James Hardie Announces Closure of SC Plant, Plans to Cease New Zealand Operations and Provides Strategic Business Update

James Hardie Industries plc (“James Hardie” or the “Company”), 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.”

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About James Hardie

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.

Contact:

Katie Spring – Investor/Media Enquiries – katie.spring@edelman.com – (312) 447-1925

Source: James Hardie Industries plc