James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q3 FY2016 Earnings Presentation
39 slides from James Hardie Industries's earnings presentation, Feb 19, 2016
Slide 1: Q3 FY16 Management Presentation
Q3 FY16 MANAGEMENT PRESENTATION 19 February 2016
Slide 2: Disclaimer
DISCLAIMER 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, on Forms 20-F and 6-K, in its annu
Slide 3: Disclaimer (continued)
DISCLAIMER (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 intended to identify forward-looking
Slide 4: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, CFO and Executive VP - Corporate • Questions and Answers In this Management Presentation, James Hardie may present financial measures, sales volume terms, financial ratios, and Non-US GAAP financial measures i
Slide 5: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 6: Group Overview
GROUP OVERVIEW2 Adjusted Net Operating Profit Adjusted Diluted EPS 3rd Qtr Nine Months 3rd Qtr Nine Months US$56.2M 16% US$185.0M 13% US13cents 18% US41cents 11% Adjusted EBIT Net Operating Cash Flow 3rd Qtr Nine Months Nine Months US$82.0M 23% US$267.0M 20% US$200.5M 93% Adjusted EBIT Margin % 3rd
Slide 7: North America and Europe Fiber Cement Summary
NORTH AMERICA AND EUROPE FIBER CEMENT SUMMARY1 9 Months Volume Q3'16 FY16 • Modest R&R and new construction market growth Net Sales US$330.5M US$1,029.4M • Increasing PDG remains the highest priority in the 12% 8% North America business Sales Volume 477.2 mmsf 1,475.0 mmsf EBIT 12% 7% Average Price
Slide 8: North America and Europe Fiber Cement
NORTH AMERICA AND EUROPE FIBER CEMENT YTD EBIT Margin up 340 bps to 25.1% 1 Excludes asset impairment charges of US$14.3 million in 4th quarter FY12, US$5.8 million in 3rd quarter FY13 and US$11.1 million in 4th quarter FY13 PAGE 8
Slide 9: North America and Europe Fiber Cement
NORTH AMERICA AND EUROPE FIBER CEMENT 2+% gross price annual increase, partially offset by the Revenue up 8% YTD on 7% volume growth. strengthening US dollar and product mix Continuing to outpace U.S. housing starts growth 1 Rolling 12 month average of seasonally adjusted estimate of housing starts
Slide 10: Asia Pacific Fiber Cement Summary
ASIA PACIFIC FIBER CEMENT SUMMARY3 9 Months Volume Q3'16 FY16 • Favorable conditions in addressable markets Net Sales A$115.8M A$354.8M 6% 9% • Excluding the Australian Pipes business, volume increased Sales Volume 109.5 mmsf 344.2 mmsf for both the quarter and YTD 6% 1% Price Sales Volume 109.5 mms
Slide 11: Financial Review
FINANCIAL REVIEW Matt Marsh, CFO and Executive VP – Corporate
Slide 12: Results – 3rd Quarter FY16
RESULTS – 3rd QUARTER FY16 Net sales increased Three Months Ended 31 December • Higher volume in both operating segments3 US$ Millions Q3'16 Q3'15 % Change • Higher average net sales prices in local currencies Net sales 413.9 388.4 7 Gross profit 149.5 135.2 11 Gross profit margin increased 130 bps
Slide 13: Results – Nine Months FY16
RESULTS – NINE MONTHS FY16 Net sales increased Nine Months Ended 31 December • Higher volume in both operating segments 9 Months 9 Months US$ Millions % Change • Higher average net sales prices in local currencies FY16 FY15 Net sales 1,292.4 1,245.6 4 Gross profit margin increased 230 bps Gross prof
Slide 14: Changes in AUD vs. USD
CHANGES IN AUD vs. USD 1.00 0.95 0.90 AUD/USD Exchange Rate 0.85 0.80 0.75 0.70 0.65 0.60 31 Dec 13 31 Mar 14 30 Jun 14 30 Sep 14 31 Dec 14 31 Mar 15 30 Jun 15 30 Sep 15 31 Dec 15 As Reported Excluding Translation Impact1 Translation Impact2 9 Months 9 Months 9 Months 9 Months % Change % Change % Ch
Slide 15: US Input Costs
US INPUT COSTS Quarterly US Input Costs 1,200 10 • The price of NBSK pulp decreased by 9 1,000 ~9% compared to pcp 8 Cement, Gas and Electric Prices 7 800 6 • Cement prices continue to rise, up 8% Pulp Prices 600 5 compared to pcp 4 400 3 • Gas prices are down more than 20% 2 compared to pcp 200 1 0
Slide 16: Segment EBIT – 3rd Quarter and Nine Months FY16
SEGMENT EBIT – 3RD QUARTER and NINE MONTHS FY16 North America and Europe Fiber North America and Europe Fiber Cement EBIT summary 300 Cement 257.9 • Quarter and YTD EBIT increased by 24% and 25%, 250 respectively when compared to pcp US$ Millions 206.3 200 179.8 150 Q3 EBIT • Primarily driven by low
Slide 17: Segment EBIT – 3rd Quarter and Nine Months FY16
SEGMENT EBIT – 3RD QUARTER and NINE MONTHS FY16 Research and Development R&D summary (25) (19.7) • On strategy to invest between 2%-3% of sales (20) (18.0) US$ Millions (17.5) (15) • Decrease impacted by strengthening US dollar (10) Q3 EBIT • Fluctuations reflect normal variation and timing in (6.4)
Slide 18: Income Tax
INCOME TAX 26.6% estimated Adjusted effective tax rate Three Months and Nine Months Ended 31 December (ETR) for the year 9 Months 9 Months US$ Millions Q3’16 Q3’15 FY16 FY15 • Adjusted income tax expense and adjusted ETR Operating profit before taxes 47.3 124.7 282.5 315.0 increased due to changes i
Slide 19: Cashflow
CASHFLOW 9 Months 9 Months • Increase in net operating cash flow US$ Millions Change (%) FY16 FY151 Lower annual contribution to AICF FY16 v Net Income 215.6 263.6 1 FY15 Adjustment for non-cash items 36.8 (36.2) Annual AICF contribution (62.8) (113.0) 44 Favorable change in working capital due
Slide 20: Capex
CAPEX CAPEX Spend • YTD FY16 CAPEX spend of US$52.1 million 40 decreased US$188.3 million compared to pcp 35 30 • Maintenance CAPEX continues 25 20 • US capacity projects substantially complete 15 10 • Commissioning of new sheet machines at our Plant City and Cleburne facilities has been deferred, 5
Slide 21: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital Liquidity and Funding Management Allocation • Strong margins and operating • Invest in R&D and capacity • Conservative leveraging of cash flows expansion to support organic balance sheet within 1-2 times growth adjusted EBIT
Slide 22: Liquidity Profile
LIQUIDITY PROFILE Debt Profile • Corporate debt structure US$ Millions US$500 million revolving credit facility, with a December 2020 maturity, replaced 4 $250 bilateral loan facilities US$325 million 8 year senior unsecured $500 notes1,2 $175m bank facilities $175 drawn at Q3 FY16; • Strong bal
Slide 23: FY2016 Guidance
FY2016 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2016 is between US$237 million and US$249 million • Management expects full year Adjusted net operating profit to be between US$240 million and US$250 million
Slide 24: Questions
(@)) James Hardie QUESTIONS
Slide 25: Appendix
(@)) James Hardie APPENDIX
Slide 26: Financial Summary
FINANCIAL SUMMARY Three Months and Nine Months Ended 31 December 9 Months 9 Months US$ Millions Q3'16 Q3'15 % Change % Change FY16 FY15 Net Sales North America and Europe Fiber Cement $ 330.5 $ 294.5 12 $ 1,029.4 $ 951.4 8 Asia Pacific Fiber Cement 83.4 93.9 (11) 263.0 294.2 (11) Total Net Sales $ 4
Slide 27: Key Ratios
KEY RATIOS Nine Months Ended 31 December 9 Months 9 Months 9 Months FY16 FY15 FY14 EPS (Diluted)1 (US Cents) 41c 37c 34c EBIT/ Sales (EBIT margin)2 20.7% 17.9% 17.5% Gearing Ratio1 27.7% 20.3% (13.4)% Net Interest Expense Cover2 14.7x 49.6x 63.0x Net Interest Paid Cover2 20.1x 106.3x 65.1x Net Debt
Slide 28: Asbestos Claims Data
ASBESTOS CLAIMS DATA • Claims received during the quarter and nine months were 4% and 8% below actuarial estimates, Three Months and Nine Months Ended 31 December respectively 9 Months 9 Months Q3'16 Q3'15 Change % Change % FY16 FY15 • Mesothelioma claims reported for the nine months Claims received
Slide 29: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION US$ Millions Three and Nine Months Ended 31 December 9 Months 9 Months Q3'16 Q3'15 FY16 FY15 Depreciation and amortization North America and Europe Fiber Cement $ 17.4 $ 15.6 $ 48.7 $ 45.2 Asia Pacific Fiber Cement 1.9 2.3 6.4 6.8 Total depreciation and amortization $ 1
Slide 30: Definitions and Other Terms
DEFINITIONS AND OTHER 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 Statements Defi
Slide 31: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS 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 Statements
Slide 32: Definitions and Other Terms
DEFINITIONS AND OTHER TERMS EBIT – Earnings before interest and taxes EBIT margin – EBIT margin is defined as EBIT as a percentage of net sales Sales Volumes mmsf – million square feet, where a square foot is defined as a standard square foot of 5/16” thickness msf – thousand square feet, where a sq
Slide 33: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBIT and Adjusted EBIT margin – Adjusted EBIT and Adjusted EBIT margin are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. Management has included these financial measures to pro
Slide 34: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted net operating profit – Adjusted net operating profit is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than net operating profit. Management has included this financial measure to provide investors with
Slide 35: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share – Adjusted diluted earnings per share is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than diluted earnings per share. Management has included this financial measure to provi
Slide 36: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted income tax expense and Adjusted effective tax rate – Adjusted income tax expenses and Adjusted effective tax rate is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than income tax expense and effective t
Slide 37: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES 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 liquidity. Not
Slide 38: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted selling, general and administrative expenses – Adjusted selling, general and administrative expenses (“Adjusted SG&A”) is not a measure of financial performance under US GAAP and should not be considered to be more meaningful than selling, general and administ
Slide 39: Q3 FY16 Management Presentation
Q3 FY16 MANAGEMENT PRESENTATION 19 February 2016
James Hardie Industries — Q3 FY2016 Earnings Presentation on 6ix