James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2010)
76 slides from James Hardie Industries's investor presentation, Sep 15, 2010
Slide 1: US Business Overview
9/15/2010 For personal use only US Business Overview Nigel Rigby Disclaimer This Management’s Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Securities and Excha
Slide 2: Overview Agenda / Macro Environment
9/15/2010 Overview Agenda For personal use only US Business Macro Environment Strategic Growth Strategy and Initiatives Category Share Initiatives Summary 3 Macro Environment Initial market demand in Q1 reversed in Q2 Structural shift in new construction to starter / 1st move up homes i.e. smaller h
Slide 3: Strategic Growth and Non Metro Strategy
9/15/2010 Strategic Growth 12 Years For personal use only Strategy: Aggressively grow demand for our products in targeted market segments Grow our overall market position while defending our share in existing market segments Offer products with superior value to that of our competitors Introduce dif
Slide 4: R&R Segment Strategy, Objectives, Initiatives
9/15/2010 R&R Segment Strategy, Objectives, Initiatives For personal use only Business Strategy – Switch the preference from vinyl to fiber cement by directly communicating the benefits and affordability of James Hardie to the consumer Strategic Objectives: Get into the home via Education, Contracto
Slide 5: Next Evolution of Color – Color Job / House Packs
9/15/2010 Next Evolution of Color – Color Job / House Packs For personal use only 2004 – 2010 Color focused at the North vinyl substitution model Focused channel access to scale dealers Focused Color / Product range due to inventory constraints Job / House Packs remove the supply chain barriers to C
Slide 6: HardieTrim NT3
9/15/2010 HardieTrim®NT3™ For personal use only HardieTrim®NT3 PRODUCT EXTENSION 12’ LENGTHS, CONCEALED NAILS FLEX FORMULATIONS FINISHED SURFACE, EASED EDGES THE JAMES HARDIE INNOVATION PATH EXTRUDED FC TRIM, COLORPLUS™ TECHNOLOGY 11 11 Photo of bad shingle 12 6
Slide 7: New HardieShingle
9/15/2010 In just a year of weathering… For personal use only 13 New HardieShingle® New HardieShingle® siding delivers an enhanced and truly authentic texture, that provides the character of traditional cedar shingles without the maintenance September October November December Washington (9/13) Oreg
Slide 8: Single Family - Complete Exterior
9/15/2010 Single Family - Complete Exterior For personal use only Launch of a new look Hardie Custom Colonial Plank Hardie complete exterior package targeted at differentiated regional and national builders Reposition of the Hardie brand in high share markets Complete Exterior product range position
Slide 9: HardieZone - HardieAdvantage / Category Share
9/15/2010 HardieZone - HardieAdvantage For personal use only Rounded drip edge eliminates damage More durable than square edge Sloped top Maintains drainage function Drip edge 17 Category Share Current State Increase in price conscious builders and contractors Gaps in Hardie – Multi Family, Producti
Slide 10: Production Builders and Dealers / Retail
9/15/2010 Production Builders and Dealers For personal use only Top 18 Production Builders account for approximately 26% of new, single-family, residential construction in the United States Executed a Scale Builder and Dealer program in May 2009 Dealer channel better aligned, understanding and suppo
Slide 11: Multi Family / Summary
9/15/2010 Multi Family For personal use only Early and Late stage sales approach Early stage specific to Color where value exits – Lifecycle value Late stage focused at project identification, pricing and supply chain efficiency Executing a model in PNW and Atlanta Launched Brand for MF direct to jo
Slide 12: Questions
9/15/2010 For personal use only Questions 23 12
Slide 13: R&R Segment
9/15/2010 For personal use only R&R Segment Mark Fisher / Paul Gentzel Disclaimer This Management’s Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Securities and
Slide 14: Outline / The Market
9/15/2010 Outline For personal use only 1. Market / Strategy Review 2. James Hardie R&R Progress Update 3. Review R&R Next Stage Thinking 4. Summary/Go Forward 3 The Market Repair and Remodel Market Overview 4 2
Slide 15: R&R opportunity continues to grow vs. New Construction
9/15/2010 R&R opportunity continues to grow vs. New Construction For personal use only 2006 2010 New Construction, 27% New Construction, 46% Repair & Remodeling, 54% Repair & Remodeling, 73% 5 Total Value in USD Source: NAHB R&R Segment Strategy • Business Strategy- Switch the preference from vinyl
Slide 16: R&R Strategic Objectives
9/15/2010 R&R Strategic Objectives For personal use only Objectives Outcomes/Challenges JH can impact seller and buyer • Get into home via education, behavior contractor or both C+ and Trim attachment • PDG ( Terminal share >35%) rates lead business Category Share is approx. • Category Share-90% 90%
Slide 17: Contractor Landscape / Market Penetration Approach
9/15/2010 Contractor Landscape For personal use only Top 24% of contractors: Breakdown by • JH primarily targets the Specialty Contractor while Sales Revenue expanding to include influential Full Line Contractors 2% • JH reaching out to top 15%+ of Specialty $ 10 mm + Contractors via Website Contrac
Slide 18: Vinyl Market / JH R&R Product Targets
9/15/2010 Vinyl Market For personal use only Terminal Share without Terminal Share with JH JH direct intervention direct intervention Wood/Stone Wood/Stone Top 3 rd Top 3 rd Middle rd Middle 3 rd 3 Vinyl Bottom 3 rd Bottom 3 rd Vinyl 11 JH R&R Product Targets Terminal Share with JH Distinct Product
Slide 19: James Hardie Repair and Remodel Progress Update
9/15/2010 For personal use only James Hardie Repair and Remodel Progress Update 13 R&R Progress Update • JH Organization • Contractor Programs, Training and Tools • Consumer Awareness • JH Siding Center 14 7
Slide 20: R&R Progress – JH Organization
9/15/2010 R&R Progress – JH Organization For personal use only • Good progress on Organizational Alignment and Knowledge • Field Sales focus continues to shift – 80+ reps with significant R&R responsibility – continue to add • R&R “Playbook” and 6 week web based Playbook training key to shift focus
Slide 21: R&R Progress – Contractor Programs, Training and Tools
9/15/2010 R&R Progress – Contractor Programs, Training and Tools For personal use only • Website Contractor Value Proposition • Credibility in the home with Consumers • Exposure and Impressions via Web listing • Business Building Blocks • Members Only Website • Consumer Leads 17 R&R Progress – Contr
Slide 22: Contractor Training
9/15/2010 R&R Progress – Contractor Programs, Training and Tools For personal use only Contractor Training is focused in four key areas • Marketing and Lead Generation • In-Home Sales • Production, Installation, Best Practices • Post Production 19 R&R Progress – Contractor Programs, Training and Too
Slide 23: 10 Step In-Home Sales Methodology
9/15/2010 R&R Progress – Contractor Programs, Training and Tools For personal use only 21 R&R Progress – Contractor Programs, Training and Tools •10 Step In-Home Sales Methodology • Focus on Selling Value in the Home • Overcoming Objections • Vinyl market • Prime-to-Color market • Role Play with Mik
Slide 24: GuildQuality / Website Contractor Program
9/15/2010 R&R Progress – Contractor Programs, Training and Tools For personal use only GuildQuality Professional Customer Satisfaction Survey Tool – GuildQuality’s mission is to elevate the stature of the building profession to a level that is commensurate with its importance • 500 members across No
Slide 25: Contractor Communication and Consumer Awareness
9/15/2010 R&R Progress – Contractor Programs, Training and Tools For personal use only Combination of one-on-one or group training, Aggregation Events and newsletters used to communicate with and train contractors. Exclusive News for the James Hardie Contractor 25 R&R Progress – Contractor Programs,
Slide 26: Neighborhood Events
9/15/2010 R&R Progress – Contractor Programs, Training and Tools For personal use only Recent Neighborhood Events Cameron Woods Community Event June 19th, Charlotte, NC Thornton, CO Open House July 24th, 2010 27 R&R Progress – James Hardie Siding Center • Lead generation, jobs and revenue all growin
Slide 27: R&R Progress Issues and Challenges
9/15/2010 R&R Progress Issues and Challenges For personal use only • Continue organizational resource build • Improving organizational focus and effectiveness in R&R • Emphasis on target acquisition and segmentation • Grow Preferred Remodeler geographic presence • Preferred Remodelers as an extensio
Slide 28: James Hardie Repair and Remodel Future State
9/15/2010 For personal use only James Hardie Repair and Remodel Future State 31 JH R&R Segment Future State • The “middle third” of the market continues to be the primary target, but this crucial segment will only move to JH if we drive the market development • If the early standard is vinyl it can
Slide 29: Future State – Neighborhood Approach
9/15/2010 JH R&R Segment Future State – Neighborhood Approach For personal use only Original Hot Mapping evolved into a more refined view of the markets 33 JH R&R Segment Future State – Neighborhood Approach Continuation of the model takes us to neighborhood and street level 34 17
Slide 30: JH R&R Segment Future State – Product Targets
9/15/2010 JH R&R Segment Future State For personal use only Distinct Product Targets in the Expanded Middle Full Line Contractors/Craftsman Tear Down and Rebuild Architecture & Design key drivers Artisan JH Sweet Spot Color Plus Wood-look arch. w/ JH durability Full Wrap JH substrate and factory fin
Slide 31: Future State – Selling Models and Contractor Programs
9/15/2010 JH R&R Segment Future State For personal use only We will employ a combination of selling models across markets Preferred James Hardie JH Siding Remodelers Sell/Outsource Center Products Mainly JH C+ Full Wrap Artisan and JH “Value” All Products with emphasis on Artisan and JH “Value” Plac
Slide 32: Future State / Summary and Go Forward
9/15/2010 JH R&R Segment Future State For personal use only Continue to drive away from broad based marketing due to: • A homeowner is in the re-side “buying window” on average only once in their lifetime, therefore, the message is wasted 90%+ the time • We are trying to mainly influence the middle
Slide 33: JH R&R Segment Summary and Go Forward
9/15/2010 JH R&R Segment Summary and Go Forward For personal use only • Original assumptions are valid – JH can and is having an impact in R&R; both the Buyer and Seller are positively impacted when JH is presented as an affordable option • Organizational Shift – we are getting the shift in focus wi
Slide 34: Questions
9/15/2010 For personal use only Questions 43 22
Slide 35: ColorPlus House Packs
9/15/2010 For personal use only ColorPlus House Packs Nigel Rigby / Ryan Sullivan Disclaimer This Management’s Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Sec
Slide 36: Agenda / What are ColorPlus House Packs?
9/15/2010 Agenda For personal use only What are House Packs? Why are we doing House Packs? How is customer value created? How will House Packs work? Current test programs Go Forward 3 What are ColorPlus House Packs? 2
Slide 37: What Are Job Packs? / House Packs
9/15/2010 What Are Job Packs? For personal use only Job packs are to-the-piece orders of ColorPlus, ordered for one house or project, that are assembled by James Hardie and sold and delivered direct to channel partners. Job Packs Defined • Ordered to the piece—not ordered in full/mid/mini quantities
Slide 38: Why are we doing ColorPlus House Packs?
9/15/2010 For personal use only Why are we doing ColorPlus House Packs? Why House Packs? House packs are a dramatic move in support of our on-going strategy of product differentiation. Since its introduction, ColorPlus has been a critical aspect of our differentiation strategy. Market adoption of Co
Slide 39: House Packs break current barriers
9/15/2010 House Packs break current barriers For personal use only House Packs remove the supply chain barriers to ColorPlus adoption. • Too many SKU’s for channel to stock • Catch-22: channel won’t get behind it without builder demand; builders reluctant without strong channel support • Job site wa
Slide 40: Impact on Supply Chain / Reduced Lead Times
9/15/2010 Impact on Supply Chain For personal use only • Dramatically reduce the amount of ColorPlus product that must be stocked by the channel • Provide easy access to the full color pallet and board range • Eliminate jobsite waste on non-stocked SKU’s • Increase efficiency through supply chain •
Slide 41: Job Site Waste Reduction
9/15/2010 Job Site Waste Reduction For personal use only House packs cut waste by allowing the builder to order exactly what they need as opposed to fixed pallet quantities Amount Saved by Enabling Order to the Piece 8 Number of Times Savings Observed 7 (in Sample of 48 Jobs) 6 80% of sample saved 5
Slide 42: Far Broader Access to Products / Reduced Supply Chain Cost
9/15/2010 Far Broader Access to Products For personal use only Job packs dramatically increase access to non-stocked SKU’s. Chicago ColorPlus SKU’s Shingle Plank Panel Soffit Trim Future Products Colors 1 day lead time (stocked by Dealer) 3 day lead time (stocked by Distribution) Formerly 3 week lea
Slide 43: Reduced Supply Chain Cost – Labor
9/15/2010 Reduced Supply Chain Cost For personal use only ColorPlus via House Packs creates a 3X improvement in labor. • ColorPlus eliminates labor intensive field painting. • House Packs eliminate several handling and stacking operations Handling & Stacking Operations Eliminated by House Packs [Mak
Slide 44: House Pack Scope / Impact on Job Orders
9/15/2010 House Pack Scope For personal use only Goal: Shift majority of our ColorPlus Single Family R&R and New Construction volume to House Packs. MF volume through standard process Remaining flows through traditional channel in full pallet / full truck. Short lead time service – walk in business
Slide 45: JH Supply Chain Network / Process Flow
9/15/2010 JH Supply Chain Network For personal use only JH Plant ColorPlus Freight Reloads C+ VMIs C+ Reloads Retail VMIs 21 Supply Chain Process Flow Customer Back-End Order Fulfillment Products Interface Execution Planning Warehouse Take Offs (APO) Management Distribution Pricing Strategy Order En
Slide 46: Importance of Take-Offs
9/15/2010 Importance of Take-Offs For personal use only Accurate take-offs are critical to the success of our Job Pack program. Handling & Stacking Operations Eliminated by House Packs Poor take-offs Not enough material Too much material Need for fill-ins Need for returns Material Contractor waste o
Slide 47: Other Factors Impacting Order Accuracy / Pricing and Order Entry
9/15/2010 Other Factors Impacting Order Accuracy For personal use only Other Reasons for Fill-Ins • Field modifications (builders do not follow plans exactly) • Builder permits customers to modify home after product is ordered • Job site theft • Job site damage • Variations in installer capabilities
Slide 48: Pricing and Order Entry: Future / Make to Order
9/15/2010 Pricing and Order Entry: Future For personal use only Builder/Contractor Dealer JH (Computer) Receives RFQ; computer checks to Enters RFQ online; make sure order is Calls dealer with gets real-time quote good & calcs price RFQ; gets pricing live & provides to builder during the call; on sa
Slide 49: Lead Times / Order Flow
9/15/2010 Lead Times For personal use only Why 5 Business Days? • Our cost to deliver different lead times varies. – Shorter lead times are costly – Longer lead times are cheaper • We believe that 5-8 day lead-time has value to customers - especially to R&R contractors. Increased cost for shorter le
Slide 50: Channel: Supply Chain and Strategy Background
9/15/2010 Channel: Supply Chain For personal use only James Hardie will configure its business to sell job packs direct to the traditional channel. We are removing the incentive for channel members to take stocking positions in ColorPlus • This ensures the most efficient/lowest cost supply chain for
Slide 51: Filling Trucks / Transportation and Delivery Model
9/15/2010 Filling Trucks For personal use only • While our freight will increase from our standard model – the overall freight cost for the supply chain will decrease due to James Hardie’s scale and scope. Backer in Primed in Full Pallets Additional Full Pallets [Note: longer lead time may apply] Jo
Slide 52: Current test programs – Florida
9/15/2010 For personal use only Current test programs Florida – ColorPlus House Packs June 2010 we started trialing a program with a limited SKU range of ColorPlus in job pack form in the Florida market. Offering State of Florida 140 skus tailored for Florida market Blend of plank, trim, Heritage, a
Slide 53: Chicago – ColorPlus House Packs
9/15/2010 Chicago – ColorPlus House Packs For personal use only July 2010 we started trial of a full SKU range of ColorPlus in job pack form for the Chicago market. Offering 90 mile radius around Peru, IL All SKUs Accessories – Touch-up by the kit and Caulk by the kit Lead times - 8 calendar day lea
Slide 54: Key Challenges / Summary
9/15/2010 Key Challenges For personal use only Proving lead-time is sufficient for majority of customer base Helping customer base reduce need for costly fill-ins and returns Ability of James Hardie to directly interact and communicate with a larger number of channel partners Ability to achieve accu
Slide 55: Questions
9/15/2010 For personal use only Questions 41 21
Slide 56: Non-Metro Segment
9/15/2010 For personal use only Non-Metro Segment Loi McLoughlin 1 Disclaimer This Management’s Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Securities and Exc
Slide 57: Agenda / Non-Metro Market Overview
9/15/2010 Agenda For personal use only Non-Metro Market Overview Going Forward Plan Q&A 3 Non-Metro Market Overview 2
Slide 58: Non-Metro vs. Metro Map
9/15/2010 Non-Metro vs. Metro Map For personal use only Metro Priority Non-Metro (45) 5 Secondary Non-Metro (low opportunity) NC Starts Trend 6 Source: JH Planning Department, Dodge - reference slide 4 6 3
Slide 59: Housing Characteristics and Cladding Comparison
9/15/2010 Market Overview - Housing Characteristics Comparison For personal use only Type SF (%) MF (%) Mobile Average Home % of home Home Value Housing (%) Size (sf) (cost per cost as a square % of foot) income Metro 59% 37% 4% 2,582 $88 24% Non-Metro 78% 7% 15% 2,203 $88 18% Source: US Census Bure
Slide 60: New Homes By Builder Classification / Scale in Non-Metro
9/15/2010 New Homes By Builder Classification For personal use only % of total Homes built Built for Sale (Land & House) 69.5% Contractor Built (builder or GC on owner’s land) Owners Built 18.0% (home owner as GC) 12.5% Non-Metro * US * Metro * 9 Source: US Census Bureau, 2008 Characteristics of New
Slide 61: Funding of Non-Metro Market Development
9/15/2010 Funding of Non-Metro Market Development For personal use only • Channel partners cannot normally afford to fund market development activities focused on a specific product category since the small differences in margins limit the potential payback for them • Manufacturers cannot normally a
Slide 62: Go Forward Plan
9/15/2010 For personal use only Go Forward Plan Key Result Drivers Sales Resource Increase the number of reps in non-metro markets Rep Training / Development (scale approach) Supply Chain Channel alignment to support market development Logistics capability for both primed units and C+ job packs to m
Slide 63: Summary
9/15/2010 Summary For personal use only • The non-metro markets represent a growth opportunity for James Hardie • Scale is required to service non-metro markets efficiently • James Hardie is in a unique position in that we can afford market development in smaller markets • Additional resources are b
Slide 64: US Market Update
9/15/2010 For personal use only US Market Update Scott Barnett Disclaimer This Management’s Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Securities and Exchang
Slide 65: Agenda / Market Summary
9/15/2010 Agenda For personal use only 1. Market Summary 2. NAHB Starts Forecast 3. Market Share Discussion 4. Market Share Conclusions 3 Market Summary • Most market participants, including JH, expected a recovering market in FY 11 • Recent starts forecasts have consistently been downgrades • Sales
Slide 66: NAHB Starts Forecast Chronology
9/15/2010 NAHB Starts Forecast Chronology For personal use only 5 Composition of North American Housing Starts FY 11 (forecast*) FY 10 (Actual) US – All 596,000 568,000 US – Multi Family High (51,000) (40,000) Canada 150,000 122,000 Addressable total 695,000 650,000 * Source: Dodge, Zelman and Assoc
Slide 67: Category Share / US Housing Demographic Shift
9/15/2010 Category Share For personal use only Fiber Cement Category Share • Our competitive intelligence suggests that we have experienced a small category share decline from six quarters ago • Early losses appear to have come within big builders, which have been substantially recovered • More rece
Slide 68: Repair & Remodel Market
9/15/2010 Repair & Remodel Market For personal use only • R&R market historically hard to get good 3rd party data on market size and opportunity, specifically as it relates to re-sides • Various sources (Harvard Joint Center, Census Bureau, Big Boxes, NAHB, etc.) have widely diverging views of the m
Slide 69: Conclusions
9/15/2010 Conclusions For personal use only • From FY 06 to FY 10, JH appeared to have slightly grown overall market share while it lost slight category share • Over same period vinyl appears to have lost market share • Available 3rd party data (NAHB, Census, McGraw Hill, Freedonia, Principia) direc
Slide 70: Questions
For personal use only Questions 7 9/15/2010
Slide 71: US Manufacturing
9/15/2010 For personal use only US Manufacturing Scott Barnett / Dave Kessner Disclaimer This Management’s Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Securit
Slide 72: Safety / People
9/15/2010 Safety For personal use only Goal = 2 and 20 Key Safety Initiatives: • Machine interface improvements - Lock out zone Graphics / OHSA compliance on guarding • Housekeeping best practices - Internal inspections • Forklift People / Interface – Delineate walk ways, High visibility • TSSA/NR T
Slide 73: Cash Cost: YTD vs. Prior YTD
9/15/2010 Cash Cost: YTD vs. Prior YTD For personal use only • Higher material and energy cost > Primarily pulp and natural gas • More complex product mix > C+ and Trim • Performance • Labor and compressible spending • Lower production volume 5 NBSK and NYMEX Index Up 49% YTD vs. PY Up 19% YTD vs. P
Slide 74: Key Issues and Opportunities in Manufacturing
9/15/2010 Key Issues and Opportunities in Manufacturing Currently For personal use only Issues: • HZ 5 Transition – Bullnose Edge • Water Processing • Heritage Line Opportunities: • SMED Embossing Capability • Texas Color Plus Line Construction • Zero-to-Landfill 7 HZ 5 Transition – Generation II (B
Slide 75: Water Processing / Cleburne ColorPlus
9/15/2010 Water Processing For personal use only • Plants currently discharge water to local municipalities • Long-term discharge regulations likely to change • Running trials to enhance processing capability > Allow recycle vs. discharge • Benefits > Cost savings > Early preparation for changing re
Slide 76: Zero to the Landfill / USA Capital Expenditures
9/15/2010 Zero to the Landfill (“ZTL”) For personal use only Goal: • Make better sheets on the roller • Identify potential rejects in green sheet condition so can be scrapped rather than finished • Recycle finishing rejects back into process i.e. no waste is sent to landfill 11 USA – Capital Expendi
James Hardie Industries — Investor Presentation (September 2010) on 6ix