CEO & MANAGING DIRECTOR, ROD PEARSE 11 FEBRUARY 2009

Transcription

1 Boral Limited Citi Investment Conference, London Rod Pearse, CEO and Managing Director March 29 RESULTS FOR THE HALF YEAR TO 31 DECEMBER 28 CEO & MANAGING DIRECTOR, ROD PEARSE 11 FEBRUARY 29 Boral is Australia s largest building & construction materials supplier, with leading market positions in the USA & Asia USA Bricks #1 Clay roof tiles #1 Concrete roof tiles* #1 Flyash #2 Concrete & Quarries (Denver #3, Oklahoma City #2) A total of 717 operating sites and 148 distribution sites across 12 countries** ASIA Plasterboard* Korea #2 Thailand #1 China (east) #1 Indonesia #1 Malaysia #1 The Philippines #1 Vietnam #1 AUSTRALIA India #2 Cement #2 Bricks #2 Concrete & Quarries Concrete #1 Masonry #1 Indonesia #1 Quarries #1 Roof tiles #2 Thailand #3 Asphalt #1 Plasterboard #2 Windows #2 Hardwoods #2 * 5%-owned joint venture ** includes Trinidad and Mexico 2

2 1H29 Financial results Revenue steady $ 2.6b EBITDA 21% to $ 285m EBIT 35% to $ 155m Net Interest 21% to $ 69m Profit after tax 44% to $ 75m EPS 42% to 12.8 cents Final dividend (1% franked) 56% at 7.5 cents Return on equity 1 (MAT) from 9.4% to 6.8% 1. Excludes June 28 significant items 3 1H29 EBITDA down 21% due to housing related losses in the US and a decline in Australian Building Products earnings Construction Materials $1m (4%) EBITDA (A$m) 1H28 1H29 Building Products USA Asia $27m (3%) $42m (147%) $3m (29%)

3 Australian dwellings and non-dwellings approvals declined and US dwelling starts declined to new lows Market changes 1H29 vs 1H28 Australia USA Boral s US States 1 17% -2% -12% -9% Dwelling Approvals 2 Non-dwelling VWA 2 RHSB VWD 3-42% Dwelling Starts 4 Non-dwelling VWC 5 1. Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Nevada, N.Carolina, Ohio, Oklahoma, S.Carolina, Tennessee, Texas, Virginia, Washington 2. Approvals / value of work approved (VWA). Source: ABS (Approvals 6mth to Dec/Sep Q 28), BIS Shrapnel Forecast for Dec Q RHSB ABS actuals (chain volume measures) Sept Q 28 actual, BIS Shrapnel Forecast for Dec Q Source: Dodge actuals 5. Non-dwelling value of work commenced (VWC) at 1992$ values. Source: Dodge actuals and forecast for Dec Q 28. Under-building (except SA) continued in all Australian states (running at 24% below underlying demand); NSW detached dwellings are at 4 year lows Building approvals for detached houses 2 (MAT, July 1996 to December 28) 1H29 dwelling starts 3 as % underlying demand 3 3, 25, 2, Melbourne 9% 111% SA VIC 15, 1, 5, Perth Brisbane Others 1 Sydney 49% 8% 78% WA QLD NSW Jun-96 Jun-97 Jun-98 Jun-99 Jun- Jun-1 Jun-2 Jun-3 Jun-4 Jun-5 Jun-6 Jun-7 Jun-8 76% Australia 1. Adelaide, Darwin, Hobart and Canberra. 2. Source: ABS. 3. Source: BIS Shrapnel based on FY9-FY13 estimates of underlying demand, Starts sourced from ABS up to Sept Qtr 28 and BIS forecast for Dec Qtr 28 6

4 Australian concrete demand decreased by 2% but remained at high levels supported by strong infrastructure activity Readymix concrete production 1 (MAT, January 1999 to December 28, ) 9, 8, 7, 6, 5, 4, 3, 2, 1, Jan-99 Jan- Jan-1 Jan-2 Jan-3 Jan-4 1. Source: ABS, December estimated based on Metro Flash figures 2. SA, NT, Tasmania and ACT Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Qld NSW Vic WA Others 2 Changes in Australian readymix concrete production 1 1H29 vs 1H28 cubic metre change Percentage change -11% % % % % % Qld WA SA Vic NSW Aust 7 The US housing market has fallen to 5 year lows Total US dwelling starts ( ) 1 2,6 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Multi family housing starts Total housing starts Single family housing starts ,6 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Seasonally adjusted annualised monthly starts from US Census 8

5 In CY6 Boral s EBITDA earnings from the USA of A$25m was 25% of Boral s total EBITDA but with the US housing downturn this declined to a loss of A$31m in CY8 EBITDA contribution split by geography Asia Building Products, Australia Construction Materials, Australia USA 1H 2H 1H1 2H1 1H2 2H2 1H3 2H3 1H4 2H4 1H5 2H5 1H6 2H6 1H7 2H7 1H8 2H8 1H9 9 1H29 EBITDA prices & PEP savings more than offset cost increases; lower volumes reduced EBITDA by ~$7m A$m Volume Cost Escalation QEU Plant One-offs EBITDA HY8 Price PEP 1 Growth Other EBITDA (Incl. FX) HY9 1. Performance Enhancement Program 1

6 Net debt and gearing increased primarily due to 28% devaluation in AUD/USD As at A$m Half year to 31 Dec-8 Half year to 31 Dec-7 Cash flow from operating activities 1 1,69 Net debt Net debt / equity Net debt / (Net debt + equity) EBITDA interest cover EBIT interest cover Funds employed Return on funds employed 2 (MAT) Return on equity 2 (MAT) 1. After interest & tax paid, before capex & dividends 2. Excludes June 28 significant items 141 2,184 79% 44.1% 4.1x 2.3x 4, % 6.8% % 34.7% 6.3x 4.2x 4, % 9.4% 11 Boral has no material debt re-financing requirements until Aug-211 & is not contemplating raising equity Weighted average debt maturity ~6 years Weighted average cost of debt 7% No major re-financing until August Debt Maturity Profile at 31 December 28 Debt A$m Syndicated Bank Debt AUD Commercial Paper 1 - US Private Placement -1yrs 1-2yrs 2-3yrs 3-4yrs 4-5yrs 5-6yrs 6-7yrs 7-8yrs 8-9yrs 9-1yrs 1-11yrs 11-12yrs 12

7 Boral has substantial committed but undrawn facilities and financial metrics remain well within covenants August 28 - Increased and extended major bank facility, replacing US$6m note issuance facility expiring in August 29 with US$7m facility expiring in August 211 March 29 - Converted US$5m of US$7m syndicated bank facility at $.63 exchange rate Available funds from this committed bank facility of ~A$44m (at 31 December 28) Boral continues to operate comfortably within our debt covenants 1,2 Debt Maturity Profile at 31 December 28 including available committed facilities 1, Debt A$m Available funds Drawn funds yrs 1-2yrs 2-3yrs 3-4yrs 4-5yrs 5-6yrs 6-7yrs 7-8yrs 8-9yrs 9-1yrs 1-11yrs 11-12yrs 13 With Boral s strong asset base, share price deterioration has led to a low price to book value ratio for BLD Share price to NTA per share Jun-1 Dec-1 Jun-2 Dec-2 Jun-3 Dec-3 Jun-4 Dec-4 Jun-5 Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 14

8 Boral s dividend payout ratio has averaged around 6% since demerger; 2.5% discounted DRP introduced in 1H29 lifting take-up to ~41% (from ~3%) Cents / share Dividend EPS CY2 CY21 CY22 CY23 CY24 CY25 CY26 CY27 CY28 CY28 excludes June 28 significant items 15 Responding to the market downturn Price management Despite volume pressures continued focus on pricing recovering input cost increases and protecting / enhancing margins Cost reductions Focus on operational and overhead cost reductions through PEP and Step Change initiatives Managing capacity Matching production with sales to avoid inventory build through plant closures, temporary shuts and slowdown programs Capital management Reducing capital expenditure and managing the business for cash 16

9 Effective pricing and cost reduction initiatives are key priorities across the business Price management Despite Despite volume volume pressures pressures continued continued focus focus on on pricing pricing recovering recovering input input cost cost increases increases and and protecting protecting // enhancing enhancing margins margins Strong pricing outcomes across the group in 1H9 Further price increases announced: Concrete $9/m 3 effective Apr-9 Quarries $1-$2/tonne effective Apr-9 Cement $1-$15/tonne effective Apr-9 Range of Australian building products price increases effective Oct-8 to Feb-9 Cost reductions Focus Focus on on operational operational and and overhead overhead cost cost reductions reductions through through PEP PEP and and Step Step Change Change initiatives initiatives US Bricks US$3m, 8% implemented MLT US$15m (5% share), 9% implemented US Construction Materials, at least ~US$25m, with US$2.4m benefits in 2H9 Australian Bricks and Roofing management restructure ~$4.3m savings Midland Brick step-change $1m-$15m ACM Six Sigma ~$45m savings over 3 years FTE/contract labour reduced 1,5 CY28 17 Pricing has increased in virtually all markets despite lower volumes Building Products, Australia Construction Materials, Australia USA Bricks Roofing Masonry Plasterboard Timber Windows Cement Concrete & Quarries Asphalt Bricks Clay Tiles Concrete Tiles 1 Flyash Construction Materials 1H9 v 1H8 Prices / Volume / EBITDA 1. MonierLifetile JV is equity accounted Boral s share of revenue does not appear in consolidated accounts 18

10 US accelerated step change programs and PEP expected incremental benefits of ~US$4m in FY29 Bricks US$22.6m US$7m MonierLifetile (5% share) US Construction Materials (flyash, concrete & aggregates) US$2.4m US$36.4m US$22.6m US$25m US$24m US$3m US$7m US$1.m Cost savings realised US$6m US$15m One-off program costs US$5m (US$4m) FY28 program impacts PEP=Performance Enhancement Program Incremental benefits in FY29 Incremental benefits in FY1-FY11 Total program benefits FY8-FY11 19 PEP savings continue to be delivered across the Group; PEP & step change initiatives targeted at 3.5% of compressible costs for FY29 PEP 1H PEP 2H % of compressible costs A$m % of compressible costs FY4 FY5 FY6 FY7 FY8 FY9 PEP=Performance Enhancement Program 2

11 Responding to the market downturn with capacity management and tight capital management Managing capacity Capital management Matching Matching production production with with sales sales to to avoid avoid inventory inventory build build through through plant plant closures, closures, temporary temporary shuts shuts and and slowdown slowdown programs programs Reducing Reducing capital capital expenditure expenditure and and managing managing the the business business for for cash cash 1 out of 24 US brick kilns shut in 1H9 2 timber mills closed/suspended in 1H9 Galong quicklime facility suspended in 2H9 Capacity utilisation from 1H9 to 2H9: Australia - bricks from 84% to ~7% - roofing from 62% to <5% - timber from ~9% to ~8% USA - bricks from 42% to ~25% - concrete roof tiles ~2% in FY9 SIB at 6% of depreciation in 1H9 Review of previously announced growth projects Growth/acquisition capex of only $52m in 1H9; still considering a number of attractive projects Comprehensive program to reduce working capital Dividend down 56% 21 Australian residential starts are expected to be around the bottom of a 5 year housing down cycle in FY29 Australian dwelling starts 1 ( ) By state 2 ( ) BIS HIA Boral FY94 FY95 FY96 FY97 FY98 FY99 FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9f FY1f FY11f FY94 FY95 FY96 FY97 FY98 FY99 FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9f FY1f Vic Qld NSW WA SA Other 3 1. Source: ABS actuals plus forecasts BIS Shrapnel (Feb-9), HIA (Feb-9) 2. Includes BIS Shrapnel forecasts; 3. Other includes TAS, NT and ACT 22

12 Australian affordability is improving (mortgage repayments down from 31% to 25% of household income), driven by falling interest rates Repayment of mortgage as percentage of household income (February 29) 4% Mortgage stress 35% 3% 25% 2% 15% 1% 5% % Affordable 1 Brisbane (28%) Perth (28%) Sydney (25%) Australia (25%) Melbourne (23%) Dec-89 Dec-9 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec- Dec-1 Dec-2 Dec-3 Dec-4 Dec-5 Dec-6 Dec-7 Dec-8 Source: HIA data to Sep-8 Qtr, Boral estimates to Feb-9 based on ABS house price index and cuts to interest rates 1. The HIA defines affordable as not more than 3% of household income to fund a mortgage. 23 BIS Shrapnel is forecasting lower non-dwellings and RHSB activity over the next couple of years Australian Non-Dwellings VWD A$97/98 Billion Australian RHSB 1 VWD A$97/98 Billion Forecast Actual Forecast 8 Actual FY88 FY9 FY92 FY94 FY96 FY98 FY FY2 FY4 FY6 FY8 FY1f FY12f 1. Includes value of work done in roads, highways, subdivisions and bridges Source: ABS, BIS Shrapnel FY88 FY9 FY92 FY94 FY96 FY98 FY FY2 FY4 FY6 FY8 FY1f FY12f 24

13 Australian markets forecast to remain flat in FY29 and FY21 with good growth thereafter Australian Building Activities Value of Work Done 1 ($97/98 billion) & Australian Readymix concrete production 2 (million cubic metres) Value of work done $97/98 billion Readymix concrete production FY89 FY9 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8e FY9f FY1f FY11f FY12f FY13f 1. Source: ABS & BIS Shrapnel (Nov 8) Citi 2. Investment Source: ABS Conference, London March Includes Alterations and Additions RHS&B Non-dwelling Dwelling 3 % change (.5).9 (1.8) 2.7 (7.1) (11.5) (.8) Concrete production (million cubic metres) Australian Federal Government stimulus programs Since October 28, three stimulus packages announced totalling A$56b ~$24b is for construction and building materials related projects, with ~$12b expected to be spent in FY1 Key projects over next four years include: refurbishment and development of education infrastructure building of ~2, homes for public housing & the Australian Defence Force $1.8b of council infrastructure spending Expected to lift housing starts by ~15,-18,5 during FY1 & FY11 Whilst some overlap with previous initiatives is starting to appear, generally the packages are in addition to previous programs, including: Housing Affordability Fund National Rental Affordability Scheme First Home Owners Boost NSW Levies reduced 26

14 The stimulus package is expected to benefit the building & construction materials sectors in FY21-11 Estimated stimulus packages spend: Construction & Building Materials vs Other Sectors (A$ billion) $25 $2 $15 $1 $23.7 $21.4 $19.2 $6.4 $11.9 $3.5 Other Non-Building Sectors (total $32.1b) Construction & Building Materials Sectors (total $23.6b) $5 $ Key project areas: $2.3 $12.8 $8.4 $1.6 FY9 FY1 FY11 FY12 Education Infrastructure Community Infrastructure Education Infrastructure Education Infrastructure Social & Defence Homes Social & Defence Homes Housing Insulation Housing Insulation $.7 $.9 Housing Insulation Social & Defence Homes Source: AFG Press Release, Boral Analysis 27 In the US, excess new dwelling stock is close to the long term average and excess existing dwelling stock has fallen significantly New Dwelling Unsold Housing Stock (Count, millions, seasonally adjusted) 1. Existing Dwelling Unsold Housing Stock (Count, millions, seasonally adjusted) Returning to 2-25 average Still elevated but reducing Existing excess: +1.4m Source: US Census Bureau, National Realtors Association 28

15 US housing affordability is improving as house prices fall; sales of existing houses stabilised S&P/Case-Shiller Home Price Index December 28 Houses Sold During Month (Annualised count, millions) 35 Roof Tile States (City / Change peak to current) 1.6 Existing Dwelling Sales (RHS) Los Angeles Las Vegas Miami Tampa San Fran. -37% -44% -41% -34% -4% Brick States (City / Change.6 peak to current) Atlanta -17%.4 New Dwelling Sales (LHS) Charlotte Dallas -1% -6% Source: Standard & Poor s Source: US Census, National Realtors Association 29 We are three years into the current US housing downturn 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, USA dwelling starts cycles peak to peak (Seasonally adjusted, moving annual total, ) Source: US Census January 26: 2.8m Current downturn January seasonally adjusted: 466k January 29: 853k February 1973 to March 1979 December 1978 to October 1984 October 1986 to May Years 3

16 The US Government has pledged support for three stimulus packages totaling ~US$1.7 trillion to date, ~15% of GDP Total stimulus pledged: US$1.7 trillion ESP $17b February 28 Economic Stimulus Plan (ESP) ~US$17b Tried to prevent the recession TARP $7b ERP $787b* October 28 to February 29 Troubled Asset Relief Program (TARP) ~US$7b Fix the banking system and stabilise housing February 29 Economic Recovery Program (ERP) ~US$787b Kick start economy * Includes ~$26b in tax changes (estimated cost over 1 years) & ~$527b in targeted investments 31 The packages are trying to stimulate home buying and protect homeowners from declining values and further foreclosures Home Purchaser Tax Credit Economic Recovery Package US$8k first-time home buyer tax credit available through 3 November 29, not repayable (estimated cost ~US$6.6b) Mortgage & Foreclosure Assistance TARP, announced 18 Feb 29 Affordability Assistance - Assist 4-5 million homeowners (ineligible to refinance but not at risk of default) to refinance loans Foreclosure Stability - Assist 3-4 million homeowners at risk of default / foreclosure in modifying loan interest rates or principal amounts, and provide monetary incentives for loan services and owners to participate before loan defaults (estimated cost ~US$75b) Security of Mortgage Market - Treasury increases Fannie and Freddie funding to US$2b (US$1b increase) through preferred stock purchase, and increase GSEs retained mortgage portfolio by US$5b to US$9b 32

17 Asian construction activity is being impacted by the global economic downturn SOUTH KOREA THAILAND INDONESIA CHINA - EASTERN Value of construction orders Gross fixed capital Value of completion. Total building received. Trillion Won 1 formation. Billion baht 1 Trillion Rp 1 commencements. Million m e 21f 212f 1, e 21f 212f e 21f 212f 1,4 1,2 1, f 21f 212f Residential Non-residential Engineering & Construction Total Building 1. Stated in CY8 prices based on GDP deflator; Source: BIS Shrapnel 33 Outlook for FY29 Australia Dwellings down to 135, starts Building Products prices up, volumes down and earnings significantly lower in FY9 than in FY8 Concrete, quarry & cement price increases from April; weaker non-dwellings demand QEU earnings of around $35m-$4m Construction Materials earnings steady in FY9 Asia Weaker Plasterboard volumes and profits. Price and operational improvements in concrete and quarries USA Dwellings of ~6,-65, starts assumed in FY9 Weakening non-dwelling markets US$7m of cost reductions coming through FY9 earnings to be significantly below FY8 June half AUD:USD exchange rate of 65 cents Whilst forecasting is extremely difficult, FY9 PAT to be around $12m 34

18 Boral Limited Citi Investment Conference, London Rod Pearse, CEO and Managing Director March 29 RESULTS FOR THE HALF YEAR TO 31 DECEMBER 28 CEO & MANAGING DIRECTOR, ROD PEARSE 11 FEBRUARY 29 Supplementary slides 36

19 Construction Materials: EBITDA down 4% driven by lower QEU outcomes; underlying EBITDA flat A$m Sales 1H9 1,463 1H8 1,454 % 1 EBITDA A$m 1H/2H EBITDA / sales 2% 18% 16% EBITDA EBIT Funds employed , ,339 (4) (7) % 12% 1% 8% EBITDA/sales % EBIT/sales % % 4% 2% ROFE % (MAT) FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 1H9 % FY5 result onward has been adjusted for adoption of A-IFRS 37 Building Products: EBITDA down 3%; improved pricing offset by housing-related volume reductions and one-off transition costs A$m Sales EBITDA EBIT Funds employed EBITDA/sales % EBIT/sales % ROFE % (MAT) 1H , H , % - (3) (46) 5 EBITDA A$m 1H/2H EBITDA / sales FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 1H9 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % FY5 result onward has been adjusted for adoption of A-IFRS 38

20 USA: EBITDA down US$35m due to housing collapse US$m 1H9 1H8 % Sales (27) EBITDA (1) 25 (141) EBIT (28) 9 (43) Funds employed A$m Sales (3) (18) EBITDA (13) 29 (147) EBIT (37) 1 (474) Funds employed 1, EBITDA/sales % (4.2) 7.5 EBIT/sales % (11.7) 2.6 ROFE % (MAT) (6.8) 3.5 EBITDA A$m 1H/2H EBITDA / sales FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 1H9 5% 4% 3% 2% 1% % -1% 1. MonierLifetile JV is equity accounted Boral s share of revenue does not appear in consolidated accounts. FY5 result onward has been adjusted for adoption of A-IFRS 39 About one third of Boral s 1H29 revenues from Australian dwelling markets & ~4% from Australian non-dwellings / infrastructure 1H29 Revenue* split by market Australian dwellings (including A&A) Australian non-dwellings Australian engineering & construction USA dwellings USA non-dwellings USA engineering & construction Asia Other * Includes revenues from Asian Plasterboard and MonierLifetile joint ventures which are equity accounted 4

21 Housing starts in Brick states fell by 39% in 1H9, following a decline of 28% in FY8 and 19% in FY7 % Change in Dwellings Starts 1H29 vs 1H28 IA MI to -9% KS OK MO AR IL IN OH MD WV KY VA TN NC DE -1 to -14% -15 to -19% -2 to -24% -25 to -29% Boral Brick plants TX LA MS AL GA SC -3 to -34% -35 to -44% -45 to -54% -55 to -65% Source: US Dodge data for single and multi family units 41 Housing activity in the Tile states fell by 44% in 1H9, this follows a decline of 37% in FY8 and 29% in FY7 WA % Change in Dwellings Starts 1H29 vs 1H28 to -9% NV -1 to -14% CO MO -15 to -19% CA -2 to -24% AZ -25 to -29% MonierLifetile plants US Tile plants TX Mexico FL -3 to -34% -35 to -44% -45 to -54% -55 to -65% Source: US Dodge data for single and multi family units Trinidad 42

22 Dwelling (and non-dwelling) activity in Colorado and Oklahoma was well down % Change in Non-dwellings VWC 1H29 vs 1H28 BMTI key market AZ Construction Materials operations 1 to 2% to -9% CO -1 to -14% TX OK GA FL VA -15 to -19% -2 to -24% -25 to -29% -3 to -34% -35 to -44% -45 to -54% Source: Non-dwelling value of work commenced (VWC) from US Dodge at 1992$ values 43 Continued strong focus on sustainability performance with excellent safety outcomes Lost time injury frequency rate (LTIFR) (per 1 million hours worked) Employee LTIFR of 2. versus 2.3 in 1HFY8 Contractor LTIFR of 2.5 versus 6.2 in 1HFY8 Over 8,5 voluntary health assessments since BWell program commenced in 23/4 Refer to 28 Sustainability Report for more detail FY99 FY FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 1H9 44

23 We are preparing for an emissions trading regime FY28 CO 2-e emissions (thousands) inventory by division and energy source 1 Other Petrol LPG Diesel Electricity Natural gas Coal 2,454 Carbon Pollution Reduction Scheme (CPRS) from 1 July 21 Protection for EITE including cement - 9% free allocation Price cap for 5 years, $4 with 5% p.a. growth ~12 Boral facilities meet carbon permit trading threshold; other businesses impacted by input cost increases Need to pass costs onto customers Calcination Cement ACM Clay & Concrete USA Plasterboard Timber Products 1. For Boral s 1% owned business EITE= Emissions Intensive Trade Exposed 45