James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q2 FY2011 Earnings Presentation
54 slides from James Hardie Industries's earnings presentation, Nov 16, 2010
Slide 1: Q2 FY11 Management Presentation
Q2 FY11 Management Presentation 15 November 2010
Slide 2: Disclaimer
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 Exchange Commission on Forms 20-F and 6-K, in the annual reports to sh
Slide 3: Agenda
Agenda Overview and Operating Review - Louis Gries, CEO Financial Review - Russell Chenu, CFO Questions and Answers 3 In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures included in the Definitions sec
Slide 4: Operating Review
Operating Review Louis Gries, CEO
Slide 5: Group Overview
Group Overview Operating results reflect a challenging US housing construction market, higher input costs (primarily pulp in the US), a strong positive contribution by the Asia Pacific businesses and lower corporate costs For the half year, net operating profit excluding asbestos, ASIC expenses and
Slide 6: USA and Europe Fibre Cement: 2nd Quarter Result
2nd Quarter Result * Net Sales down 12% to US$200.7 million Sales Volume down 15% to 303.6 mmsf Average Price up 3% to US$661 per msf EBIT down 40% to US$39.4 million EBIT Margin down 8.9 pts to 19.6% 6 USA and Europe Fibre Cement *Comparisons are of the 2nd quarter of the current fiscal year versus
Slide 7: USA and Europe Fibre Cement: Half Year Result
Half Year Result * Net Sales down 4% to US$433.7 million Sales Volume down 7% to 661.3 mmsf Average Price up 4% to US$656 per msf EBIT down 29% to US$95.5 million EBIT Margin down 7.7 pts to 22.0% 7 USA and Europe Fibre Cement *Comparisons are of the half year of the current fiscal year versus the h
Slide 8: Average Net Sales Price
Average Net Sales Price US$ per MSF USA and Europe Fibre Cement US$656 8 (CHART)
Slide 9: EBIT and EBIT Margin
(CHART) USA and Europe Fibre Cement * Excludes impairment charges of US$45.6 million in Q4 FY08 9 EBIT and EBIT Margin* EBIT EBIT Margin
Slide 10: USA Fibre Cement housing starts
USA Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau 10 (CHART)
Slide 11: Primary Growth Performance
USA and Europe Fibre Cement Primary Growth Performance All market and market share figures are management estimates. 11 (CHART) Q311
Slide 12: Asia Pacific Fibre Cement: 2nd Quarter Result
2nd Quarter Result * Net Sales up 16% to US$86.9 million Sales Volume down 3% to 99.7 mmsf Average Price up 9% to A$965 per msf EBIT up 10% to US$17.9 million EBIT Margin down 0.9 pts to 20.6% 12 Asia Pacific Fibre Cement *Comparisons are of the 2nd quarter of the current fiscal year versus the 2nd
Slide 13: Asia Pacific Fibre Cement: Half Year Result
Half Year Result * Net Sales up 26% to US$172.3 million Sales Volume up 8% to 206.1 mmsf Average Price up 4% to A$936 per msf EBIT up 48% to US$40.0 million EBIT Margin up 3.3 pts to 23.2% 13 Asia Pacific Fibre Cement *Comparisons are of the half year of the current fiscal year versus the half year
Slide 14: Group 2nd Quarter Summary
14 Group 2nd Quarter Summary* *Comparisons are of the 2nd quarter of the current fiscal year versus the 2nd quarter of the prior fiscal year USA and Europe Fibre Cement results reflected: A challenging operating environment Lower production and sales volumes Higher fixed unit cost of manufacturing f
Slide 15: US housing starts indicating renewed weakness
15 US housing starts indicating renewed weakness in housing construction Total USA Housing Starts - US Census Bureau
Slide 16: Group Outlook
Group Outlook 16 United States The operating environment remains challenging and the outlook uncertain The US housing construction sector continues to be affected by factors such as: High levels of unemployment Low levels of consumer confidence Excess housing inventory Limited credit availability Ad
Slide 17: Group Outlook: Group Strategy
17 Group Outlook Group Strategy The company's key medium term priorities in the US are: Growing primary demand and market share in the repair and remodel and non- metro markets Increasing market penetration of our ColorPlus(r) products Overall Group Strategy The company remains focused on: Deliverin
Slide 18: Financial Review
Financial Review Russell Chenu, CFO
Slide 19: Overview
Overview* 19 *Comparisons are of the half year of the current fiscal year versus the half year of the prior fiscal year Operations US earnings continue to be affected by weak activity in US housing sector Group earnings benefited from: The strong contribution of Asia Pacific businesses The strength
Slide 20: Consequences of changes - A$ versus US$
Consequences of changes - A$ versus US$ A$/US$ Exchange Rate Favourable impact from translation of Asia Pacific results - Q2 FY11 vs Q2 FY10 Unfavourable impact on corporate costs incurred in Australian dollars - Q2 FY11 vs Q2 FY10 Unfavourable impact from translation of asbestos liability balance -
Slide 21: Results - Q2
wal Results - Q2 USS Millions 214 210 — % Change Net sales 287.6 304.2 ©) Gross profit 93.4 117.6 (21) SG&A expenses (5.1) (49.0) 28 Research & development expenses (67) (7) E Asbestos adjustments (107.8) 27) (72) EBIT (56.2) (0.8) 2 Net interest expense (0.9) (0.4) - Other expense (2.9) (1.0) - Inc
Slide 22: Results - Q2 (continued)
Results - Q2 (continued) 22 * Includes AICF SG&A, interest income and gain on investments
Slide 23: Results - Half Year
mal Results — Half Year USS Millions HY "11 HY "10 Change Net sales 606.0 588.7 3 Gross profit 210.2 228.0 @) SG&A expenses (81.0) (90.4) 10 Research & development expenses (13.7) (13.0) ©) Asbestos adjustments (44.7) (182.5) 76 EBIT 70.8 (67.9) : Net interest expense (2.0) (1.1) (82) Other (expense
Slide 24: Results - Half Year (continued)
Results - Half Year (continued) 24 * Includes AICF SG&A, interest income and gain on investments
Slide 25: Segment Net Sales - Q2
mat Segment Net Sales - Q2 USS Millions Q2711 Q2'10 — % Change USA and Europe Fibre Cement 200.7 229.0 (12) Asia Pacific Fibre Cement 86.9 75.2 16 Total 287.6 304.2 (5) 25
Slide 26: Segment Net Sales - Half Year
Segment Net Sales - Half Year 26
Slide 27: Segment EBIT - Q2
1 Research & development includes "core" research & development expenses and administrative expenses, but excludes product development expenses Segment EBIT - Q2 27
Slide 28: Segment EBIT - Half Year
1 Research & development includes "core" research & development expenses and administrative expenses, but excludes product development expenses Segment EBIT - Half Year 28
Slide 29: Income Tax Expense - Q2
ma Income Tax Expense - Q2 US$ Millions eeu Cah Operating loss before income taxes (60.0) (2.2) Asbestos: Asbestos adjustments 107.8 627 AICF SG&A expenses as 0s AICF interest income (at) (1.0) Gain on AICF investments e (19) Operating profit before income taxes excluding asbestos 473 58.4 Income ta
Slide 30: Income Tax Expense - Half Year
Income Tax Expense - Half Year 30 * Includes AICF SG&A, interest income and gain on investments
Slide 31: Cash Flow
wal Cash Flow USS Millions read oD EBIT 708 67.3) Non-cash items: Asbestos adjustments 447 182.5 Other non-cash items 19.4 89.4 Net working capital movements (11.3) (65.4) Cash Generated By Trading Activities 123.6 148.6 Tax payments (40.2) (26.1) Change in asbestos-related assets & liabilities (10.
Slide 32: Debt
Debt Net debt increased by US$4.6 million compared to net debt at 31 March 2010 Net debt decreased by US$32.5 million compared to net debt at 30 June 2010 Weighted average remaining term of total facilities of US$265.0 million was 2.0 years at 30 September 2010 up from 1.2 years at 30 September 2009
Slide 33: Legacy Issues Update
Legacy Issues Update 33 Asbestos On 7 November 2009, the Australian and NSW Governments announced an A$320 million standby loan facility for AICF. James Hardie is continuing to work with the NSW Government and the AICF to finalise the details of the facility ATO - 1999 Disputed Amended Assessment Ja
Slide 34: Asbestos Fund Update - Pro forma
Asbestos Fund Update - Pro forma (unaudited) 34 *In accordance with the Amended and Restated Final Funding Agreement A$ millions AICF holdings 31 March 2010 (cash and short term investments) 63.1 Contribution by James Hardie* 72.8 Insurance and cross claim recoveries 19.4 Interest income and unreali
Slide 35: Key Ratios
Key Ratios 1 Excludes asbestos adjustments, AICF SG&A expenses, AICF interest income, gain or impairment on AICF investments, tax benefits related to asbestos adjustments, ASIC expenses and tax adjustments 2 Excludes asbestos adjustments, AICF SG&A expenses and ASIC expenses 3 EPS, Dividend Paid per
Slide 36: Summary
36 Summary USA and Europe Fibre Cement 2nd Quarter EBIT decreased 40% due to lower production and sales volumes, higher input costs (primarily pulp), partially offset by a higher average net sales price. For the half year EBIT fell 29% to US$95.5 million Asia Pacific Fibre Cement net sales increased
Slide 37: Questions and Answers
@sames Hardie Questions and Answers
Slide 38: Appendix
@sames Hardie Appendix
Slide 39: Global 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 differentiated products to deliver a sustainable competitive advantage
Slide 40: General Corporate Costs - Q2
General Corporate Costs - Q2 40
Slide 41: General Corporate Costs - Half Year
General Corporate Costs - Half Year 41
Slide 42: EBITDA - Q2
wa EBITDA-Q2 USS Miilions a2"14 210 % Change EBIT USA and Europe Fibre Cement 39.4 65.3 (40) Asia Pacific Fibre Cement 17.9 16.2 10 Research & development (5.0) 4.8) @) General corporate excluding asbestos and ASIC expenses (10.2) (13.9) 27 Depreciation and Amortisation USA and Europe Fibre Cement 1
Slide 43: EBITDA - Half Year
wal EBITDA — Half Year USS Milions HY "11 HY'10% Change EBIT USA and Europe Fibre Cement 95.5 134.1 (29) Asia Pacific Fibre Cement 40.0 274 48 Research & development (10.0) (8.8) (14) General corporate excluding asbestos and ASIC expenses (18.5) (25.8) 28 Depreciation and Amortisation USA and Europe
Slide 44: Capital Expenditure
mal Capital Expenditure USS Millions. HY"11 HY'10 _% Change USA and Europe Fibre Cement 21.8 17.5 25 Asia Pacific Fibre Cement 2.9 3.4 (15) Total 24.8 20.9 19
Slide 45: Net Interest Expense
mag Net Interest Expense USS Millions a2"44 a2 "10 HY '14 HY '10 Gross interest expense (0.8) (0.9) (2.3) (2.0) Capitalised interest - 04 - O14 Interest income 0.2 04 0.3 02 Realised loss on interest rate swaps (1.4) (07) (1.8) (1.1) Net interest expense excluding AICF interest income (2.0) (1.4) (3
Slide 46: Endnotes
Endnotes 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 Management's Analysis of Results, a Media Release and a Financial Report. Definitions Financial Measures - US GAA
Slide 47: Financial Ratios
Financial Ratios Gearing Ratio - Net debt (cash) divided by net debt (cash) plus shareholders' equity. Net interest expense cover - EBIT divided by net interest expense. Net interest paid cover - EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payback -
Slide 48: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures EBIT and EBIT margin excluding asbestos and ASIC expenses - EBIT and EBIT margin excluding asbestos and ASIC expenses are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has
Slide 49: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Net operating profit excluding asbestos, ASIC expenses and tax adjustments - Net operating profit excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningfu
Slide 50: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments - Diluted earnings per share excluding asbestos, ASIC expenses and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be mo
Slide 51: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Effective tax rate excluding asbestos and tax adjustments - Effective tax rate excluding asbestos and tax adjustments is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than effective tax rate. The com
Slide 52: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) Adjusted EBITDA - is not a measure of financial performance under US GAAP and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by US GAAP or as a measure of profitability or liq
Slide 53: Non-US GAAP Financial Measures (continued)
Non-US GAAP Financial Measures (continued) General corporate costs excluding ASIC expenses and domicile change related costs - General corporate costs excluding ASIC expenses and domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be
Slide 54: Q2 FY11 Management Presentation
Q2 FY11 Management Presentation 15 November 2010
James Hardie Industries — Q2 FY2011 Earnings Presentation on 6ix