James Hardie Industries Plc. · NYSE:JHX
James Hardie Industries — Q1 FY20 Earnings Presentation
49 slides from James Hardie Industries's earnings presentation, Aug 9, 2019
Slide 1: Q1 FY20 Management Presentation
Q1 FY20 MANAGEMENT PRESENTATION 9 August 2019
Slide 2: Cautionary Note on Forward-Looking Statements
James Hardie Q1 FY20 Results CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS 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 Secur
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
James Hardie Q1 FY20 Results CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS (continued) Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue,” “may,” “objective,” “outlook”
Slide 4: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
James Hardie Q1 FY20 Results USE OF NON-GAAP FINANCIAL INFORMATION; AUSTRALIAN EQUIVALENT TERMINOLOGY This Management Presentation includes financial measures that are not considered a measure of financial performance under generally accepted accounting principles in the United States (US GAAP). The
Slide 5: Agenda
James Hardie Q1 FY20 Results AGENDA • Group Operating Review Dr Jack Truong, CEO • Financial Review Matt Marsh, EVP and CFO • Strategy Update Dr Jack Truong, CEO • Questions and Answers Page 5
Slide 6: Group Operating Review – Dr Jack Truong, CEO
• Xxx • Xxx GROUP OPERATING REVIEW – DR JACK TRUONG, CEO
Slide 7: Q1 FY20 Group Results Overview
James Hardie Q1 FY20 Results Q1 FY20 GROUP RESULTS OVERVIEW Q1'20 • North America delivered very good volume 957.2 mmsf growth in a down market Sales Volume 2% • North America EBIT margin at the top end of US$656.8 M our range Net Sales 1% • Europe continued to deliver strong top line US$124.4 M Adj
Slide 8: Q1 FY20 North America Summary
James Hardie Q1 FY20 Results Q1 FY20 NORTH AMERICA SUMMARY Q1'20 • We expect underlying addressable housing market 612.7 mmsf to be slightly positive for full year FY20 Sales Volume 4% • Exteriors volume grew 5%, showing continuous improvement in primary demand growth US$452.3 M Net Sales 4% • Inter
Slide 9: Q1 FY20 Europe Summary
James Hardie Q1 FY20 Results Q1 FY20 EUROPE SUMMARY Q1'20 • Very good revenue growth; up 7% in Euros 210.1 mmsf Sales Volume FLAT • Fiber Cement revenue increased 37% in Euros versus prior corresponding period €85.4 M Net Sales 7% • EBIT Margin Excluding¹ of 10.7%, in line with internal targets and
Slide 10: Q1 FY20 APAC Summary
James Hardie Q1 FY20 Results Q1 FY20 APAC SUMMARY Q1'20 • Solid financial results despite significant softening of Sales Volume 134.4 mmsf Australian housing market -3% • Strong volume growth in the Philippines A$154.4 M Net Sales FLAT • EBIT and EBIT Margin continue to be impacted by A$35.4 M input
Slide 11: FY20 Key Assumptions & Market Outlook
James Hardie Q1 FY20 Results FY20 KEY ASSUMPTIONS & MARKET OUTLOOK North America Europe Asia Pacific Modest growth in the US Slight housing market growth Addressable housing market housing market across addressable market in Australia is contracting US Residential Housing starts Introduction of new
Slide 12: Financial Review – Matt Marsh, EVP and CFO
FINANCIAL REVIEW – MATT MARSH, EVP AND CFO Page 12
Slide 13: Results – 1st Quarter FY20
James Hardie Q1 FY20 Results RESULTS – 1ST QUARTER FY20 Three Months Ended 30 June Net sales increased 1%, US$5.8 million US$ Millions Q1'20 Q1'19 % Change • Exterior growth above market in the North America Fiber Cement segment Sales volume 957.2 938.6 2 • Asia Pacific Fiber Cement segment impacted
Slide 14: North America Fiber Cement Summary
James Hardie Q1 FY20 Results NORTH AMERICA FIBER CEMENT SUMMARY Q1'20 Volume 612.7 mmsf Sales Volume • Exteriors volumes +5% compared to pcp 4% • Interiors volumes -3% compared to pcp US$452.3 M Net Sales Price 4% • Favorably impacted by annual change in strategic US$731 per msf pricing, partially o
Slide 15: North America Fiber Cement Quarterly EBIT and EBIT Margin
James Hardie Q1 FY20 Results NORTH AMERICA FIBER CEMENT Quarterly EBIT and EBIT Margin 120 30 100 25 80 20 EBIT Margin EBIT US$M 60 15 40 10 20 5 0 0 FY15 FY16 FY17 FY18 FY19 FY20 EBIT EBIT/Sales Q1 FY20 EBIT Margin % up 40 bps to 25.1% compared to pcp and at the top end of our target range Page 15
Slide 16: North America Input Costs
James Hardie Q1 FY20 Results NORTH AMERICA INPUT COSTS Quarterly US Input Costs 1,600 10 • The price of NBSK pulp down 1% compared to pcp 1,400 9 • Price down 6% compared to Q4 FY19 8 Cement, Gas, Electric and Freight Prices ($) 1,200 7 • Freight prices down 16% compared to pcp 1,000 6 Pulp Prices (
Slide 17: Asia Pacific Fiber Cement Summary
James Hardie Q1 FY20 Results ASIA PACIFIC FIBER CEMENT SUMMARY Q1'20 134.4 mmsf Volume Sales Volume -3% • Positive PDG in Australia despite continued softening A$154.4 M of the housing market Net Sales FLAT • Strong sales volume growth in the Philippines A$1,018 per msf EBIT Average Price 2% • Impac
Slide 18: Asia Pacific Fiber Cement (Local Currency)
James Hardie Q1 FY20 Results ASIA PACIFIC FIBER CEMENT (LOCAL CURRENCY) Q1'20 Australia Australia • Gained market penetration despite a soft market Volume Net Sales EBIT • EBIT decrease primarily driven by lower net sales Q1'20 New Zealand New Zealand • EBIT impacted by higher input costs and Volume
Slide 19: Europe Building Products Summary
James Hardie Q1 FY20 Results EUROPE BUILDING PRODUCTS SUMMARY Q1'20 210.1 mmsf Net Sales Sales Volume FLAT • Net sales in Euros increased 7% €85.4 M • Fiber cement net sales in Euros increased 37% Net Sales 7% Average Price €315 per msf EBIT Excluding1 in Euros 4% • Higher gross margin US$7.9 M EBIT
Slide 20: Segment EBIT – 1st Quarter FY20
James Hardie Q1 FY20 Results SEGMENT EBIT – 1ST QUARTER FY20 1 Other Businesses Research and Development (10) 0.4 US$ Millions (7.4) US$ Millions 0 (6.2) (6.1) (5) (1) Q1 EBIT Q1 EBIT (1.5) (2) (1.8) 0 FY18 FY19 FY20 FY18 FY19 FY20 Exited Windows business Committed to R&D investment 1 General Corpor
Slide 21: Income Tax
James Hardie Q1 FY20 Results INCOME TAX Three Months Ended 30 June 18.2% adjusted effective tax rate for the quarter • Increase in adjusted income tax expense driven by a US$ Millions Q1'20 Q1'19 change in the geographical mix of earnings, including the Operating profit before taxes 118.6 121.5 acco
Slide 22: Financial Management Framework
James Hardie Q1 FY20 Results FINANCIAL MANAGEMENT FRAMEWORK Strong Financial Management Disciplined Capital Allocation Liquidity and Funding • Strong margins and operating cash flows • Invest in R&D and capacity expansion to • Conservative leveraging of balance sheet support organic growth at a targ
Slide 23: Cash Flows
James Hardie Q1 FY20 Results CASH FLOWS1 Change US$ Millions FY20 FY19 (% ) Higher operating cash flow Net Income 86.5 90.6 (5) • Net cash inflow due to working capital 1 Adjustment for non-cash items 48.0 26.5 81 • Increase in income adjusted for non-cash items 2 Operating working capital 44.1 24.8
Slide 24: Liquidity Profile at 30 June 2019
James Hardie Q1 FY20 Results LIQUIDITY PROFILE AT 30 JUNE 2019 Strong balance sheet Debt Profile • US$96.1 million cash Millions • US$1,210.1 million net debt 3 • US$420.5 million available on revolving credit facility US$2501 Corporate debt structure US$500 US$70 • US$400 million 4.75% senior unsec
Slide 25: Capital Expenditures
James Hardie Q1 FY20 Results CAPITAL EXPENDITURES CAPEX Spend CAPEX spend of US$63.3 million; decreased US$4.5 million 100 compared to pcp 90 80 • North America capacity projects 70 • Continued start-up of Tacoma greenfield expansion US$ Millions 60 50 • Continued construction of our Prattville faci
Slide 26: FY20 Key Assumptions, Market Outlook & Guidance
James Hardie Q1 FY20 Results FY20 KEY ASSUMPTIONS, MARKET OUTLOOK & GUIDANCE North America Europe Asia Pacific Modest growth in the US Slight housing market growth Addressable housing market housing market across addressable market in Australia is contracting US Residential Housing starts Introducti
Slide 27: Key Financial Messages
James Hardie Q1 FY20 Results KEY FINANCIAL MESSAGES • Good and disciplined financial performance in all three business segments • North America Fiber Cement delivered marked improvement in primary demand growth while generating an EBIT margin at the top of our target range • Asia Pacific Fiber Cemen
Slide 28: Strategy Update – Dr Jack Truong, CEO
STRATEGY UPDATE – DR JACK TRUONG, CEO Contents are confidential and subject to disclosure and insider trading considerations
Slide 29: Long Term Value Creation
James Hardie Q1 FY20 Results LONG TERM VALUE CREATION North America • 35/90 with strong returns (20-25% EBIT margin) Europe • €1 billion business with 20+% EBIT margin APAC • Deliver growth above market with strong returns (20-25% EBIT margin) Page 29
Slide 30: Strategic Priorities: FY20 – FY22
James Hardie Q1 FY20 Results STRATEGIC PRIORITIES : FY20 – FY22 North America Europe Asia Pacific 1 Accelerate Exteriors Growth 1 Gain market traction 1 Continue to drive growth • current fiber cement above market • new, for Europe, fiber cement 2 Drive Lean Transformation 2 Continue to drive fiber
Slide 31: Lean Transformation – Global Update
James Hardie Q1 FY20 Results LEAN TRANSFORMATION – GLOBAL UPDATE North America • Hardie Manufacturing Operating System (HMOS) already rolled out to 5 plants • 2 additional plants will be implemented by 30 September 2019 • On-track to deliver US$100 million cost savings Europe • Team visited NA plant
Slide 32: Europe Update
James Hardie Q1 FY20 Results EUROPE UPDATE • Continue to drive sales synergies of Fiber Cement Exteriors with Fiber Gypsum Interiors • Manufacturing improvements New construction luxury development in Hertfordshire, UK utilizing ColorPlus® HardiePlank® on exteriors • Deliver EBIT accretion New const
Slide 33: Australia: Growth Above Market - Update
James Hardie Q1 FY20 Results AUSTRALIA: GROWTH ABOVE MARKET - UPDATE • Market Trends • Labor shortage • Less space / smaller lot sizes • Lightweight construction • Take share from Brick • Continue to deliver sustained A modern mixed material home built using James Hardie’s Scyon® range, Growth Above
Slide 34: Questions
QUESTIONS Contents are confidential and subject to disclosure and insider trading considerations
Slide 35: Appendix
APPENDIX
Slide 36: FY20 Guidance
James Hardie Q1 FY20 Results FY20 GUIDANCE • Management notes the range of analysts’ forecasts for net operating profit excluding asbestos for the year ending 31 March 2020 is between US$328 million and US$360 million, with a mean of US$344 million • Management expects full year Adjusted net operati
Slide 37: North America Fiber Cement Average Net Sales Price
James Hardie Q1 FY20 Results NORTH AMERICA FIBER CEMENT Average Net Sales Price 750 731 718 698 700 US$ per MSF 666 669 665 650 600 FY15 FY16 FY17 FY18 FY19 Q1 FY20 • FY20 strategic price increase effective April 2019 • Overall, satisfied with price positioning Page 37
Slide 38: Translation Impact on Consolidated Results
James Hardie Q1 FY20 Results TRANSLATION IMPACT ON CONSOLIDATED RESULTS Excluding Translation As Reported Translation Impact 2 Impact 1 US$ Millions Q1 FY20 Q1 FY19 % Change Q1 FY20 % Change $ Unfav % Net Sales $ 656.8 $ 651.0 t 1% $ 669.9 t 3% (13.1) u 2% Gross Profit 233.1 221.1 t 5% 237.4 t 7% (4
Slide 39: Asia Pacific Fiber Cement Results AUD vs USD
James Hardie Q1 FY20 Results ASIA PACIFIC FIBER CEMENT RESULTS AUD vs USD Three Months Ended 30 June FY20 Results in Results in Impact of AUD USD FX Averge net sales price per unit +2% -5% -7% (per msf) Net sales FLAT -8% -8% Gross profit -5% -12% -7% EBIT -6% -12% -6% Page 39
Slide 40: Financial Summary
James Hardie Q1 FY20 Results FINANCIAL SUMMARY Three Months Ended 30 June US$ Millions Q1'20 Q1'19 % Change Net Sales North America Fiber Cement $ 452.3 $ 433.8 4 Asia Pacific Fiber Cement 108.0 117.1 (8) Europe Building Products 95.9 95.4 1 Other Businesses 0.6 4.7 (87) Total Net Sales $ 656.8 $ 65
Slide 41: Asbestos Claims Data
James Hardie Q1 FY20 Results ASBESTOS CLAIMS DATA Claims Received • Gross cash outflow in the quarter was 7% below actuarial 157 expectations. 141 125 • Claims received were 11% above actuarial estimates and 26% higher than pcp • Claims reporting for mesothelioma: Q1'20 Q1'20 Q1'19 • 22% higher than
Slide 42: Depreciation and Amortization
James Hardie Q1 FY20 Results DEPRECIATION AND AMORTIZATION US$ Millions Three Months Ended 30 June Q1'20 Q1'19 Depreciation and amortization North America Fiber Cement $ 22.0 18.1 Asia Pacific Fiber Cement 3.0 3.1 Europe Building Products 5.4 4.7 Other Businesses 0.1 0.6 Research and Development 0.2
Slide 43: Non-US GAAP Financial Measures and Terms
James Hardie Q1 FY20 Results NON-US GAAP FINANCIAL MEASURES AND 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
Slide 44: Non-US GAAP Financial Measures
James Hardie Q1 FY20 Results NON-US GAAP FINANCIAL MEASURES 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 C
Slide 45: Non-US GAAP Financial Measures
James Hardie Q1 FY20 Results NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months Ended 30 June Q1'20 Q1'19 EBIT $ 132.5 $ 131.9 Asbestos: Asbestos adjustments (8.5) (25.1) AICF SG&A expenses 0.4 0.3 Adjusted EBIT $ 124.4 $ 107.1 Net sales 6
Slide 46: Non-US GAAP Financial Measures
James Hardie Q1 FY20 Results NON-US GAAP FINANCIAL MEASURES Europe Building Products Segment Adjusted EBIT excluding costs associated with the acquisition US$ Millions Three Months Ended 30 June Q1'20 Q1'19 EBIT $ 7.9 $ (4.6) Inventory fair value adjustment - 7.3 Transaction costs - 7.2 Integration
Slide 47: Non-US GAAP Financial Measures
James Hardie Q1 FY20 Results NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months Ended 30 June Q1'20 Q1'19 Adjusted net operating profit (US$ Millions) $ 90.2 $ 79.9 Weighted average common shares outstanding - 443.3 443.0 Diluted (millions) Adjusted diluted earnings per
Slide 48: Non-US GAAP Financial Measures
James Hardie Q1 FY20 Results NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA excluding Asbestos US$ Millions Three Months Ended 30 June Q1'20 Q1'19 EBIT $ 132.5 $ 131.9 Depreciation and amortization 31.6 28.1 Adjusted EBITDA $ 164.1 $ 160.0 Asbestos: Asbestos adjustments (8.5) (25.1) AICF SG&A expens
Slide 49: Q1 FY20 Management Presentation
Q1 FY20 MANAGEMENT PRESENTATION 9 August 2019
James Hardie Industries — Q1 FY20 Earnings Presentation on 6ix