James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Investor Presentation (September 2009)
57 slides from James Hardie Industries's investor presentation, Sep 11, 2009
Slide 1: Investor Presentation September 2009
Investor Presentation September 2009
Slide 2: Disclaimer
Disclaimer This Presentation contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering
Slide 3: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financ
Slide 4: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 5: James Hardie: a growth focused company
Annual net sales US$1.2b Total assets US$1.9b Operations in North America, Asia Pacific and Europe 2,300 employees Market cap US$2.49b S&P/ASX 100 company NYSE listing Note: Net sales and total assets are at 31 March 2009 James Hardie: a growth focused company
Slide 6: Investment attributes
Growth focused Sustainable competitive advantage Unique proprietary technology Strong financial performance, cash flows and balance sheet1 Track record of outperforming US housing market Focused on fibre cement 1 Excluding asbestos-related items 1 Excluding asbestos-related items Investment attribut
Slide 7: James Hardie pioneered fibre cement technology in the 1980s
James Hardie pioneered the development of fibre cement technology in the 1980s Superior Durability Fire Resistant Termite Proof Fire Resistant Hail Resistant Moisture Resistant Termite Proof First to develop fibre cement
Slide 8: 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 9: Business portfolio
Business portfolio At and for the ended ended 31 March 2009 * Total Identifiable Assets - Excludes General Corporate, Research and Development and Asbestos-related items ** EBIT - Excludes Research and Development EBIT and Asbestos-related items USA and Europe Fibre Cement (Established High Growth/H
Slide 10: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 11: Brief history 1990-2000
1990 - 1995 Entered US in 1990 to manufacture and market roofing shakes (one line, one plant) Shifted target market from roofing to siding Moved to high throughput, low unit cost manufacturing strategy Revenue growth led to investment in new capacity 1995 - 2000 Entry of direct fibre cement competit
Slide 12: Brief history continued 2000-2006
2000 - 2006 A number of cladding competitors exit Business continued to grow strongly in buoyant housing market Product leadership strategy helps revenue outstrip volume growth Business model is proven - continues to deliver good returns in housing downturn New competitive capacity is added USA and
Slide 13: Staying on strategy: 2006-present
2006 - present The business focus turn to: Sustaining earnings in a low demand environment Ensuring output matches demand Building Repair and Remodel into a core business Maintaining product leadership Retaining the operational flex to increase production should a recovery eventuate Staying on strat
Slide 14: Sustainable competitive advantage
Sustainable competitive advantage Unique plant engineering and proprietary process technology and product formulations - significant investment in R&D Superior capital cost efficiency Low cost manufacturer Only national producer of fibre cement in each key geographic market Excellent plant economies
Slide 15: Revenue growth streams
Exterior products Siding Soffit Fascia Trim Interior products 1/4 inch backerboard Hardiebacker 500(r) Total net sales compound annual growth rate of 17% for interior products and 4% for exterior products (FY00 - FY09). USA and Europe Fibre Cement - revenue growth streams
Slide 16: Sales mix: New Construction vs. Repair and Remodel
USA and Europe Fibre Cement - sales mix New Construction vs. Repair and Remodel New Construction R&R Total Sales 35% 65% Exterior Products 39% 61% Interior Products 25% 75% Exterior vs. Interior Products Exteriors Interiors Volume 75% 25% Revenue 80% 20% All market and market share figures are manag
Slide 17: Exterior products - US siding market
Exterior products - US siding market Large growth opportunity Sources: NAHB Builder Practices and Consumer Practices Report - 2008 Siding and Exterior Wall Finish Note - market and share figures reflect siding only; exclude fascia, soffits & trim; data reflects Repair & Remodel and New Construction
Slide 18: Understanding the Repair and Remodel market
Understanding the Repair and Remodel market Repair and Remodel siding market - 5.7 billion square feet (2008 est) Replace SF 48% Add & Alts 7% Repairs 27% Replace MF 16% All market and market share figures are management estimates and cannot be accurately measured MF = Multi Family; SF = Single Fami
Slide 19: Superior product performance
Fibre cement is more durable than wood and engineered wood, and looks and performs better than vinyl Vinyl Fire resistant Hail resistant Resists warping Resists buckling Colour lasts longer Dimensional stability Can be repainted Hail resistant ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Fibre cement USA and Eur
Slide 20: Interior products
Interior products Net sales growing strongly CAGR* 17% (FY00-FY09) Leading position in 1/4" segment technology advantage for floor applications Hardiebacker 500(r) is driving penetration on wall applications High terminal segment share * Compound Annual Growth Rate Hardiebacker FY 1997 657mmsf FY 20
Slide 21: Interior products - continued
Attributes Protection against moisture damage and mould growth (total wet area solution) Strength Highest compressive and flexural strength available Workability Cleaner and less abrasive than glass mesh Low density formulation - lightest cement board on the market Interior products - continued USA
Slide 22: Largest fibre cement producer in North America
Flat Sheet Plants Capacity (mmsf) Plants operating at September 2009 Cleburne, Texas 500 Peru, Illinois 560 Pulaski, Virginia 600 Reno, Nevada 300 Tacoma, Washington 200 Waxahachie, Texas 360 Plants suspended at September 2009 Blandon, Pennsylvania1 200 Fontana, California1 180 Summerville, South Ca
Slide 23: Low cost fibre cement producer
Low cost fibre cement producer CAPITAL COST PER UNIT OF CAPACITY (US$/SF) 0.1 0.15 0.2 0.25 0.3 0.35 0.4 FY91 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY05 FY06 FY07 $US / SF PRODUCTION CAPACITY PER LINE 60 100 150 200 3001 0.1 50.1 100.1 150.1 200.1 250.1 300.1 350.1 1990 1994 1998 2001 2006 MMSF 1
Slide 24: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 25: Asia Pacific Fibre Cement
Five manufacturing plants in Asia Pacific FY09 net sales US$52.6m FY09 EBIT US$6.7m Higher value differentiated products Lower delivered cost Shift to growth model Philippines focus on profitability Asia Pacific Fibre Cement
Slide 26: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 27: Organisational focus: product leadership
Product leadership Continued investment in new product development and commercialisation Value-added, differentiated products Benefits: Grow the fibre cement category Grow revenue Sustain good margins Defend and strengthen our competitive position Organisational focus
Slide 28: Organisational focus - ColorPlus
Product leadership - examples in USA and Europe Fibre Cement: ColorPlus(r) Collection (pre-painted siding and trim): Driving growth against vinyl in Northern Division Launched in Western and Southern Divisions FY07 Organisational focus - ColorPlus(r)
Slide 29: ColorPlus Model
Higher quality products with higher revenue stream Strategy designed to reduce 'on the wall' cost and close gap with vinyl siding Supply of pre-painted exterior products Reduce supply chain costs Installer education Channel increases revenue base and gains incremental volume End-user gets higher qua
Slide 30: Organisational focus - HardieZone System
30 7th Generation versus 2nd Generation generic fibre cement The HardieZone(tm) System represents a logical extension of Hardie technology Organisational focus - HardieZone(tm) System
Slide 31: HardieZone System
31 Our finest siding ever Engineered for Climate(tm) Highest protection from the elements Sustained beauty with less maintenance Higher customer satisfaction Differentiation from generic fibre cement Seven strategically located manufacturing facilities The warranty homebuyers have been asking for Ou
Slide 32: Product leadership - Asia Pacific Fibre Cement
Product leadership - examples Asia Pacific Fibre Cement ScyonTM range of value-added, differentiated products launched 2007 ScyonTM wet area flooring ScyonTM Trim and ScyonTM LineaTM weatherboards ScyonTM Matrix cladding Organisational focus - continued
Slide 33: Changing US product mix
Today Tomorrow HardiePlank ColorPlus Cemplank Next Generation Cemplank HardieZone Hardieplank/ ColorPlus Changing US product mix Product mix will evolve significantly in the medium term to continue to drive revenue and leverage market position Organisational focus - continued
Slide 34: Total Housing Starts - NAHB
34 Total Housing Starts - NAHB NAHB latest forecast of 2009 Housing Starts is 561k (including MF-high) Source: NAHB Executive Level Forecasts - Total US Housing Starts (incl. SF, MF-low and MF-high) May 2009 estimate Jul 2009 estimate
Slide 35: Response to US housing downturn
Focus on primary demand growth and cost management Business re-sets in late 2006/early 2007; in April 2008; and in November 2008: production re-scheduled to balance supply and demand production suspended at Blandon PA, Summerville SC plants and Fontana CA corporate-wide review of activities, project
Slide 36: Top Line Growth
36 USA and Europe Fibre Cement Rolling 12 month average of seasonally adjusted estimate of housing starts by US Census Bureau Top Line Growth '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 Q1FY10 Volume (mmsf) / Starts (000s Units) $0 Revenue (US$M) JH Volume JH Revenue
Slide 37: Primary Growth Performance
37 USA and Europe Fibre Cement Primary Growth Performance Sources: Dodge US addressable starts (SF & MF-low); US Census R&R $ expenditures less CPI Note: • US Census discontinued their R&R $ expenditures report in 2007 • 2008 R&R = avg. published Home Depot & Lowe's same store sales less CPI
Slide 38: Average Net Selling Price
38 Average Net Selling Price US$ per MSF USA and Europe Fibre Cement 380 420 460 500 540 580 620 FY04 FY05 FY06 FY07 FY08 FY09 Q1 FY10 US$625
Slide 39: EBIT and EBIT Margin
39 USA and Europe Fibre Cement 0 20 40 60 80 100 120 140 FY04 Q1 FY05 Q1 FY06 Q1 FY07 Q1 FY08 Q1 FY09 Q1 FY10 EBIT US$M 0 5 10 15 20 25 30 35 EBIT MARGIN % EBIT EBIT/Sales EBIT and EBIT Margin* * Excludes impairment charges of US$45.6 million in Q4 FY08
Slide 40: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 41: Long term financial targets
Actual FY09 Actual FY08 Actual FY07 Actual FY06 Actual FY05 Actual FY04 Revenue Growth (18)% (5)% 4% 23% 23% 25% EBIT Margin* 14% 20% 22% 21% 19% 18% Return on Capital Employed* 17% 25% 28% 32% 27% 23% 1Long term targets exclude asbestos-related items * Excludes asbestos adjustments, SCI and other r
Slide 42: Q1 FY10 - results overview
Q1 FY10 - results overview Operating results continue to reflect weakness in the US housing construction activity and general economic conditions Net operating profit for the quarter primarily affected by unfavourable asbestos adjustments US$ Millions Q1 FY10 Q1 FY09 % Change Net operating (loss) pr
Slide 43: 1st Quarter Key Points
43 1st Quarter Key Points Sales down due to weaker market Sales volumes were lower across all regions ColorPlus(r) again increased as a percentage of our product mix Earnings benefitted from lower costs, particularly for pulp, energy and freight Lower SG&A costs, higher average selling price and low
Slide 44: Outlook
44 Outlook While the US residential construction market appears to be "nearing the bottom", it remains too early to ascertain the timing, rate or extent of any recovery The market is facing continuing challenges, including: excess supply of existing housing stock; restricted access to credit for pot
Slide 45: Key Ratios
45 Key Ratios Q1' FY10 FY09 FY08 EPS (Diluted)1 9.6c 22.3c 38.1c Dividend Paid per share N/A 8.0c 27.0c Return on Shareholders' Funds1 17.8% 11.2% 17.7% Return on Capital Employed2 23.6% 16.7% 24.2% EBIT/ Sales (EBIT margin)2 22.4% 14.2% 19.2% Gearing Ratio1 19.0% 24.0% 21.5% Net Interest Expense Co
Slide 46: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 47: Corporate issues - current status
Current status Asbestos compensation agreement - negotiated 2004 - 2006, resolved early 2007 Australian tax issue - FY 2002-2006, resolved 2008 IRS - 2006 - 2007, resolved 2009 ASIC proceedings - decision on exoneration, penalties and costs delivered August 2009 Future domicile - expect resolution l
Slide 48: Agenda
Operations, strategy and performance USA and Europe Fibre Cement Asia Pacific Fibre Cement Organisational focus Financial history Corporate issues Summary Agenda
Slide 49: Summary
We have a strong, well established, growth focused and high return business We have a sustainable competitive advantage Our model for strong growth is based on: Large market opportunity Superior value proposition Proprietary and/or protected technology Upsides due to current R&D investments Signific
Slide 50: Financial Measures - US GAAP equivalents
50 Financial Measures - US GAAP equivalents EBIT and EBIT Margin - EBIT, as used in this document, is equivalent to the US GAAP measure of operating income. EBIT margin is defined as EBIT as a percentage of net sales. We believe EBIT and EBIT margin to be relevant and useful information as these are
Slide 51: Financial Ratios
51 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 paybac
Slide 52: Non-US GAAP Financial Measures: EBIT and EBIT margin
52 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 h
Slide 53: Non-US GAAP Financial Measures: Net operating profit
53 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 meanin
Slide 54: Non-US GAAP Financial Measures: Diluted EPS
54 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
Slide 55: Non-US GAAP Financial Measures: Effective tax rate
55 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
Slide 56: Non-US GAAP Financial Measures: EBITDA
56 Non-US GAAP Financial Measures (continued) 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 liquidity
Slide 57: Non-US GAAP Financial Measures: General corporate costs
57 Non-US GAAP Financial Measures (continued) General corporate costs excluding domicile change related costs - General corporate costs excluding domicile change related costs is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than general corp
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