million • JH Europe EBIT margin ~10% with Hardie type returns Future Growth ~ 10% EBIT margin • Fiber Gypsum • Existing Fiber Cement Products • New Fiber Cement Product Development €
Slide 19: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 20: Key Financial Messages
KEY FINANCIAL MESSAGES • Strong 4 th Quarter Results ; Adjusted EBIT up 34% – Good operational momentum in North America Fiber Cement, strong performance in Australia • Solid full year cash flows • Capacity expansion and capital allocation on track • Second Half Dividend declared of 30 cents per sha
Slide 21: Results – 4th Quarter FY18
RESULTS – 4th QUARTER FY18 Net sales increased 6% Three Months Ended 31 March • Higher average net sales price and volume in the North US$ Millions Q4'18 Q4'17 % Change America Fiber Cement segment and International Fiber Net sales 525.9 494.3 6 Cement segment Gross profit 191.1 160.8 19 Gross profi
Slide 22: Results – Full Year FY18
RESULTS – FULL YEAR FY18 Net sales increased 7% Full Year Ended 31 March • Higher average net sales price in the North America US$ Millions FY18 FY17 % Change Fiber Cement segment Net sales 2,054.5 1,921.6 7 • Strong volume growth in the International Fiber Cement Gross profit 730.2 674.7 8 segment
Slide 23: Changes in AUD vs. USD
CHANGES IN AUD vs. USD Excluding Translation As Reported Translation Impact 2 Impact 1 $ Favorable % US$ Millions FY18 FY17 % Change FY18 % Change (Unfavorable) Net Sales $ 2,054.5 1,921.6 ttt 7% $ 2,047.7 ttt 7% 6.8 - Gross Profit 730.2 674.7 ttt 8% 727.4 ttt 8% 2.8 - Adjusted EBIT 397.5 354.3 ttt
Slide 24: North America Input Costs
NORTH AMERICA INPUT COSTS Quarterly US Input Costs 1,400 10 • Freight market prices up 23% compared to pcp 9 1,200 8 1,000 7 • The price of NBSK pulp up 19% compared to pcp 6 800 5 600 • Cement prices up 3% compared to pcp Pulp Prices ($) 4 400 3 2 • Electricity prices up 2% compared to pcp 200 Ceme
Slide 25: Segment EBIT – 4th Quarter and Full Year FY18
SEGMENT EBIT – 4th QUARTER and FULL YEAR FY18 North America Fiber Cement North America Fiber Cement EBIT summary 450 400 381.9 • Q4 EBIT increased 36% and full year EBIT increased 352.2 343.9 350 11% compared to pcp 300 250 Q4 EBIT • Quarter increase primarily driven by lower production 200 Full Yea
Slide 26: Segment EBIT – Other Businesses, R&D, General Corporate
SEGMENT EBIT – 4th QUARTER and FULL YEAR FY18 Other Businesses (10) Other Businesses (8.6) (8.6) (8) (6.7) • Continued investments in product development, (6) manufacturing and organizational capabilities (4) (2.8) (2.4) Q4 EBIT US$ US$ Millions (2.0) (2) Full Year 0 FY16 FY17 FY18 Research and Deve
Slide 27: Income Tax
INCOME TAX Three Months and Full Year Ended 31 March 20.6% adjusted effective tax rate for the year US$ Millions Q4’18 Q4’17 FY18 FY17 • Full year Adjusted income tax expense decrease Operating (loss) profit before taxes (103.2) 71.1 174.3 367.0 driven by US amortization of certain intangible Asbest
Slide 28: Income Taxes
Income Taxes • In Q4 FY18, James Hardie undertook an internal restructuring transaction • Aligned certain intangible assets with our US business • Resulted in the US amortization of those intangible assets • Favorable impact on Income Tax Expense and Adjusted ETR for FY18 • How ETR is calculated und
Slide 29: Cashflow
CASHFLOW Change US$ Millions FY18 FY17 Modest increase in net operating cash flow (%) • Net income adjusted for non-cash items was flat compared to pcp Net Income 146.1 276.5 (47) • Built inventory levels during FY18 Adjustment for non-cash items1 220.6 90.1 Annual AICF contribution (102.2) (91.1) (
Slide 30: Capital Expenditures
CAPITAL EXPENDITURES Full year CAPEX spend of US$203.7 million increased US$101.8 million compared to pcp • North America capacity projects: Started up the 3rd sheet machine at Plant City facility; recommissioned and completed the start up of 4th sheet machine Commissioned our Summerville facili
Slide 31: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital Liquidity and Funding Management Allocation • Conservative leveraging of balance Strong margins and operating • Invest in R&D and capacity • sheet at a target within 1-2 times cash flows expansion to support organic growth A
Slide 32: Liquidity Profile at March 2018
LIQUIDITY PROFILE AT 31 March 2018 Strong balance sheet US$281.6 million cash US$602.8 million net debt 3 80% liquidity on bank debt Corporate debt structure US$400 million 4.75% senior unsecured notes maturing January 2025 US$400 million 5.00% senior unsecured notes maturing January 2028
Slide 33: Asbestos Compensation Key Points
ASBESTOS COMPENSATION KEY POINTS • Updated actuarial report completed as at 31 March 2018 • Undiscounted and uninflated central estimate increased to A$1,443 million from A$1,386 million • Increase of A$113 million in NPV of estimate to A$1,853 million, from A$1,740 million at 31 March 2017, reflect
Slide 34: Asbestos Claims Data
ASBESTOS CLAIMS DATA Claims Received • Quarter and full year claims received were 10% and 2% below actuarial estimates, respectively 562 576 557 • Quarter and full year claims received were flat and 1% higher, respectively, compared to pcp 129 144 129 • Mesothelioma claims reported for the full year
Slide 35: FY2019 Key Planning Assumptions
FY2019 KEY PLANNING ASSUMPTIONS • The Company expects to see steady growth in the US housing market continue in fiscal year 2019 • US Residential Housing Starts forecasted to be between 1.2 and 1.3 million • North America Fiber Cement Segment EBIT margins expected to be in the top end of our state
Slide 36: Summary
SUMMARY Adjusted Net Operating Profit 1 Adjusted Diluted EPS 1 4th Qtr Full Year 4th Qtr Full Year US$81.1 M 49% US$291.3 M 17% US18 cents 50% US66 cents 18% Adjusted EBIT 2 Net Operating Cash Flow 4th Qtr Full Year Full Year US$103.0 M 34% US$397.5 M 12% US$295.0 M 1% • Good operational momentum in
Slide 37: Questions
(@) sames Hardie QUESTIONS
Slide 38: Appendix
(@) sames Hardie APPENDIX
Slide 39: Financial Summary
FINANCIAL SUMMARY Three Months and Full Year Ended 31 March US$ Millions Q4'18 Q4'17 % Change FY18 FY17 % Change Net Sales North America Fiber Cement$ 410.1 $ 387.7 6$ 1,578.1 $ 1,493.4 6 International Fiber Cement 112.5 102.8 9 461.7 411.8 12 Other Businesses 3.3 3.8 (13) 14.7 16.4 (10) Total Net S
Slide 40: Net Post-Tax Unfunded Asbestos Liability
NET POST-TAX UNFUNDED ASBESTOS LIABILITY A$ millions (except where stated) FY18 FY17 Central Estimate - Undiscounted and Uninflated$ 1,442.9 $ 1,385.7 Provision for claims handling costs of AICF 30.1 29.4 Cross claims and other 33.8 18.8 Net assets of AICF (81.9) (71.9) Effect of tax (526.0) (488.6)
Slide 41: Asbestos Cash Movements for Full Year Ended March
ASBESTOS CASH MOVEMENTS FOR FULL YEAR ENDED 31 MARCH A$ millions AICF cash and investments - 31 March 2017$ 142.4 Contributions to AFFA by James Hardie 135.1 Insurance recoveries 9.5 Loan drawdowns - Loan repayments (68.5) Interest income, net 2.5 Claims paid (133.1) Operating costs (4.0) Other 0.7
Slide 42: Updated Actuarial Estimate
UPDATED ACTUARIAL ESTIMATE PAGE 42
Slide 43: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Full Year Ended 31 March Q4'18 Q4'17 FY18 FY17 Depreciation and amortization North America Fiber Cement$ 18.4 $ 16.3 $ 72.5 $ 64.3 International Fiber Cement 3.1 2.9 12.6 11.8 Other Businesses 0.5 0.5 2.1 2.2 Research and Development 0.3 0.
Slide 44: Non-US GAAP Financial Measures and Terms
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 Consolidated Financial St
Slide 45: Non-US GAAP Financial Measures – US GAAP Equivalents
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 Consolidated Financial Stateme
Slide 46: Non-US GAAP Financial Measures – Adjusted EBIT
NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months and Full Year Ended 31 March Q4'18 Q4'17 FY18 FY17 EBIT $ (95.8) $ 78.2 $ 229.2 $ 393.2 Asbestos: Asbestos adjustments 192.9 (1.4) 156.4 (40.4) AICF SG&A expenses 0.6 0.3 1.9 1.5 Fermacell
Slide 47: Non-US GAAP Financial Measures – Adjusted Diluted EPS
NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months and Full Year Ended 31 March Q4'18 Q4'17 FY18 FY17 Adjusted net operating profit (US$ Millions) $ 81.1 $ 54.6 $ 291.3 $ 248.6 Weighted average common shares outstanding - 443.0 441.4 442.3 443.9 Diluted (millions) Adjust
Slide 48: Non-US GAAP Financial Measures – Adjusted EBITDA
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos US$ Millions Three Months and Full Year Ended 31 March Q4'18 Q4'17 FY18 FY17 EBIT $ (95.8) $ 78.2 $ 229.2 $ 393.2 Depreciation and amortization 23.4 20.7 92.0 83.2 Adjusted EBITDA $ (72.4) $ 98.9 $ 321.2 $ 476.4 Asbestos: Asbestos adj
Slide 49: Non-US GAAP Financial Measures – Adjusted ROCE
NON-US GAAP FINANCIAL MEASURES Adjusted Return on Capital Employed ("Adjusted ROCE") US$ Millions Full Year Ended 31 March 1 FY18 FY17 Numerator Adjusted EBIT $ 397.5 $ 354.3 Denominator Gross capital employed (GCE) 1,272.0 1,107.6 Adjustment to GCE (24.3) 50.3 Adjusted gross capital employed $ 1,24
Slide 50: Q4 FY18 Management Presentation
Q4 FY18 MANAGEMENT PRESENTATION 22 May 2018
James Hardie Industries — Q4 FY2018 Earnings Presentation on 6ix