James Hardie Industries plc. · NYSE:JHX
James Hardie Industries — Q4 FY2017 Earnings Presentation
45 slides from James Hardie Industries's earnings presentation, May 18, 2017
Slide 1: Q4 FY17 Management Presentation
Q4 FY17 MANAGEMENT PRESENTATION 18 May 2017
Slide 2: Cautionary Note on Forward-Looking Statements
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 Securities and Exchange Commission,
Slide 3: Cautionary Note on Forward-Looking Statements (continued)
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” and similar expressions are i
Slide 4: Note to the Reader
NOTE TO THE READER As of 30 June 2016, the Company changed its reportable operating segments. Previously, the Company reported on three operating segments: (i) North America and Europe Fiber Cement, (ii) Asia Pacific Fiber Cement, and (iii) Research and Development. As of 30 June 2016, the Company b
Slide 5: Use of Non-GAAP Financial Information; Australian Equivalent Terminology
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). These financial measures are des
Slide 6: Agenda
AGENDA • Overview and Operating Review – Louis Gries, CEO • Financial Review – Matt Marsh, EVP and CFO • Questions and Answers PAGE 6
Slide 7: Overview and Operating Review
OVERVIEW AND OPERATING REVIEW Louis Gries, CEO
Slide 8: Group Overview
GROUP OVERVIEW Adjusted Net Operating Profit1 Adjusted Diluted EPS1 4th Qtr Full Year 4th Qtr Full Year US$54.6M 6% US$248.6M 2% US12 cents 8% US56 cents 4% Adjusted EBIT 2 Net Operating Cash Flow 4th Qtr Full Year Full Year US$77.1M 8% US$354.3M 1% US$292.1M 12% Adjusted EBIT Margin % 2 4th Qtr Ful
Slide 9: North America Fiber Cement Summary
NORTH AMERICA FIBER CEMENT SUMMARY Q4'17 Full Year Volume Net Sales US$387.7M US$1,493.4M • Steady growth in R&R and new construction markets 12% 12% • Market penetration was strong Sales Volume 578.6 mmsf 2,215.4 mmsf 12% 13% EBIT Average Price US$662 per msf US$665 per msf • EBIT for the year decr
Slide 10: North America Fiber Cement: Average Net Sales Price and Top Line Growth
NORTH AMERICA FIBER CEMENT Average Net Sales Price 710 Top Line Growth1 3,000 $1,600 666 669 2,800 $1,500 665 JH Volume (mmsf), Starts (000s Units) 670 2,600 $1,400 2,400 $1,300 641 2,200 $1,200 638 $1,100 US$ per MSF Revenue (US$M) 630 2,000 625 1,800 $1,000 630 616 $900 1,600 $800 1,400 $700 1,200
Slide 11: North America Machine Performance & Capacity
North America Machine Performance & Capacity Machine Performance Current Capacity vs. Index 100% 3.7 3.4 Billion Standard Feet 0.3 0.8 3.4 2.6 80% Nameplate Capacity Current Capacity Active Network Idle Capacity • FY16 step-change improvement in performance • Throughput at ~75% of nameplate capacity
Slide 12: North America Manufacturing Capacity
North America Manufacturing Capacity Capacity Since Housing Downturn 0.7 3.4 0.2 0.1 2.4 • Fontana 2 • Fontana 1 • Waxahachie 1 • Plant City 4 • Cleburne 3 FY10 FY13 FY14 FY17 FY17 Nameplate Wax Restart Fontana Restart Start Ups Nameplate Future capacity additions: • FY18 brownfield additions: Summe
Slide 13: North America Fiber Cement EBIT Margin
NORTH AMERICA FIBER CEMENT Quarterly EBIT and EBIT Margin1 100 30 90 25 80 70 20 EBIT Margin 60 EBIT US$M 50 15 40 10 30 20 5 10 0 0 FY12 FY13 FY14 FY15 FY16 FY17 EBIT Quarterly EBIT/Sales Full year EBIT Margin % in target range, but down 340 bps to 23.0% compared to pcp 1 Excludes asset impairment
Slide 14: International Fiber Cement Summary
INTERNATIONAL FIBER CEMENT SUMMARY Q4'17 Full Year Volume Net Sales US$102.8M US$411.8M • Full year volume increased 3%, excluding Pipes business 18% 9% Volume growth in Australia, New Zealand and Europe Sales Volume 125.9 mmsf 487.2 mmsf Volume declined in Philippines 12% 1% Sales Volume 125.9
Slide 15: International Fiber Cement (USD)
INTERNATIONAL FIBER CEMENT (USD) Australia • Solid EBIT growth for quarter and full year • Non-recurring start-up costs at Carole Park in FY16 New Zealand • Higher average net sales price and volume for quarter and full year Philippines • Full year volume, sales and EBIT lower • Entrance of competit
Slide 16: Financial Review
FINANCIAL REVIEW Matt Marsh, EVP and CFO
Slide 17: Results – 4th Quarter FY17
RESULTS – 4th QUARTER FY17 Net sales increased 13% Three Months Ended 31 March • Higher volumes in North America Fiber Cement and US$ Millions Q4'17 Q4'16 % Change International Fiber Cement segments • Higher average net sales price in International Fiber Net sales 494.3 435.8 13 Cement segment Gros
Slide 18: Results – Full Year 2017
RESULTS – FULL YEAR 2017 Net sales increased 11% Full Year Ended 31 March • Higher volumes in North America Fiber Cement and International Fiber Cement segments US$ Millions FY17 FY16 % Change • Higher average net sales price in International Fiber Net sales 1,921.6 1,728.2 11 Cement segment Gross p
Slide 19: Changes in AUD vs. USD
CHANGES IN AUD vs. USD 1.00 AUD/USD Exchange Rate 0.80 0.60 31 Mar 15 30 Jun 15 30 Sep 15 31 Dec 15 31 Mar 16 30 Jun 16 30 Sep 16 31 Dec 16 31 Mar 17 Excluding Translation As Reported 1 Impact 12 Months 12 Months 12 Months US$ Millions % Change % Change FY17 FY16 FY17 Net Sales $ 1,921.6 $ 1,728.2
Slide 20: North America Input Costs
NORTH AMERICA INPUT COSTS Quarterly US Input Costs 1,200 10 • The price of NBSK pulp increased 9 9% compared to pcp1 1,000 Cement, Gas, Electric and Freight Prices 8 7 • Cement prices continue to rise, up 800 6 4% compared to pcp1 Pulp Prices 600 5 4 • Gas prices are up 21% compared to 400 3 pcp1 2
Slide 21: Segment EBIT – 4th Quarter and Full Year FY17
SEGMENT EBIT – 4th QUARTER and FULL YEAR FY17 North America Fiber Cement North America Fiber Cement EBIT 400 352.2 343.9 • Quarter and full year EBIT decreased 11% and 2%, 350 290.0 300 respectively, compared to pcp US$ Millions 250 200 Q4 • Driven by unfavorable plant performance, increased start-
Slide 22: Segment EBIT – Other Businesses, R&D, General Corporate
SEGMENT EBIT – 4th QUARTER and FULL YEAR FY17 Other Businesses (10) Other Businesses (8.6) (8) • Quarter and full year EBIT loss improved by 17% US$ Millions (6.7) (6) (4.5) and 22%, respectively, compared to pcp (4) Q4 (2.4) (2.0) (2) Full Year (1.3) 0 FY15 FY16 FY17 R&D Research and Development (3
Slide 23: Income Tax
INCOME TAX Three Months and Full Year Ended 31 March 24.5% adjusted effective tax rate for the year US$ Millions Q4’17 Q4’16 FY17 FY16 • Adjusted income tax expense for the quarter and Operating profit before taxes 71.1 48.0 367.0 330.5 full year decreased primarily due to lower adjusted 1 Asbestos
Slide 24: Cashflow
CASHFLOW US$ Millions FY17 FY16 Change (%) Increase in net operating cash flow Net Income 276.5 244.4 13 Increase in net income adjusted for non-cash items 1 Adjustment for non-cash items 90.1 98.9 (9) Favorable changes in working capital Annual AICF contribution (91.1) (62.8) (45) Partially o
Slide 25: Capital Expenditures
CAPITAL EXPENDITURES CAPEX Spend • Full year CAPEX of US$101.9 million up by 39% 50 compared to pcp 45 40 • North America capacity projects: 35 Continued to start-up both sheet machines at Fontana facility US$ Millions 30 25 Commissioned 3rd sheet machine at Plant City facility; began to recommi
Slide 26: Financial Management Supporting Growth
FINANCIAL MANAGEMENT SUPPORTING GROWTH Strong Financial Disciplined Capital Liquidity and Funding Management Allocation • Invest in R&D and capacity • Conservative leveraging of • Strong margins and operating balance sheet within 1-2 times cash flows expansion to support organic growth adjusted EBIT
Slide 27: Liquidity Profile and Debt Profile
LIQUIDITY PROFILE Strong balance sheet Debt Profile US$ Millions US$78.9 million cash US$485.6 million net debt3 at 31 March 2017 1 $250 65% liquidity on bank debt at 31 March 2017 $500 Corporate debt structure US$175m bank facilities $175 drawn at Q4 FY17; US$500 million unsecured revolving
Slide 28: Asbestos Compensation
ASBESTOS COMPENSATION KEY POINTS • Updated actuarial report completed as at 31 March 2017 • Undiscounted and uninflated central estimate decreased to A$1,386 million from A$1,434 million • Decreased A$164 million NPV of estimate to A$1,740 million, from A$1,904 million at 31 March 2016, reflecting:
Slide 29: Asbestos Claims Data
ASBESTOS CLAIMS DATA Claims Received • Quarter claims received increased by 6% and full year 625 claims received decreased by 3% compared to pcp 557 577 • Quarter and full year claims received were 17% and 11%, below actuarial estimates, respectively 129 156 122 • Mesothelioma claims reported during
Slide 30: FY2018 Key Planning Assumptions
FY2018 KEY PLANNING ASSUMPTIONS • The modest market growth and more prolonged recovery of the US housing market to continue into FY2018. The single family new construction market and repair and remodel market are expected to grow similar to the year-on- year growth experienced in fiscal year 2017 •
Slide 31: Summary
SUMMARY Adjusted Net Operating Profit1 Adjusted Diluted EPS1 4th Qtr Full Year 4th Qtr Full Year US$54.6M 6% US$248.6M 2% US12 cents 8% US56 cents 4% Adjusted EBIT 2 Net Operating Cash Flow 4th Qtr Full Year Full Year US$77.1M 8% US$354.3M 1% US$292.1M 12% • The financial performance noted above lar
Slide 32: Questions
(@) vames Hardie QUESTIONS
Slide 33: Appendix
(@) vames Hardie APPENDIX
Slide 34: Financial Summary
FINANCIAL SUMMARY Three Months and Full Year Ended 31 March US$ Millions Q4'17 Q4'16 % Change FY17 FY16 % Change Net Sales North America Fiber Cement $ 387.7 $ 345.8 12 $ 1,493.4 $ 1,335.0 12 International Fiber Cement 102.8 86.9 18 411.8 379.4 9 Other Businesses 3.8 3.1 23 16.4 13.8 19 Total Net Sa
Slide 35: Net Post-Tax Unfunded Asbestos Liability
NET POST-TAX UNFUNDED ASBESTOS LIABILITY A$ millions (except where stated) FY17 FY16 Central Estimate - Undiscounted and Uninflated $ 1,385.7 $ 1,433.9 Provision for claims handling costs of AICF 29.4 32.2 Cross claims and other 18.8 18.2 Net (assets)/liabilities of AICF (71.9) 45.5 Effect of tax (4
Slide 36: Asbestos Cash Movements for Full Year Ended March
ASBESTOS CASH MOVEMENTS FOR FULL YEAR ENDED 31 MARCH A$ millions AICF cash and investments - 31 March 2016 $ 22.2 Contributions to AFFA by James Hardie 120.7 Insurance recoveries 122.3 Loan drawdowns 101.6 Loan repayments (99.4) Interest expense, net (1.4) Claims paid (120.5) Operating costs (3.7) O
Slide 37: Updated Actuarial Estimate
UPDATED ACTUARIAL ESTIMATE 6,000 5,000 4,000 3,586 3,604 3,169 A$ million 3,131 3,079 3,027 3,124 2,811 2,906 2,805 2,661 2,743 3,000 2,525 2,513 2,427 2,200 2,000 2,143 1,782 1,870 1,904 1,685 1,694 1,740 1,536 1,568 1,517 1,555 1,537 1,478 1,580 1,000 1,355 1,426 0 30 Jun 31 Mar 30 June 31 Mar 30
Slide 38: Depreciation and Amortization
DEPRECIATION AND AMORTIZATION US$ Millions Three Months and Full Year Ended 31 March Q4'17 Q4'16 FY17 FY16 Depreciation and amortization North America Fiber Cement $ 16.3 $ 16.4 $ 64.3 $ 61.8 International Fiber Cement 2.9 4.3 11.8 10.7 Other Businesses 0.5 0.5 2.2 2.0 Research and Development 0.3 0
Slide 39: 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 40: Non-US GAAP Financial Measures
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 Consolidated Financial Stateme
Slide 41: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES 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
Slide 42: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Financial Measures – US GAAP equivalents Adjusted EBIT US$ Millions Three Months and Full Year Ended 31 March Q4'17 Q4'16 FY17 FY16 EBIT $ 78.2 $ 56.3 $ 393.2 $ 354.0 Asbestos: Asbestos adjustments (1.4) 27.0 (40.4) (5.5) AICF SG&A expenses 0.3 0.4 1.5 1.7 New Zealand
Slide 43: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted diluted earnings per share Three Months and Full Year Ended 31 March Q4'17 Q4'16 FY17 FY16 Adjusted net operating profit (US$ Millions) $ 54.6 $ 57.9 $ 248.6 $ 242.9 Weighted average common shares outstanding - 441.4 447.1 443.9 447.2 Diluted (millions) Adjust
Slide 44: Non-US GAAP Financial Measures
NON-US GAAP FINANCIAL MEASURES Adjusted EBITDA US$ Millions Three Months and Full Year Ended 31 March Q4'17 Q4'16 FY17 FY16 EBIT $ 78.2 $ 56.3 $ 393.2 $ 354.0 Depreciation and amortization 20.7 24.7 83.2 79.8 Adjusted EBITDA $ 98.9 $ 81.0 $ 476.4 $ 433.8 Adjusted selling, general and administrative
Slide 45: Q4 FY17 Management Presentation
Q4 FY17 MANAGEMENT PRESENTATION 18 May 2017
James Hardie Industries — Q4 FY2017 Earnings Presentation on 6ix