James Hardie Industries (JHX)

Jack Truong CEO
Jason Miele CFO
Peter Steyn Macquarie
Simon Thackray Jefferies
Daniel Kang CLSA
Lee Power UBS
Keith Chau MST Marquee
Sam Seow Citi
Paul Quinn RBC
Peter Wilson Credit Suisse
Andrew Scott Morgan Stanley
Call transcript
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Thank you for standing by, and welcome to the James Hardie Industries JHX Q2 FY '22 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Dr. Jack Truong, Chief Executive Officer. Please go ahead.

Jack Truong

Good morning, and good evening, everyone. us second joining XXXX fiscal for call. earnings you on quarter our year Thank the quarter our tenth delivering now consistent is This consecutive global our financial returns on strategy. with execution strong of on of results growth and of market based the strong company our update on results also our begin Miele, CFO, today's update will providing our for which and strategy, on cover a by will global guidance. an includes financial the year Jason provide quarter I brief our call our full sustainability; then After that, we'll open up for questions.

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day our we Turning initiative, help discuss the integral report. our to is strategy, to how but rather Sustainability are around first part now and of Earlier to sustainability every our ESG XX separate really woven is we company not delivered operate distinctive and Page into this business year, world. sustainability. an a

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Jason Miele

you, results, start above-market EBIT and EBIT Good and global including X I with sales quarter Thank simultaneously. global financial the good on is net delivered this double-digit delivered quarter, adjusted XX the straight strong on everyone. the sales, growth returns records fifth global All on and marks net evening, This results. all double-digit Slide is strong growth. And will of consistent with fourth now this our have for now Also, are strategy, morning, our net executing we tenth income. X with global regions the quarter Jack. regions growth record and quarterly based our results strategy. execution adjusted straight consecutive

strategy: million initiatives executing strong the foremost, good and manufacturing, regions marketing strategic commercializing innovations. This an to with in in initiatives, led teams the result record global on built as our push globally strong our operating to XXX.X our of underpinned of all continued homeowner newer in mix. net growth XXXX, First regions execution XX% X global driving the a product sales and lean X top of year customers. was in quarter. have pull directly has the execution successfully momentum This high-value plus foundational USD And and the to a supply price/mix line strategic by second excellent X% chain integrated fiscal all momentum increasing

increasing expand continue and maintain in to with deflationary our In To we this environment, quarter. XX% invest XX operating million, points USD EBIT and adjusted our USD current to delivered increased global XXX.X our income marketing, were XX%. strong while innovation XX.X%. capacity in we record expansion significant for investment Global volume in momentum, initiatives, net margin and XX% addition, all the X by significantly regions global growth in strategic with global basis highs able million to EBITDA to growth to represent adjusted both volumes increased we all-time XXX.X

with supply of driving plus continued through exceptional penetration mix execution Page top our of execution price/mix America Through customers. able outcome. increased USD to The growth our into quarter. and in of line XXX.X double-digit In with growth integration high-value continues level. deliver XX%, results the customers, to plus delivered volume growth record more excellent of exceptional manufacturing outstanding growth XXX.X delivered Adjusted team team continued team a record foundational The line the bottom EBIT XX% X%. North We net American will strategies, in outstanding detail, review main step each EBIT delivered an million of million. now we're consistent a America, The net to another translate through was sales North product North region sales chain USD margin change and strong XX. with starting on our our price an

high-value Europe delivered of the net net quarter straight discuss sales delivered Fiber XX% sales outstanding to well price basis to team cement growth. of quarter, as results EBIT X% and XX inflationary strong high the million In million. contributed of exceptional margin, product net XXX in quarter, strong to through XX% environment by The resulted Page EBIT price/mix. quarter which double-digit execution XX.X%. the improvements increased offset adjusted second than growth to as more XX% penetration a mix the expanding team's in to quarter XX.X now resultsIn fifth combination X the and points strategy. lean the increased Europe, sales straight of XXX.X was adjusted Europe Turning sales to an growth a A continued EUR a EUR improved volumes second and mix, net increased in

discuss now Let's Asia to Page XX move to Pacific.

in XX.X to XX% growth execution offset as on delivered to in in continue quarter manufacturing continued X% delivered Zealand. execute bottom-line resulting compared similar top mix focus the the a AUD team price of XXX.X results, adjusted The high-value to ANZ of adjusted high-value regions driving Asia XX% mix at and in global to the EBIT high quarter. see regions environment, strategy Australia outstanding The robust of X execution on strong second were inflationary The Asia story product You'll net AUD helped business in leading margin growth growth other into to an New million XX.X%. sales translated second line EBIT plus plus product million to effectively. lean penetration, Pacific and the results in all of X the Pacific

These cash XXX.X slide, the XX% step million, give XX to to further of translate flow continue capital will cash you the flow XX, Moving USD expenditures. In results expenditures few discuss our the we operational to side million. discuss operating Page up strong totaled and second a quarter, cash change now I'll capital right-hand trailing the expenditures. past slide. operating in in for of to USD flows the Shifting capital a cash on months to summary XXX.X we'll discussed the next Operating flow. and was slides

successfully Focusing first and on on our at Prattville, of restart March Alabama facility restart facility is Carolina plan track our the continues shorter still in up and Production to South XXXX. Summerville, term. to ramp our

now we include ahead, Prattville, Alabama a capacity further In expansion. machines. period our embarking on are will to America, facility shot of we Looking more X transformational North expand

Prattville year at expansion this in production expect saleable calendar We to provide late XXXX.

locally the land States land In capacity growth to we purchase In our the of for products facility this fiber for and construction and greenfield cement expand market gypsum that a in growth. us our to we And high-value fiber high-value Victoria. drive Adding plan addition, on to Europe, positions cement lastly, continue products to capacity site and European gains on fiber and fiber right expect organic in a Spain drive continued will capacity to Europe, purchase the focus fiber production will we and plan Australia, to United greenfield time innovation. we the of right begin focus enable Orejo, to capacity of gypsum the business Similar in States, in the greenfield to strong add greenfield share innovation. United market. cement will produce in we at

to let's allocation. Now discuss XX Page capital move to

Our resulted step in Hardie operating in transformation James change has new a cash flow. to a

over the return the funds our us have shareholders. significantly than to X billion XX future and in contribute ICI growth have On can capacity you debt the past reduce invest to through cash allowed we left, expansion, These to generated months. more capital USD see of

we are which XXX that USD of per see can you pleased equates capital unchanged. first to USD half right, share, approximately dividend And to million. a the allocation On X.XX our priorities today, announce remain

December a record date dividend XX, date November XX. half first of of payment will and have The

Page to to move Let's injury the funds. compensation the discuss funding XX of asbestos

year annual side to growth the can contribution the now discussed our you average million. now contributions slide, on from linked We change almost in step can our AUD the see to AICF, directly of in XXX The the of XXXX, has On inception cash AUD 'XX fiscal which flow X.X year AICF was is Slide to years our in to in XX. XXXX AICF fiscal Hardie the left-hand operating see contributed XXX that the You we James And to AUD year tripled over has million. fiscal the AICG. billion to X

and right-hand it accounts. Moving of impact page, James increase see had the contribution to the side cash can Hardie the you on AICF's the in of investment

Over October the March than cash XX, XXX XX, few AUD XXXX. million years, on to from more AICF and XXXX, tripled has XX AUD on million investments past

and We in investment step robust sheet pleased balance balance. cash operating our for has are specifically change that AICF, cash led a stronger for flow to

to discuss turn XX to let's Page guidance. Now

net X Our regions, raised full points of for with greater USD momentum USD guidance, we XXX The year-on-year execution range income. adjusted a market XX% XX% penetration for high-value net America North income the North improvement in guidance figure America, the gives to million. and confidence prior share range. first, in significant XXX growth provide The X year continued the all us was raising product than to range adjusted combined We a of USD lean our fiscal million. guidance mix million income our net comparable in year Specific in represents to net XX% sales guidance segment, adjusted we continue XXXX. gains revised expect XXX to

plus growth X% and of We plus between expect price/mix X%.

initiatives investing experience in in and in we first our significantly year significant we inflation May, to fiscal 'XX. As strategic are expect growth guided

please for Hardie high strategy XX to a at highlights year. continues some to financial our level. the Page execute Finally, team the James turn half for Globally,

and driven was mission increased delivers adjusted of growth in product sales EBIT strong driving is by in growth market a to company the net increased high-value first global 'XX, In XX%. organic consistently. net penetration. above high-performing significant and global the fiscal sales execution Our global with returns strong XX% EBIT be year that This primarily half

directly in invest to the continue significant to we innovation and commitment homeowner, investment expansion X includes in capacity Importantly, marketing to regions. This investment significant in in all growth.

in continue it's our expand growth by As strong period, our execution EBITDA invest margin we global that to to important XX us adjusted to future basis our a of strategy inflationary during note points. the highly enabled

continue shareholders USD capital with we an raised per half our of of year million. adjusted USD to lastly, income We today XXX and to current USD to dividend. And announcement for share fiscal the million return net range a X.XX the first guidance our XXX

We have it the now commence I Q&A to to concluded today's our prepared operator over the remarks. will of hand portion meeting.


Macquarie. The [Operator first comes question Steyn Peter from Instructions] from

Peter Steyn

new products faring product to bit if a of the the more of little 'XX? are for FY wanted against us a of Just from a a targets view and your contribution a how sense get little on color how LTI sales -- tracking mix point effects and from you could you're give

Jack Truong

the home that we on then that the just a as the products all shift to a and new get as approach good of typical sure lot as and and question. channel let new a the wall just now, market right is trickle But #X supposed about in Peter. the that out. or created mentioned. to It's more launch products homeowners it the -- to really the a pull-through priority, driven, is making and that to Yes, LTI well We're you the our tracking innovations our about targets

mass, with approach the momentum homeowners -- continue that just growth demand of increase a lift that to pull, as will you more between difference and mix of the creation time the as price more products big in with value and And to we our about lift. see saw create continue and on, that price high a then part So with the your drive to the goes more critical relative to is until demand a to product our the we effect it's the build showed. that first more that is about that that's high-value the that and we your when through gets versus homeowners QX mix really really question, execute you QX mix be driven and

Jason Miele

just Textured others my the coming as mind, a accelerate contribution will clarify the then lot it is course not in channel can I due So more heck Plank a at this drawing point, definitively. Panel starts VL but that in among of drawing that that interpretation from there starts customer the of and there’s

early to from this same at Yes. plant point playing seeing the hardie we’re what that very the of is stages the still SPXX that, out. end plank shift tail largely the So in of but

really in – the from price right see prime from Cemplank the it’s also to prime So mix driven what from color. is shift really and more the our to you and now shift about Cemplank

Peter Steyn

makes Okay. question And Perfect. Jason. for then just a That sense.

on cash up was mentioned of CARES, excluding flows, effect of the faster. quite X% growing substantially Just flow in the your EBIT, context you cash obviously tax that operating

at balance sheet, account movements in the would for Looking there’s appreciable that. capital no working that

that to a effective and this was just in a improvement trying quarter op from little bit I more curious X% get on cash So delivered what color cash.

A –Jason Miele

rolling step up is shifted you change we’ve exclude it X%. And basis. out, level the as a Yes. XX-month to CARES laid when on Act, we’ve a certainly Peter,

happy with As some very minor flow quarter, we’re but perspective. differences, we’re at with cash from any timing there’s a where

We expect going continued forward. improvement


question Simon from from comes next Jefferies. Thackray The

Simon Thackray

good X.XX%, any -- sales, I particularly sort of sort the observation of few questions, the the capacity supply of just which I'm gone. in we of I chain just quarter constraints, curious talk about was in was light notwithstanding European if just growth sequential constraints margin the Can may. bottlenecks, only performance. in of kind

capacity the but any want better, question And North beg might to for the Europe, some to APAC as be growth where America whether factors? better there and we done could track exist capacity constraints I you end of results, constraint in the been contrast constrained to now through So have year? you have could or if just understand regions are where

Jack Truong

Simon. Yes.

more is combination we a we to high-value way things are Just really volume a Simon, of just -- that is the we what driving market right the at driving the highlight couple look products. we how now, tour of strategy of show of

So selling it's about volume. just not volume selling for

really -- we of since of very further business of demand about X model really our we that going is to integration is about maximizing supply It's So visibility our with how big a so strategy really then distinction produce a that's produce ship that to and out can you have the forward. we lot that customers chain our can the our so store. --

really about sales on so we've criteria, our strategic driving it's X we been of based high-value So those the on that's business how net we so based growth -- products. --

plan capacity this flow why see us to and as a free we business. integrated for allow to do have So have our be European is we'll serve very good much with Europe, profiles you And will for the continue Europe, better customers better lot growth out in a our a more the to that we demand market even better.

Simon Thackray

modest quarter Europe under X.XX% that in strategic just whilst those Jack, quarter saying lift, was to that you using that that me? accelerate. that, the sequentially, that you're to Is so pretty second sales expect is I that suggesting understand what initiatives So should -- first would growth net the

Jack Truong

growth. should what of sales see as we just in is for volume that growth the so sake acceleration And our of the opposed to net

at and look that X, see So Europe of if slide Panel in I is a in backer. product there there [indiscernible] versus versus on and in in was brand difference you think the a the big today portfolio you Hardie the pricing something Slide that blank

well America Europe of shipping in opposed upsell as them in to value Zealand we in value and creating the product as in really right Philippines homeowners the units. of understanding So us and for is it's the needs in Australia provide the and North about more the New homeowners and as with Europe

Simon Thackray

sense. if continuing your from R&R more shift a That to makes R&R? new you of Jack, characterize Okay. now, percentage And housing, R&R, that we're sales would towards you say coming versus see

Jack Truong


our world, I it's semi growing fast. and R&R more think right It's that is similar. around business quite the now, XX-plus pretty they're percent like

Simon Thackray

static better May? because function Or just of then inflation, change but terms of the the volume this assumptions? but the COGS inflation first COGS since And business for guidance. May Is the great. is in quarter of That's of in it COGS it's, cost increase from a higher on Jason, it's terms the expectations a Okay. it's inflation the noting update,

Jack Truong

Simon. both, of bit little A

comfortable As that elevated closely, about range and we're the XXX with pulp include we've remains we USD million provided our watching talked USD to would markets freight. last well. We're number, but as globally, XXX of does million as assumptions volume

Simon Thackray

great, And the Jason. on update That's Page it, then X. while I've on got just

the the forward a thinking here? guidance, will run about spend with look the delivering sales that spend, as marketing terms is percentage marketing the forward? for spend in terms SG&A going Or rate? advertising or now of stepped which at be we in and and it of should And in we advertising the terms marketing steady are of increase from those dollar as obviously growth up business, to per initiatives Just

Jason Miele

Simon. Yes,

So to that continue marketing initiatives drive we'll in line invest growth. top

And year. will we're year be we run we're did outcomes next ensure continue expect to monitoring investing to But forward. it So we that's more this obviously, to getting expect. than we going the how we'll

we'll about then we we or percentage that should of get to dollars whole but be growth. that, deeper potentially into of drive thinking investing of about all guidance in As think it's provide we a future sales, do

Jack Truong

more marketing need. in to way to as demand homeowners we about create worry the as high-value that the that of the products very this Simon, homeowners is the us to think our for the invest really

into of growth segment. remodel to in expansion expand you and because So we expect growth gross into as see when business the margin in more of high repair our more terms of and should

of be go So then the should percent investment within absolute market term up, -- than to correlate expect more will to the but sales. we'll you dollar that

Simon Thackray

Is Just Yes. I that expansion. Victorian That the quickly just And Zealand so Zealand? greenfields. feed makes designed understand sense, greenfields to Jack. on New New the then

Jack Truong

as we sourced material build we than our to at you ship big growth have XXX As plants South a within remarks where And for therefore, very that an more in way our ESG And you for products us to raw market big Victoria in important it’s Wales. able a we probably long Simon, the facility strategically in opportunity of opening of the that’s plant miles my we for to know, operate area then be have serve a heard our New that that to least well then see plant And to That’s that in Gold X/X to Coast. of XXX XX% we that our so Park us. plant. we miles around the from our term. is within a such strategy Carole one of it a really –

consistent VL mention is with the and incentive. that why that strategy, are a So Victoria and is we this looking growth Plank in to to it not big


Lisa [indiscernible] question from JPMorgan. comes from The next

Unidentified Analyst

to be online driven years, X.X be by drag a there the in and well? planning when had Prattville. on over I Fiber commissioning a expect as America how question of in margin from just gross at start-up the of line done terms a the that guess you costs from as years the X to point Prattville the input I will Cement. drag just guess, context in margin you’re gross of Can should continue well next will give future bring idea be I was North cost we to I the And much the and that an also, percentage capacity us also exactly?

Jack Truong

prior not think a costs of for lot Yes, you about Lisa, start-up costs when period a competent start-up with period. in the

transformational drag forward. expect continue our P&L forward costs be it’s to this a expansion, So year-on-year we capacity start-up part you going why consistently can as that’s of with

comping you’re on period, into view the wouldn’t when as a period versus investment it future So drag growth. I

Unidentified Analyst


quarter? And so that from what was for the the contribution

Jason Miele

Seen X and X in as well. Brazil

will that we be And compared your walk. but to that margin We was [indiscernible] start-up break we it with don’t freight – have cost in one earlier continue don’t you think specifically, smaller pulp and then ramp-up gross to percentage in costs I out So increases. costs rate would question as expand. we table give

Unidentified Analyst

the on Okay. seen where the given what what you the uptake, on you’re taking then Sure. up just Northeast? and can second share And just – ColorPlus from over you’re quarter specifically, in seeing market of you’ve the more comment course

Jack Truong


and homeowners. Custine product that key a is want want our with for campaign about it ColorPlus. delivering of part It’s Lisa, of the Custine type with the marketing made those what So Acerroduct our homes really to

very mix our the expect really our the investments So been have continue when campaign, started that since ColorPlus the continued healthy and with to growing, of in consumer year some we beginning growth has going to of we market. particularly forward


from next The Daniel Instructions] [Operator question comes from Kang CLSA.

Daniel Kang

that price looks X%. why only any on XQ is be America into from X%, price question of X% guidance a up FY for Is momentum should continue North not I for X your ‘XX there momentum – contributing price prior the mix to mix. question first gaining this realize to FY ‘XX? with in quarters. a Just reason X%

Jack Truong

products research have. we that of want we consumers, continue the about and after homeowners. Daniel, I what directly – call what one and execute those a our know really high-value we then and we market homeowners, market mean, that And we to will directly believe we that we doing can which that the on as lot homeowner the the strategy, marketing exactly the is to the consumer we when extensive owners need

of owners exterior Hardie of products with James or the that as really want the products key one So from the home Color need. is

we that to color that will is expect it that continue – we as something that would to should So product grow. continue execute, the


The UBS. next question comes from from Lee Power

Lee Power

the through consumer, Just looking that with direct at any there leads direct for XX%. rates when Is contractor? dealing in find consumer a you conversion on to like you’re difference

Jack Truong

convert. of would you able then I the that our would contractor always demand generate and mean when is message our great very sales lead be And then customer with consumer which customers, get to clear. consistent the – directly within very

quality of to it close So the that, – that then and the but the also not well. leads, only ability quicker is about as

of and Hardie value to product owner So tell home right the now that connect the ability to on to the directly the for story immense. directly brand us is


Marquee. Chau The next Keith from from MST comes question

Keith Chau

North question and is So you constraints following exteriors sales question, then the held us a isn’t volumes, issues were tracking just quarter-to-date the in whether there this sense And – with the America back sales both to to my growth and any in just relation in Could keeping that, American with where give any North the for previous interiors hurricane that is may activity. from the please? business. have

Jack Truong


and now the that owners I driving are market mentioned we consumers that directly we home want Keith, – homeowners to we the is need. products or the So as the market what that we connect and as with high-value

So about it’s our the our maximize right it’s – can and we for EBIT. maximizing products really, that produce growth the us, sales so ability to

it’s more for will more interior or growth create a that us, you see products. really we lot of in can And high-value it’s where value. where that in so of about is the of about kind of exterior And more irrespective


comes question from Sam Citi. next from Seow The

Sam Seow

if think of left a could you’d a to savings think like I the on if into successful back guess, been – we more distributors, And a back with Just SPXX time, few and reinvesting, we working forwards really existing you’re around you’re bit partnered you main supply it logically, maybe SPXX proving I just versus be still about or what’s you’re say I you’d I’m fully guess how And your kind of trying only a today, many up. the lean a think think understand the of guess, how I integration? of us with was initiative. distributors. give still at many, chain, where concept Yes. with. I feel be integrated to to are Rolling pathway

a journey. supply of today, years what is really miles why to integration, customers we serve is X like and and and continue continue. And we we us where to a still is are produce have I is that come a allowed suppliers strategic than will it our journey, and that board. is our most that – ago, path – to our it say ahead this it It it better is But our our And chain improve, markets were certainly So would we we because integrating – more is it’s is chain can a it’s it supply the and will on and about too. path. but


comes from RBC. Quinn Paul from question next The

Paul Quinn

on question pulp a markets. Just global

are rollover. over they just on use really X-month spot how a much they contracts – X- you pricing? in are how and on I volumes contracted a a seeing We’re those year are volume or wondering period? Or

Jack Truong

of X in be would Hope our X top costs business. our Paul. Thanks, Yes.

bold when period. talked moves execution significant strategy us expand to inflationary through of however, we – has enabled it’s our about, as high So the this to margins

some types of and some that’s of or operates variety a spot contracts, have periodic quarter on a that whether X months. a basis, We

it’s a So variety.


next The Wilson Suisse. question Credit from comes from Peter

Peter Wilson

North America another in your of context capacity volume the one on Just expansion announced.

take that It’s high-value XQ million just about of volume Should volume. So consider Jack, it’s volume, but volume. focus put I we the not all and your XXX point square feet. about that side on we just

new out So of comes your you that online? would you consider this is the more until that limit to volume Or capacity on there be can eke the network?

Jack Truong

will to and VL more of up of integrate X our run and property to right – line more will and better of that of three, production we then be we year, is existing the a is lead on line so it’s are on and year X to terms have reopening No, from be going of capacity product about we And middle as of are be that open network that execution will the out flow products to so and more – opening that a next we’ll months. X. more we demand our that of continue then in to X view One, our can market up two, more; the March much Plank, for reasons. slated actually in scaling up be continue calendar of more in asset; us that time effectively our in our opened to customers plants be allow should on more line be which it

the in So not drive us volume those that us continue mix. factors that allow revenue. would of course, are to key And of to some growth the would also only or give


question comes from Stanley. Andrew Morgan next from Scott The

Andrew Scott

out commodity. there? around expecting also price have tell meaningful X point price, and you you where cost what us Can to for announcements a you're can throughout value the less methodology, stuck just have us gone LP vinyl bit just question, on you that's January. just that, year let made if a like know we're Jack, a you more difference will at this to on-the-wall I a that now that whereas priced And pricing Can think if then maybe comparison?

Jack Truong

the Answer first.

Jason Miele

Yes, Andrew.

about your about price to So be question they first increases North we'd price X increases, X% January or expect for America. X% are about

Jack Truong


mean, a key now this poll we home is we -- I are here Andrew, directly that to that true the are owners. think the So thing marketing is push I

our that they is from with home about to Honey the But it endless products, looks homeowner brand the remodel give really Hardie Colors all that their the protect their different home yet, allow Exterior fantastic brand can elements. is designs. with So possibilities

make homeowners on So is about value. intangible that effects. their the mostly decisions that's that is what really And is the

the home remodel post-COVID then, not the So but course, the pride particularly as to home where is important that as environment on-the-wall castle. decision it's enjoy, -- having and in of have of is important, wants homeowners the cost making the really gift with terms she that to a

this not the price So so it between terms is on. what board. much the of And that is it's as important board versus other where in we focus


to Thank Truong. conclude question-and-answer Dr. session. back conference That I'll the you. hand does the

Jack Truong

and colleagues world. Hardie before thanks Well, my extend the just around I end take to we the call, the gratitude all would like opportunity to James

continue reach, deliver of direct as I'm year consistently XXXX of execute fiscal a across on X our the It's new another of we and to quarter quarter company. execution Our next to a results within that XXXX result are growth. this financial leverage remainder our as the results all exceptional for indication beyond second target. of phase the continued capabilities truly global global do profit financial global a This it we results everyone the outstanding regions. and together strategy, scale a together we you. of company fiscal year company that excited global and and are global second of continue strong in Thank