Relentless focus on a safe and sustainable
workplace
Strong liquidity and financial flexibility to
manage through continued market volatility
Double digit volume growth in North America in
Q4 FY20
James Hardie Industries plc (ASX:JHX) today provided an update
on actions the Company has proactively taken since the pandemic was
declared to ensure that its workplaces around the world are
protected and secured for its thousands of employees. With 19
manufacturing plants in the U.S., Europe and Asia Pacific, the
Company has instituted pandemic protocols in plants and workspaces
around the globe, including strict social distancing policies,
extensive disinfection processes, robust employee communications,
procurement of required PPE, and ongoing well-being and hygiene
support for our employees at work and at home.
“James Hardie employees have been incredibly dedicated and
resilient during this very challenging time,” said James Hardie
CEO, Dr. Jack Truong. “I want to express my gratitude to our team
members and their families for their tireless commitment to the
safety of themselves and one another. I am confident we will emerge
from this crisis a stronger company.”
Business Update
James Hardie also shared an update on its global business,
including additional detail on financial and operational
performance.
“Two years ago, we established a strategic and scalable
management system to drive sustainable and profitable growth. Now,
the management system also proved to be critical to our ability to
navigate through the global COVID-19 crisis,” said Dr. Truong. “By
operating in a safe, sustainable and thoughtful manner, we continue
to protect our employees, deliver value to our customers, minimize
disruption to our plants and preserve liquidity in anticipation of
a potentially prolonged period of market volatility.”
Refined FY20 Guidance
The Company narrowed its previous, guided range for FY20
Adjusted NOPAT from US$350 million – US$370 million to US$350
million – US$355 million, an increase from the prior year’s US$301
million. Refined guidance is driven by the following operating
results in Q4 FY20:
- Double digit volume growth in North America
- Strong revenue growth in Europe
- APAC results in line with expectations, driven by strong
Australian business performance
- Higher than anticipated integration and operational costs in
Europe
- Unplanned costs related to government-mandated closures of
manufacturing plants in Spain, New Zealand and the
Philippines.
Dr. Truong noted, “Since the COVID-19 crisis emerged, we have
maintained a relentless focus on providing our teams with a safe
and efficient workplace and a comprehensive management system with
clearly defined and connected processes. This resulted in a strong
finish to our fiscal year 2020 performance. Our strategic
initiatives in North America continued to take hold as we drove
significant growth in both our exteriors and interiors businesses
in Q4FY20 and continued to deliver manufacturing cost improvements
through our Hardie Manufacturing Operating System.”
Cash Management and Liquidity
To further strengthen the Company’s liquidity position and to
manage market volatility, the Company is taking the following
strategic measures:
- The immediate suspension of dividends until further notice, as
approved by the Board of Directors.
- Adjusted FY21 Capital Expenditures to be in a range of US$80 –
US$95 million, compared to a historic three-year, annual average of
approximately US$240 million.
- Will make its annual contributions to Asbestos Injuries
Compensation Fund (AICF) in quarterly installments, versus one lump
sum payment in July 2020, as allowed under the provisions of the
Amended and Restated Final Funding Agreement (AFFA).
- Implemented strategic cost-control measures globally. These
include a hiring freeze and a significant reduction of
non-essential and controllable expenses.
As of 30 April 2020, the Company’s liquidity position was US$578
million, an increase from US$510 million at 31 March 2020 and
US$464 million at 31 December 2019. Its leverage ratio improved
from 2.1x at 31 December 2019 to approximately 1.9x at 31 March
2020.
James Hardie CFO, Mr. Jason Miele, noted, “We remain
well-positioned with sufficient liquidity to manage through a
prolonged downturn, should that happen. Our strong sales
performance in the fourth quarter along with our quick and decisive
capital management and working capital actions helped increase our
liquidity position to US$578 million as of 30 April 2020. Our
relentless focus on these actions will help ensure strong liquidity
and financial flexibility as we navigate through this crisis.”
Improving and Securing Global
Operations
Consistent with the Company’s strategy to scale and modernize
its global operations, the following changes to the global
manufacturing footprint have been announced:
- To better harmonize supply and demand in the North American
market, the Company will close its Summerville, South Carolina, USA
manufacturing plant.
- Delayed commissioning of the Prattville, Alabama, USA
manufacturing plant until FY22.
- The move to a regional model for the manufacture and supply of
fiber cement products for the New Zealand market. The Company will
begin by entering into consultations with affected employees and
their union. Ultimately, the Company intends to cease all
manufacturing of products in New Zealand under this model and shift
manufacturing from Penrose, New Zealand to its two plants in
Australia: Rosehill and Carole Park. The Company would also expand
the outsourcing of freight and logistics management, in New
Zealand, to a third-party logistics provider. The sales, marketing,
customer service and technical support teams would continue to be
based locally in New Zealand to ensure that the Company is able to
partner with customers and provide them with the service and
support to which they are accustomed.
- Closure of James Hardie Systems, the permanent formwork
business based out of Cooroy, Australia, and the associated
manufacturing plant in the middle of calendar year 2020.
- The temporary closure of the Siglingen, Germany manufacturing
plant to better match supply to demand in the short term in
Europe.
In addition to the above noted operational actions, the Company
reviewed its organizational structure and resourcing levels
globally and made strategic adjustments to ensure it is well
positioned to continue serving customers in this fast-changing
market environment. As a result of realigning the global resources
and closing the Summerville, Penrose and Cooroy plants as noted
above, the Company expects to reduce its global workforce by
approximately 375 employees.
“These decisions are always extremely difficult. Our leadership
team took this action with considerable thoughtfulness, with the
strategic objective of preserving and enhancing the global
organization’s competitiveness over the long term,” said Dr.
Truong.
Expected Impairment Charges
The actions regarding the Summerville, Penrose and Cooroy
manufacturing plants will result in impairment expenses in the
Company’s Q4 FY20 financial results. In addition to the impairments
of these three manufacturing plants, the Company identified some
non-core assets which have also been impaired as of 31 March 2020.
The Company expects the total amount of non-cash impairment
expenses to be approximately US$90 million in Q4 FY20, which is
subject to the finalization of our annual independent audit of our
financial statements. These non-cash impairment expenses will be
excluded from Adjusted EBIT and Adjusted NOPAT in the FY20
financial results.
Full Year Fiscal Year 2020 and Q4 Fiscal
Year 2020 Results Briefing
Management will conduct its Q4 FY20 results briefing on Tuesday
19 May 2020, 09:00 Sydney, Australia time. A teleconference and
webcast will be available for analysts, investors and media,
details will be announced shortly via the ASX.
Dr. Truong concluded, “Our strong fourth quarter finish
completes a very positive year and demonstrates our ability to
perform well in both growing and highly volatile markets. It also
demonstrates that our commitment to the safety and well-being of
our employees, accompanied by the appropriate discipline and
adherence to execution of the strategic plan we set two years ago,
is the right path forward. I am confident that we will emerge from
this crisis even stronger as a company with a relentless focus on
taking market share and commercializing high-impact innovations to
deliver continued growth above market with consistently strong
returns.”
This media release has been authorized by the James Hardie Board
of Directors.
James Hardie Industries plc is a limited liability company
incorporated in Ireland with its registered office at Europa House
2nd Floor, Harcourt Centre, Harcourt Street, Dublin 2, D02 WR20,
Ireland.
Forward Looking Statements
This Media Release 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 annual reports to shareholders, in offering
circulars, invitation memoranda and prospectuses, in media releases
and other written materials and in oral statements made by the
Company’s officers, directors or employees to analysts,
institutional investors, existing and potential lenders,
representatives of the media and others. Statements that are not
historical facts are forward-looking statements and such
forward-looking statements are statements made pursuant to the Safe
Harbor Provisions of the Private Securities Litigation Reform Act
of 1995.
Examples of forward-looking statements include:
- statements about the Company’s future performance;
- projections of the Company’s results of operations or financial
condition;
- statements regarding the Company’s plans, objectives or goals,
including those relating to strategies, initiatives, competition,
acquisitions, dispositions and/or its products;
- expectations concerning the costs associated with the
suspension or closure of operations at any of the Company’s plants
and future plans with respect to any such plants;
- expectations concerning the costs associated with the
significant capital expenditure projects at any of the Company’s
plants and future plans with respect to any such projects;
- expectations regarding the extension or renewal of the
Company’s credit facilities including changes to terms, covenants
or ratios;
- expectations concerning dividend payments and share
buy-backs;
- statements concerning the Company’s corporate and tax domiciles
and structures and potential changes to them, including potential
tax charges;
- uncertainty from the expected discontinuance of LIBOR and
transition to any other interest rate benchmark;
- statements regarding the effect and consequences of the novel
coronavirus ("COVID-19") public health crisis;
- statements regarding tax liabilities and related audits,
reviews and proceedings;
- statements regarding the possible consequences and/or potential
outcome of legal proceedings brought against us and the potential
liabilities, if any, associated with such proceedings;
- expectations about the timing and amount of contributions to
Asbestos Injuries Compensation Fund (AICF), a special purpose fund
for the compensation of proven Australian asbestos-related personal
injury and death claims;
- expectations concerning the adequacy of the Company’s warranty
provisions and estimates for future warranty-related costs;
- statements regarding the Company’s ability to manage legal and
regulatory matters (including but not limited to product liability,
environmental, intellectual property and competition law matters)
and to resolve any such pending legal and regulatory matters within
current estimates and in anticipation of certain third-party
recoveries; and
- statements about economic conditions, such as changes in the US
economic or housing recovery or changes in the market conditions in
the Asia Pacific region, the levels of new home construction and
home renovations, unemployment levels, changes in consumer income,
changes or stability in housing values, the availability of
mortgages and other financing, mortgage and other interest rates,
housing affordability and supply, the levels of foreclosures and
home resales, currency exchange rates, and builder and consumer
confidence.
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 statements but are not the exclusive means
of identifying such statements. Readers are cautioned not to place
undue reliance on these forward-looking statements and all such
forward-looking statements are qualified in their entirety by
reference to the following cautionary statements.
Forward-looking statements are based on the Company’s current
expectations, estimates and assumptions and because forward-looking
statements address future results, events and conditions, they, by
their very nature, involve inherent risks and uncertainties, many
of which are unforeseeable and beyond the Company’s control. Such
known and unknown risks, uncertainties and other factors may cause
actual results, performance or other achievements to differ
materially from the anticipated results, performance or
achievements expressed, projected or implied by these
forward-looking statements. These factors, some of which are
discussed under “Risk Factors” in Section 3 of the Form 20-F filed
with the Securities and Exchange Commission on 21 May 2019 and
subsequently amended on 8 August 2019, include, but are not limited
to: all matters relating to or arising out of the prior manufacture
of products that contained asbestos by current and former Company
subsidiaries; required contributions to AICF, any shortfall in AICF
and the effect of currency exchange rate movements on the amount
recorded in the Company’s financial statements as an asbestos
liability; the continuation or termination of the governmental loan
facility to AICF; compliance with and changes in tax laws and
treatments; competition and product pricing in the markets in which
the Company operates; the consequences of product failures or
defects; exposure to environmental, asbestos, putative consumer
class action or other legal proceedings; general economic and
market conditions; the supply and cost of raw materials; possible
increases in competition and the potential that competitors could
copy the Company’s products; reliance on a small number of
customers; a customer’s inability to pay; compliance with and
changes in environmental and health and safety laws; risks of
conducting business internationally; compliance with and changes in
laws and regulations; currency exchange risks; dependence on
customer preference and the concentration of the Company’s customer
base on large format retail customers, distributors and dealers;
dependence on residential and commercial construction markets; the
effect of adverse changes in climate or weather patterns; possible
inability to renew credit facilities on terms favorable to the
Company, or at all; acquisition or sale of businesses and business
segments; changes in the Company’s key management personnel;
inherent limitations on internal controls; use of accounting
estimates; the integration of Fermacell into our business; risk and
uncertainties arising out of the COVID-19 public health crisis,
including the likely significant negative impact of COVID-19 on our
business, sales, results of operations and financial condition and
all other risks identified in the Company’s reports filed with
Australian, Irish and US securities regulatory agencies and
exchanges (as appropriate). The Company cautions you that the
foregoing list of factors is not exhaustive and that other risks
and uncertainties may cause actual results to differ materially
from those referenced in the Company’s forward-looking statements.
Forward-looking statements speak only as of the date they are made
and are statements of the Company’s current expectations concerning
future results, events and conditions. The Company assumes no
obligation to update any forward-looking statements or information
except as required by law.
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version on businesswire.com: https://www.businesswire.com/news/home/20200504005776/en/
Investor, Analyst and Media Enquiries: Katie Spring and Josh
Hochberg +1 312 447 1925 and +1 917 848 7194
katie.spring@edelman.com josh.hochberg@edelman.com
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