James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Day (September 2018)
44 slides from James Hardie Industries's investor day presentation, Sep 20, 2018
Slide 1: Operations
Exhibit 99.6 • Xxx • Xxx OPERATIONS Matt Marsh Ryan Kilcullen Dave Merkley
Slide 2: Agenda
AGENDA • Introduction • Enabling Growth & Network Returns • Transforming Our Manufacturing Approach • Customer Value Creation & FC Process Innovation • Capacity Project Update PAGE 2
Slide 3: Introduction
• Xxx • Xxx INTRODUCTION
Slide 4: Hardie Operations – Historical Perspective
HARDIE OPERATIONS – HISTORICAL PERSPECTIVE JH Operations: A significant enabler of our 35/90 organic growth strategy NETWORK CAPACITY FC MANUFACTURING PROCESS INNOVATION & WITH UNIQUE RETURNS SCALE ADVANTAGE CUSTOMER VALUE • Regional flexibility • Hatcheck scale up • Engineered for Climate ® • Effic
Slide 5: Hardie Plant Overview
HARDIE PLANT OVERVIEW Manufacturing Key Process Inventory Processes Objectives Model Raw Materials Continuous Long Continuous Make-to- Process Run Inventory Sheet Machine Raw Material Raw Material Postponed Pre-Autoclave Conversion Yield Differentiation Autoclaves Finishing Material Long Continuous
Slide 6: Sheet Machine Index Concept
SHEET MACHINE INDEX CONCEPT 4x4 Sheet Machine 9x5 Sheet Machine Machine Throughput Drivers Tub 1 Tub 1 Machine throughput of “design product” is determined by: 4 Tubs • Machine index • Film build capability Tub 4 9 Other factors that influence Tubs throughput: 4’ Width • Product line discounts on fe
Slide 7: Machine Indexing Created High Throughput FC
MACHINE INDEXING CREATED HIGH THROUGHPUT FC A culture of engineering step-change has yielded a tremendous increase in manufacturing scale Key: Tub Config Finishing SM Index PAGE 7
Slide 8: Manufacturing Scale Creates FC Moat
MANUFACTURING SCALE CREATES FC MOAT Manufacturing scale creates a significant competitive advantage machine hour machine Volume/gross Throughput Capital $/Annual Capital Fontana Plant City Tacoma Pulaski Fontana Plant City Tacoma Pulaski Capital Efficiency Unmatched Machine Size & Automation by Comp
Slide 9: Process Innovation Leads to Customer Value
PROCESS INNOVATION LEADS TO CUSTOMER VALUE Internally developed process capability enables product differentiation Product thickness & density HardieTrim ® & Artisan ® control product lines Fit-to-purpose manufacturing HardieZone ® Engineered processing for Climate ® Post-processing Aspyre engineeri
Slide 10: Hardie Operations – Enabling Future Value Creation
HARDIE OPERATIONS – ENABLING FUTURE VALUE CREATION JH Operations: Organized to deliver on the next phase of value creation in our 35/90 organic growth strategy NETWORK CAPACITY FC MANUFACTURING PROCESS INNOVATION & WITH UNIQUE RETURNS SCALE ADVANTAGE CUSTOMER VALUE High scale mega-sites Transforming
Slide 11: Enabling Growth & Network Returns
• Xxx • Xxx ENABLING GROWTH & NETWORK RETURNS
Slide 12: Historical Core Concepts in Capacity Planning
HISTORICAL CORE CONCEPTS IN CAPACITY PLANNING Core concepts of our approach to capacity management Provide supply ahead of demand to enable JH organic growth strategy Make network design investments with the end state in mind Design an optimal network footprint for JH by optimizing a multi-part equa
Slide 13: Designing an Optimized JH Footprint
DESIGNING AN OPTIMIZED JH FOOTPRINT JH Total Network Cost Trade-Off Curve Total Network Cost Network Total # of Site Locations As the Number of Freight Total Manufacturing Sites Increases Capex Site Opex PAGE 13
Slide 14: Phases of Our Network Expansion
PHASES OF OUR NETWORK EXPANSION Phase 1 Phase 2 Phase 3 Markets Existing Enabled HZ10 HZ5 Approach Greenfield Greenfield Brownfield Bias Network Significant LOH Continued LOH Reductions Product Line Flexibility Enabler Reductions Post-autoclave Value Add Multi-Line Sites Full-Wrap Capability Brownfi
Slide 15: JH North American Manufacturing Network
JH NORTH AMERICAN MANUFACTURING NETWORK Post-recessionSingle & double capacity line flat sheetadds –plants combination were constru of greenfctedield to enable& brownfield NA FC sites growth LocationsRecent brownfield driven by sites proximity have usedto raw site materials optionality & ma torket c
Slide 16: Key Learnings Through Phase 3 of Our Expansion
KEY LEARNINGS THROUGH PHASE 3 OF OUR EXPANSION Insights from our expansion to date have led us to value creation opportunities for our phase 4 expansion Key Insights Brownfield expansion offers a significant capital efficiency over greenfield Multi-line (3+ SM) plants can be efficiently run and have
Slide 17: Insight Example #1: Multi-Line Operating Opportunity
INSIGHT EXAMPLE #1: MULTI-LINE OPERATING OPPORTUNITY Addition of 3 rd SM Opportunities Cleburne Pre-Expansion Post-autoclave flexibility ColorPlus® By-pass finishing for Color Finishing Finishing Finishing Shared systems running at high utilizations, driving plant decision making despite low value a
Slide 18: Insight Example #2: Regional Product Specialization
INSIGHT EXAMPLE #2: REGIONAL PRODUCT SPECIALIZATION Regional Specialization of Products: • Input cost advantage • Machines advantaged Operational Advantages • Reduced changeovers • Improvements from specialization Opportunity to ship higher ratio of products via rail PAGE 18
Slide 19: Insight Example #3: Post Autoclave Spoke Opportunity
INSIGHT EXAMPLE #3: POST AUTOCLAVE SPOKE OPPORTUNITY Enabled mega-site provides in market, post autoclave operations Low input cost Low capital cost (land, building, and installation) Rail In plant economies of scale Competitive rail enabled Prattville, AL Shortened truck length of haul PA
Slide 20: Insight Example #4: Specialization for Effective Capacity
INSIGHT EXAMPLE #4: SPECIALIZATION FOR EFFECTIVE CAPACITY 5 foot wide machines Optimize products to Plank Opportunity machines Plank Plank Plank Panel Plank More output with same hours Changeover Reduction Low incremental cost to produce Efficient supply chain Plant B 5 foot machine Plant A 4 foot m
Slide 21: Today to 35/90 – Phase 4 of Our Network Expansion
TODAY TO 35/90 – PHASE 4 OF OUR NETWORK EXPANSION In our phase 4 network expansion we will look to apply these insights Brownfield expansions at existing sites Investments in multi-line (3+ SM) sites will enable efficient mega-sites Individual capacity investments will deliver total network optimiza
Slide 22: Core Concepts of a Mega-Site (Inside the Walls)
CORE CONCEPTS OF A MEGA-SITE (INSIDE THE WALLS) Capex & opex efficiencies from multi- In 6 1 Market line construction & operations Potential Mega-Site Spoke Configuration 2 Flex product line capability for full local Finished Goods market coverage, specialized to distribute Inventory unit cost advan
Slide 23: Core Concepts of Mega-Sites (Outside the Walls)
CORE CONCEPTS OF MEGA-SITES (OUTSIDE THE WALLS) Deliver landed cost advantage while benefiting from site scale – In-market spoke enables freight Tacoma, WA efficiencies Reno, NV Peru, IL – High volume rail capability Pulaski, VA Fontana, CA Summerville, SC Waxahachie, TX – Optimized plant and produc
Slide 24: Capacity Summary
CAPACITY SUMMARY • Our current network footprint was designed to enable future organic volume growth at a high efficiency • Insights from our network build out are well understood, and learnings are being applied to future investments • Mega-site facilities will enable a scale advantage locally & cr
Slide 25: Transforming Our Manufacturing Approach
• Xxx • Xxx TRANSFORMING OUR MANUFACTURING APPROACH
Slide 26: Historical Manufacturing Approach
HISTORICAL MANUFACTURING APPROACH JH Manufacturing Approach: A decentralized, entrepreneurial approach utilizing step change engineering to scale a process with unlocked potential An approach that enabled unique …that contributed significantly to manufacturing capabilities… the value creation equati
Slide 27: An Approach That Aligns With the Opportunity
AN APPROACH THAT ALIGNS WITH THE OPPORTUNITY The value creation opportunity in JH manufacturing has shifted significantly… Potential of the technology Raise the potential 6x Reach the Raise the potential 18x potential 20x Machine design potential Reach the Actual machine performance Sheet Machine Th
Slide 28: A New Path Forward for Hardie Manufacturing
A NEW PATH FORWARD FOR HARDIE MANUFACTURING We are in the early stages of deployment of a shift in how we manage of manufacturing site operations… From To Local site autonomy Network standardization Step change delivers the gains Continuous improvement sustains & improves Technical/Engineering manag
Slide 29: A Transformation to Lean Manufacturing
A TRANSFORMATION TO LEAN MANUFACTURING The adoption of a lean manufacturing approach will create the platform for our manufacturing transformation Expected Outcomes of Lean Sustain & Build on Improvements • A JH manufacturing operating system • Increased standardization • Common problem solving appr
Slide 30: Machine & Process Reliability
MACHINE & PROCESS RELIABILITY We have recently launched a reliability initiative designed to increase the net production hours of our sheet machines Opportunity Approach Total Available Hrs Type 1 Loss 1. Planned Outage Type 2 Loss Minimization Type 3 Loss 2. Critical Asset Reliability Program Run W
Slide 31: Additional Areas of Opportunity & Focus
ADDITIONAL AREAS OF OPPORTUNITY & FOCUS We have invested in organizational capability to deliver on a number of specific additional opportunities inside of JH operations Product Line Operations ColorPlus ® Operations Post Autoclave 2.0 Manufacturing focus on Enabling the market share gain Creating a
Slide 32: JH Manufacturing Strategy Summary
JH MANUFACTURING STRATEGY SUMMARY • A culture of innovation & step change has delivered significant value creation from our historical manufacturing approach • Greater efficiencies in our base network will be generated from a shift to continuous improvement, world class manufacturing • We are design
Slide 33: Customer Value Creation & FC Process Innovation
• Xxx • Xxx CUSTOMER VALUE CREATION & FC PROCESS INNOVATION
Slide 34: JH Manufacturing Step Change
JH MANUFACTURING STEP CHANGE We have also doubled down on our ability to deliver break through engineering step change in all areas of JH manufacturing Step innovation in… …enables break through progress Next Generation Hatschek New Product Enablers Mfg Platform Development JH Manufacturing Capabili
Slide 35: Step Changing the Hatschek Process
STEP CHANGING THE HATSCHEK PROCESS Current Speeds vs. Enabled by step change Nameplate innovation… Potential Speed Gains Beyond Design • Significant increase in drainage rate Potential to Close Gap to Nameplate • Raw material formation modifications Current Current Speed Speed • Felt technology inno
Slide 36: Manufacturing Platform Step Change
MANUFACTURING PLATFORM STEP CHANGE Manufacturing platform innovation has the potential to unlock significant process, product and cost levers in fiber cement manufacturing Enabling Product Enabling Total Enabling New Attributes Cost Optimization Products Platform A Platform B Platform C Longer Lower
Slide 37: Manufacturing and Supply Chain Scale
MANUFACTURING AND SUPPLY CHAIN SCALE Supply Chain enables efficient, full truck load shipments to distribution Scale and aggregation allows for efficient manufacturing Optionality offered Full Truck Aggregated Paint Long Sheet Machine to Customer Shipments Runs Product Runs PAGE 37
Slide 38: Manufacturing Capability Summary
MANUFACTURING CAPABILITY SUMMARY • We have an established history in step change manufacturing innovation • We are adding to and enhancing the talent and capability of our engineering teams with the talent & capability to accelerate the pace of step change in JH • The value associated with continuou
Slide 39: Capacity Project Update
• Xxx • Xxx CAPACITY PROJECT UPDATE
Slide 40: Tacoma Update
TACOMA 2 UPDATE • In start-up phase – C+ line expected 1H FY20 • Nameplate Capacity - 300 mmstdft/year • Capabilities – Plank, Backer, HardieShingle ®, ColorPlus ® Technology • 130 Employees at full production First Stacks Produced • Site benefits – Low input cost – Proximity to growing markets PAGE
Slide 41: Alabama Update
ALABAMA UPDATE • Construction in process • Expected commissioning 1H FY20 • Initial Nameplate Capacity – 600 mmstdft/year • Anticipated Capabilities – HZ10 & HZ5 Plank, Backer, Aspyre Plank • 175 – 200 Employees at full production • Site benefits • Low input cost • Skilled manufacturing workforce •
Slide 42: Summary
SUMMARY • Tacoma II and Alabama projects are on-track • Both investments bring incremental flat sheet and product line capacity to support future demand creation • Learnings from our previous experience in building & operating sites are being applied PAGE 42
Slide 43: Overall Summary
OVERALL SUMMARY • We have a clear path forward in operations to continue to enable our 35/90 organic growth strategy • Our network design capabilities continue to improve and mega- sites are expected to be important to future capacity • Our journey to world class manufacturing has started • Process
Slide 44: Q&A
• Xxx • Xxx Q&A
James Hardie Industries — Investor Day (September 2018) on 6ix