Louis Gries - CEO Matt Marsh - CFO.

Emily Smith - Deutsche Bank Andrew Johnston - CLSA Peter Stein - Macquarie Andrew Scott - RBC John Hind - Merrill Lynch Andrew Peros - Credit Suisse Keith Chau - JP Morgan James Rutledge - Morgan Stanley Matthew McNee - Goldman Sachs Kathryn Alexander - Citi.

Okay, thanks. Good morning, everybody. I appreciate you joining our results call today. We're going to do this - I am Louis Gries, obviously and Matt Marsh is here, our CFO. We’re going to do this like we do pretty much every time. I’ll give a very quick overview of the businesses, how they performed and then Matt will go in more detail.

After Matt’s done we will go to Q&A for investor, analysts and then at the end if we have any media we will go to media questions. So, sorry, I flipped through those early slides, which is the disclaimer. So I am on slide number six I guess. I think you had a chance to look at the results.

Basically the quarter was flatter than you would have thought it was going to be in the quarter from both net operating profit and EBIT and that brought us in a little short where most of you were expecting for the full year in net operating profit.

That’s kind of a one-off, it’s not a one off from an accounting standpoint, but it was isolated incident we had in one of our manufacturing plants in the US, so I will go to that. That’s where we came up short on the EBIT side. Overall I think we finished a good year.

The growth was flatter than what we are used to and certainly that's our main focus as we move into fiscal year ‘17. We talked about the last couple of quarters.

I think we do have some traction starting on the PDG again and that will be our main focus going forward as far as the financials in the business in the US are strong, Asia-Pac pretty much right through the region are strong.

Europe had a bad year in fiscal year ‘17 somewhat due to the FX change, I mean that dampened financials, but in addition to that we just didn’t run the businesses as well as we normally do or should have. Cash generation was good as you see on the slide. Go to next slide which drills down little bit on North America.

The market is okay in the US, so we're seeing now getting to be pretty normal pattern of each year. Housing is a little bit better that the previous year and when I say a little bit, it's - when you think about addressable starts, it’s less than 10% improvement year-to-year and that’s what we've been looking at, six or seven for the most part.

We kind of expect the same thing for fiscal year ‘17 which again most of you that know our business know that that's not bad for us. We like to focus on market share gains and market share gains are actually - much easier to get a builder to switch in a market that’s not red hot. So 10% up, if we got that next year we would be really happy with that.

If it’s more like 6 or 7, that’s fine as well. We don’t see any way that falls back at all. So I talked about the one problem we had higher production costs at one US plant.

We are not going to dwell on this, but it was $7 million, so just short of $7 million and that’s kind of what impacted the - well, that is what impacted the financials differently than I think most of you were expecting and certainly we were planning for. Having said that, pretty much the rest of the business performed well.

Like I said we had a little bit more traction in PDG. Our other plants outside of that one incidence performed well. Input costs are okay, so no problem with the input cost, it will be a little bit higher maybe next year but nothing to be too concerned about.

A real, and again these are North America and Europe and when you look at North America, obviously the comps or the results are stronger. So instead of the - We will go to next slide.

Instead of the slightly at the high end of our target, US is actually over the target, so we are running more like 26 and then that’s being pulled down as we talked about before our windows initiative which is early stages of starting up a business.

That initiative continues to track pretty well that after a shaky start first part of the year and get some things worked out on the operations side about half way into the year and since then we’ve had good momentum.

When I say good momentum, relative to our plan for what we're trying to do with that startup business through the rest of the year, so - but that does drag down the EBIT margins and Europe like I said, we didn’t have a good year in Europe and that dragged it down rest of the way.

FX in Canada and Europe also affects our pricing that we publish for the US Europe business and obviously that falls through to EBIT as well. But again we're pretty happy with the year. Everything is running well. We would have liked it growing at a higher rate.

When we became aware that we are losing traction in our growth rate above market we kind of tune up our programs and we think we're on the right track there. So next slide shows you the price. Price is flat for the year which was a little bit of a surprise.

I think we went into the year, we said flat maybe plus 2, we didn’t get the plus 2, probably that was the FX outside the US and probably that was we didn't get - the mix didn’t work out the way we originally forecasted it might and some of that was positive.

So we had - HardieBacker sales was strong again last year, so our growth rate in HardieBacker was very good.

So that pulled down price a little bit, because that product line sells at a lower average price than siding And ColorPlus is kind of flat in our mix now, so we're not getting help from color on price which we would have thought we would have gotten a little bit, so we got some work to do there as well.

Now you know we don’t sell color in the same way every market. In some markets it’s our standard product and other markets it's just for certain segments, certain applications, so the mix on color can be somewhat what we are doing and then somewhat where the geographic mix is going in the country.

So more to the north, you are going to get more color as a percentage of total and that’s going to give you help on mix. We didn’t have that last year. As far as next year go, most of you know we didn’t take across the board market increase on price in March or April.

We did the review and decided to leave the prices where they were and stay focused just on the gross side.

We think kind of gone through the whole equation again we are going to be flat maybe down here, so down here will be more the mix, maybe a little bit of a change in few rebates here and there, but the main thing would be we are not seeing a lot of help from mix next year, so since we have no increase, it will start out flat and if it’s down a percent, it’s probably down for mix.

Go to the next slide which gives you a little bit on Asia Pac. Asia Pac had a good year except for the Carole Park startup. They ran over budget on that by about $5 million. It’s obviously disappointing but it’s a good line, we are going to get very good unit cost off the line. I visited the plant on Monday.

I think we're now in - we're not at full utilization line but we're now in steady state on the line, so the financial impact on the line shouldn’t carry into fiscal year ‘17 to any real degree, but we did absorb that extra $5 million, plus we have planned for about $3 million, so it cost us about $8 million to start the line.

And we haven’t started getting the benefit of the lower unit cost yet. Other than that I think the market trends are good down here. I know the market is a lot concerned about the overall market coming off. We’re aware of that. We still think it’s going to be a good enough market for us to perform well again next year.

Philippines, we are going to add capacity because we are basically out up there, so we will be adding capacity in the next year or so.

In the meantime there will be some exports in some other markets in order to kind of meet our commitment to the customers in that so that it won’t be at a great margin when you are coming out of either Australia or I think it would be out of Australia, but again it’s not something that’s going to be negatively impacting our absolute results, but it might from a margin standpoint doesn’t contribute much.

So, before I hand it over to Matt, summaries, kind of all good. I definitely think Europe will - Europe is small, you all know it’s small, but it had a bad enough year to where you could see the impact of a poor year. We will get that back on track.

The windows business I think will do from a expense standpoint a negative EBIT dollar perspective we think it’s about half of what it was this year so that will be an improved result financially, but more importantly I think we are starting to prove out the business model there, still very early days, but we are kind of liking where we are at.

US business, better traction in the last two quarters. You can’t measure PDG quarter to quarter, so we are always cautious. We really should let it run for rolling quarters, so I don’t think we will know for sure exactly what we are out on PDG until the November announcement, but certainly in the business we feel like we’ve got some traction.

I think the plants in the US will run well. They are a little tight right now on supply of our products. We are commissioning the Plant City line, we built year or so ago.

They have probably cost us maybe a couple million this quarter and maybe a couple million next quarter, but the capacity is needed to service demand in the south and we haven’t been that happy with our last two startups, so we are focused on Plant City delivering a better startup result.

So again traction on PDG, we think all the plants will run well.

Freight is likely to be a little bit higher, somewhat due to inefficiencies and somewhat due to the market being a little tighter on basic trucking, flatbed trucking, but all in all we see more of the same, some growth in the market, some growth against the market and EBIT margins either in the high end or above our range. Okay, Matt, thanks..

Good morning. Thanks, Louis. So for the Group, fourth quarter Group results, net sales were up 6%. As Louis said, we had higher volumes in both segment, higher price in Asia Pacific, price was down a little bit in the fourth quarter in the North America and Europe segment and for the Group overall we had some headwind with the strong US dollar.

You can see gross profit was up about 40 basis points. Overall that’s a combination of the isolated production issue that Louis talked about in the US combined with the tail end of the Carole Park startup costs as well as a continued strong US dollar and the adverse effect that’s got on pulp purchases for Asia Pacific.

Adjusted net operating profit was up 4%. If you take out for the impact of FX it would be up 10%. We don’t talk about foreign exchange too much because we don’t control it and we don’t think it matters, but you will see in a couple slides in aggregate for the year at a relatively big impact.

Adjusted EBIT was up for again excluding FX it would be up 7%. Interest expense was up obviously as the debt level was higher year-over-year. So we had net operating profit in the quarter of 28.8. For the full year we had net sales of $1.728 billion, up 4%.

A similar story, higher volumes in both segments, good price traction in Asia Pacific, flat price in the North America Europe segment. Excluding the effect of foreign exchange, net sales would have been up 8%. You see gross profit margins were up 170 basis points.

As we’ve said in each of the loss three quarters the US plants had a good year overall and the production efficiencies that we’ve seen there over the last 12 to 18 months that really helped contribute to the gross margin expansion. That combined we had a lot of the input prices going in the right direction in fiscal ‘17 almost across the board.

SG&A expenses were up. Here you can see 4%, little bit of FX helped offset that, so underlying SG&A was up closer to 6, but more I would say BAU, we are investing business as usual. We're investing in the businesses mainly in growth programs, marketing programs and putting more feet on the street, that’s what’s driving the SG&A.

Adjusted and operating profits at $244 million for the year on a reported basis and on an adjusted basis at $243 million compared to $221 million a year ago. You see about a $7 million swing in other income.

About $3 million of that is foreign exchange, about $2 million of that is interest rate swaps and then almost $2 million of it is a small gain that we took in the first quarter on the sale of the pipes business. Here is the foreign exchange slide we’ve been showing for quite some time.

Down in the lower right hand corner if you are looking at the screen, you can see the impact for the year, so about a 4 point adverse effect if you will on sales growth on a reported basis and almost a 5 point impact on the growth rate for adjusted net operating profit, so again we don’t think that it’s material to the overall value of the company or certainly anything that we are trying to manage on a day to day basis, but in the context of foreign exchange the dollar is really strong this year and across the board on our major currencies, the euro, the pound and Aussie dollar that had an adverse effect.

US input costs, pulp decreased by about 7% year-over-year. Cement prices were up last year. We think they are going to be up again this year. The cement overall is a marketplace in the US has got lot of demand more than supply, so prices continue to rise.

You can see the utilities are down, so gas was down a lot as you would expect, the fracing dried up and oil production stayed high. On both the industrial usage and the residential usage, gas prices were low, quite a bit low, we are not expecting that kind of reduction in ‘17. Electricity prices were also down.

Freight last year was down from pretty high levels of the year before that was largely driven by fuel two years ago. Last year a lot of the fuel prices came down as many of you know and so that brought freight prices down. A little more detail on the segments for the fourth quarter.

As you can see, the North America and Europe segment for the quarter and the full year was up 4% and 19% for EBIT. As Louis said, the US only was over the 20% to 25% EBIT margin range, it was at 26%.

When you combine in the impact that windows had in FX and Europe that drags it down to 24%, 24.5%, so it gets you into the upper end of the range for the segment, but the US business operating above the range.

A lot of the dynamics in the North America business are very similar in the fourth quarter as they were to the first three quarters, so freight was favorable, the plants performed well with that one exception, lower units cost, volumes were good, a little bit of headwind with the SG&A improvements that we are - the investments that we are making.

In Asia Pacific, in local currency, for the quarter and the full year, EBIT was up 10% and 8% compared to the prior year mainly as a result of higher volumes and average selling price.

Production cost as I have said were up, a combination of US dollar impact on the pulp purchases as well as to a lesser extent in the fourth quarter the Carole Park startup. For the year, Carole Park, as Louis mentioned, ran over what we had initially forecasted and caused some year-over-year headwind for us.

On R&D, I would say very consistent in the fourth quarter as the prior three quarters, so for the year we are happy with our R&D as very much on strategy, it continues to be in the range that we try to keep in as a percent of sales.

On general corporate cost for the full year more or less flat, the increase - any increase would have been as a result of higher stock comp. Adjusted effective tax rate for the year at 25.8%, so fairly close to where we had forecasted it to be.

Adjusted income tax expenses for the full year increased primarily because of the mix, the geographic mix of earnings. We had income taxes. We are paid and payable in Ireland, the US, New Zealand as well as the Philippines.

And in both Europe and Australia income taxes aren’t paid and that’s been again fairly consistent with prior quarters due to - in Australia primarily the losses associated with the deduction related to the annual contribution we made to the fund. Cash flow is strong for the year, so operating cash flow is up 45%.

Really three things, the underlying operating cash from the businesses was up almost 15% so that was good. There is a difference in the annual contribution in every other year, one year is higher than the other and so it just happened to be a difference this year, it will go the other way for this coming year.

And then in working capital, we had some timing variances you'll see year-over-year some headwind if you will or some cash used in receivables and payables, nothing to read into that it just happens to be with the way the timing of the quarters closed year over year and we fully expected that cash will provide some nice headwind for us, sorry some nice tailwind for us for fiscal’17.

Inventory came down quite of a bit year over year so that was a total source of cash by almost $55 million. We had built up some inventory two years ago, blend that down and inventory levels as Lou mentioned the network is tight at the moment and so as a the result inventory levels are down a little bit.

Lower CapEx as you’d expect year-on-year, most of the CapEx that you see here and on the next page is maintenance CapEx, a little bit of the final fine tuning that we did in Cleburne and the Plant City investments are reflected in the CapEx numbers but that obviously was down on a year over year basis.

And then you can see lower financing activities as well. Here are some more on CapEx, for the full year we spent $73 million is down from over $200 million the year before. You can see the mix, the green bar is maintenance and the grey bar is capacity, the capacity related is primarily the Plant City and the Cleburne new sheet machines.

So those are more or less completed, we are in the process of commissioning the Plant City machine and expect to start that up in fiscal ‘17. The capacity expansion at Carole park as you know is done and that line is up and running. Similarly on financial management framework, no real change to the framework.

We continue to start with overall strong financial management, you may have seen we got upgraded in the fourth quarter from S&P, we are currently being reviewed as part of the annual process by Moody's and we’ll see how that discussion goes.

No real change in [Technical Difficulty] research and development, sales and marketing, from all the operating costs. Maintaining ordinary dividend, so we are at the higher end of our dividend payout range for fiscal ‘16 but we very much remain committed to paying within that range.

And then maintaining flexibility for sort of everything else whether that's being strategic on the acquisition side or making sure we’ve got plenty of headroom given market volatility and cycles as well as additional returns when that’s appropriate.

If you see on the next page, no real change overall to the liquidity profile of the company, the facilities remain in place, we’ve got the revolving credit facility now for $500 million, we’ve continue to have the senior secured notes of $325 million over eight years.

Balance sheet I think is in good shape, we had $170 million of cash at the end of the year, foreign almost $6 million and net debt. Plenty of liquidity and access given the accordion and the event that we needed. And we are certainly at the low-end, we’re at the very bottom of our targeted net debt to EBITDA range.

You probably will note that we’ll move out round within that 1 to 2 times x range at various points in the year. There tends to be a quite a bit of cash outflow in the first quarter of the fiscal year related to the payment to the trust primarily.

So while we’re at the low end we’d expect to certainly feel that to come back up here over the next 60 to 90 days. Couple of slides on asbestos, KPMG and AICF completed their annual actuarial review and the report is available now on the website.

So that's been completed for March, 31, the undiscounted and uninflated central estimate decreased this year, so down to $1.434 billion, down from a year ago about $1.566 billion.

The 8% decrease in the net present value was really three main things; the estimated future number of non-mesothelioma claims decreased, the lower average claim size which I'll go through in the moment as well as lower protection projection on defense costs.

Those were partially offset a little bit by Sullivan and Gordon regulatory change in the year, you’ll see a little bit of commentary in the report this year, where [indiscernible] services those costs in the state of Victoria can be included in future claims, overall that impact was a AUD56 million for Sullivan and Gordon, but overall the net present value is down for the year.

Last year we made a contribution of $62.8 million. We made a total of AUD799 million since the trust was established and in this July we expect to make a US dollar payment of about $91 million for the trust.

A little bit more detail on claims, so for fiscal ‘16 claims received at AICF were 12% below the actuarial estimate and 13% lower than the prior year.

Claims reporting for mesothelioma were 4% lower than the prior year and just about on the actuarial estimate, so that’s - I think that's a good piece of news, they trended up from the actuarial estimate the prior two years and so being back on the actuarial curve is a positive outcome for AICF.

Reporting for non-mesothelioma claims were all down pretty significantly, you can down 31% from the prior year of 33% from the actuarial estimate and that’s across almost all the other claim categories other than meso.

And then overall good trends on average claim settlements size, so across almost all disease types, the average settlement size is lower, mill settlement rates tracked below expectations and large claims also tracked below expectations, so all that is positive.

AICF’s gross cash flow for the year was about 20 million more favorable than it was originally projected, so. That's good, I think the AICF and the claims process seems to be in good shape. For fiscal ‘17, Lou mentioned a number of these already, we expect the US housing market to be a lot like it was last year.

So fiscal ‘17, we’re expecting it to be kind of moderate growth below 10% kind of 6%, 8%, 10% somewhere in there and most of the forecast seem to be hovering around that.

So we’ve planned on US residential stands of about 1.2 million, 1.3 million is kind of our planning assumption that’s off of a total North America meaning US and Canada res and non-res headline number about 1.4 million. We expect the EBIT margins in North America to be at the high end of the range for the year.

And you can see for Australia, we’ve got this detach starts forecasted to be around 100,000 obviously that’s the segment we play in more favorably than in high-density. And then we expect New Zealand and the Philippines to also have a good healthy market.

So to wrap up, overall ‘16, we think was a good year a bit about 10% increase in adjusted net operating profits, really strong operating cash flow for the year of almost 45%.

We've done a total of about $269 million of shareholder returns in the year, a combination of dividends that we declared last year and the dividend we declared in the first half of this year plus a little bit of share buyback activity that we did.

We did announce today, our intentions to do a $100 million share buyback as part of the fiscal ‘17 program. And with that we will open up for questions..

Just a couple of questions from me, Emily Smith from Deutsche Bank, just looking at your volume growth numbers, 11% looks like a pretty good number to me, I wondered if you could sort of clarify what that might have been on a like-for-like basis without the pool forwarding the previous corresponding period.

So just running what the - wondering what the sort of real volume growth might be.

And I guess bearing that in mind looking into the Q1, you are obviously, well it was tough comp this quarter, obviously a bit of an easier comp in the next quarter, just wondering if you can give us a little bit of help there? And looking at the your utilization, your plants, you obviously mentioned Plant City, where is you utilization sitting at the moment and just finally on PDG, you said November is probably when you’ll know if you’ve been successful but it is, would it be fair to say that early signs are looking pretty positive that you guys feel comfortable that you’re back on track in that PDG sense?.

Okay, thanks Emily. So the 1st question is kind of an order file question, we did have a price increase that had some portfolio volume last year. So, we felt the first-quarter - the fourth comp was going to be a more difficult quarter the comp against the first-quarter coming up.

And all that does remain the same, so we definitely had a stronger volume quarter in the fourth quarter than we are expecting. And our order file right now looks pretty good. So, we would expect to comp well against first-quarter numbers.

When you put into together and kind of figure well, put them together then you don't have to worry about the price increase and all that and that's what I said we’re pretty happy with the number.

The market we had different views on the market even internally, I think it’s just a little bit better than it was and then other thinks it's pretty much the same as it was.

So if you put all together that’s why I say we kind of on to clearing that, we are back on the PDG curve we want to be on but we do believe we have traction, so the market might be growing a little bit better, if it is obviously we're getting that benefit but we definitely feel we’re getting some benefit traction on the PDG side.

Utilization, the way we calculate our utilization on a gross hour basis, so we still have some plants that don't run 24/7 and we have some lines that don't run 24/7.

So the number is not, the overall number is not really the issue right, if certainly product categories getting a little bit tight and probably the most significant one is Plant City, I mean in HLD which is actually in South, and that’s where we need the Plant City line up..

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Andrew Johnston, CLSA. Just a couple of questions around geography, Lou if I could around the US, what trends are you seeing across difference parts of the US.

And then secondly on those US margins, I think you mentioned that it would have been 26 without the Europe issue, without the FX issue and is that also without the seven mill plant issue as well?.

So, yeah we ran 26 and we could have run a little bit more than that in the US I we didn’t have that production issue. As far as geography, I know you’re specifically interested in Texas and Texas is fine.

Houston a little bit off, Dallas real good shape, most of the other markets in South Texas are in good shape, so our volume in Texas is up year over year, so we sold more in fiscal year ‘16 then we did ‘15. And some of that PDG but even our market index is slightly up in Texas.

So I don't know how the Texas market is held up to be oil price reduction as well as it has, it's done pretty well.

As far as other parts of the country, I think everyone is back in a growth position, Midwest, Northeast, Southeast, Mid-Atlantic, Pacific Northwest, California and obviously some are harder than the others but when you go and we did do this earlier when we were working on our PDG analysis.

It really balances out to almost being meaningless for our company. So we are participating in all those markets and the variance between markets isn’t great enough to really impact our growth rate, so the US housing market although it's low by historical standards has been good from a year-to-year improvement..

Particularly targeting vinyl in the Northeast and we saw some ridiculously high numbers for vinyl volumes in the first quarter?.

I think we had some ridiculous numbers up there as well and that was just a monthly variance thing. I don't know why, at the same time we had a bit of a spike, they had a bit of a spike. But again we track the VSI number and we do look at it.

I mean we look at the public companies and once they give us the information, we were able to correlate pretty closely with our reduction in PDG pretty well timed to slowing of the rate of decline in vinyl citing.

And right now if you bring that forward six months and say okay you think your PDG is better, do you think vinyl is doing worse, you really can’t declare that either, they have a okay trend, they went through a softening and then they kind of have an okay trend right now.

But believe me if you’re invested in Hardie, you’re investing on a basis that vinyl is going to continue to decline and we are certainly of the belief and we think we’re seeing it but you can’t look at short term numbers and always pull it out exactly, especially monthly numbers you just can't do.

But again whether it’s hard citing, vinyl, we always look at everything four-quarter rolling. And when we are talking to in August, we didn’t like or even in November, we did like the four-quarter rolling. We like the four-quarter rolling better for the three categories than we did either in November or August..

Thanks first, so Peter Stein, Macquarie.

Could you perhaps just give us a bit more of a sense and a background on the issue with the plant?.

I mean we’re not going to give you all the details and we’ve decided to not tell you which facility, just embarrass the facility any further.

But the - yeah, it was a just a management mistake, it was a breakdown in the management system, we made products that shouldn't have been made and we had [indiscernible] situation that cost us about $7 million..

And that’s obviously at the EBIT line?.

Pardon me?.

That’s at the EBIT line?.

Yes, cost of goods sold that’s in, right..

And then perhaps just the second question around costs, how are you seeing the cost environment specifically in the broader pulp context of the next period, some views on that?.

I do have views but Matt would be more informed, these guys work on the numbers, so I’ll have Matt run through that for you..

So, like we said for last year, obviously pulp was down compared to the prior year. We think for fiscal ‘17, we don't necessarily know if the forecasts are right, I mean the external forecast, I think a lot of them are calling for it to come back up, we’re not seeing that yet, we continue to sort of see it down to flattening.

So if it goes back up, it will sort of go back up or flatten back out, so we’re expecting pulp for the next year to be pretty similar to the pricing that we’re seeing now and then we’ll just sort of see how it plays out, obviously that’s on the US dollar side, as long as the US dollar stays strong that will continue to have an adverse effect on how we purchase it in Asia-Pacific..

Matt, Andrew Scott from RBC. Just Louis mentioned possibility of adding capacity in the Philippines, I think the market is batting up against utilization.

Can you just give us some guidance on what the spend might be and timeframe on that?.

Yes, we are just starting to go through the approval process. We have gone through their approval process, so we are just starting to go through the projects process. I think it will be in $20 million range is what that line and incremental facility cost will end up being.

We will do most of the construction work over the next 12 to 18 months and then start to move into a commissioning phase right after that..

And is that plan with a view to purely servicing the Philippines market or do you look either broader field maybe within Asia or specific product categories that might be coming down here?.

Yes, it’s primarily the Philippines, I mean they also service - they do some export business, and we have constrained that business, the Philippines business on their export side.

Particularly, this year we took a little bit of their capacity out of exports in order to fund the internal market, that’s just - that’s a higher return sale for us obviously, and it was a way for us to manage the capacity of that plant and maximize the returns while we were - until we get the new capacity on board.

So as the new line comes on over, let’s call it 18 months from now, we would obviously allow them to start to ramp back up the export sales.

But the main reason for the doing the capacity expansion is because the Philippines market is quite good and the team is getting good traction there and the business is getting good traction in the market, and it’s equivalent of PDG..

Thank you..

Any questions on the phone?.

Your next question comes from John Hind of Merrill Lynch. Please go ahead..

Good morning, Louis and Matt. Congratulations on a good result.

Just a quick one or couple of quick ones for me, perhaps if we could talk about the strategy around the buyback program please, obviously you didn’t get pretty much at the last one, and share prices were in at $19 then, so - I mean, what is the thinking around that? I mean, how should we be thinking about it?.

Probably, you won’t believe me we actually do it, I don’t it. It’s probably what you’re really thinking. So I mean, obviously we changed a couple of things last year. One, I was trying to shift the way from special dividends. I think we have done that.

I think there doesn’t seem to be an expectation at the moment on the special and I think that’s a good thing. That’s in line with what we are trying to do on the balance sheet and from an overall capital allocation standpoint.

Two; historically, over the last several years, we have announced up to 5% of issued capital as the share buyback program and obviously that would be a very large number. And so this year, what we are trying to do is announce a number that we are actually going to do. And so that’s the reason that we have announced $100 million.

And then the other thing I would say is we intend to actually go do it. So it was a strategy all along, a year ago when we moved away from special dividend to share buyback to - step one of that was to get away from specials, and step two is get to a quantum and then actually go execute on the quantum, and I think now we will go and do that.

So I am hoping over the next 3 to 6 months that we will execute on the share buyback and either the next time that we are talking or certainly the next time that I am here, we won’t be talking about whether or not we are doing a share buyback..

Thanks.

And Louis, I think you mentioned some PDG program tune-ups this quarter, can you perhaps give us some color of what was involved there? I mean, are they ongoing and what you think that - I guess the net impact [indiscernible]?.

Yes, I think on our PDG, if you look at the story over the last year, I think as we started focus on doing some other things right in the business that either had financial returns or the HardieBacker growth, the concerns about LP trying to grab the [indiscernible] position in our category, all that work kind of distracted us from the main PDG work of positioning Hardie against vinyl kind of with our market development models that we developed over the last 10 years.

So I think it’s just really aimed reemphasizing the need to be running the vinyl as well as we do these other things that are also important at a business. And again, I think Ryan and his team in North America have definitely made that shift.

And market development isn’t like sales development where you walk into the door, you talk to a customer and you walk out, maybe with a few extra orders. Market development is changing behaviors in the market you are participating in, so it takes a little time to see the results.

We get some early indications, obviously we see commitments and conversions before we see volume. So our early indicators are definitely ticking up for us. So we are pretty happy. Now, that’s all about everything I said there was mainly about new construction in vinyl markets. Our programs in R&R had been performing well.

And probably we softened a bit as far as the conversion rate in R&R for a while. We really didn’t have to do much to kind of reemphasize that. There was a little bit of analysis required on the new construction side and not so much on the R&R side.

So we’ve got the people, we’ve added people into the business, we have structured it a little bit differently to where we get the right amount of attention on the exterior products, and vinyl in particular, and still get a good result on interiors, so they are running as separate organizations now, which I think is helpful.

So it’s just kind of that stuff, it’s just tune up organization, resource allocation, just all the normal stuff you’re supposed to do and we just lost a little traction and we are trying to get it back..

Thanks.

Just one more, I guess the new and R&R split, was there much of a change this quarter and how is it going to look - how do you think it’s going to look in FY17?.

Sorry, I missed the first part of your question..

Sorry.

Your traditional split between R&R and new volumes, normally it’s sort of 40/60?.

Yes, sorry about that. We are growing in both segments, so it probably won’t change radically until there is a change in market demand, meaning when next time we run into a housing recession. Right now, we are growing in both segments.

R&R is bigger than new construction, especially now, because even though housing starts have improved for several years in a row, they are still not at the - what the normal level is. But yes, we are doing well in both segments. I am pretty satisfied with where we are at now. New construction, we talked a little about mix.

As new construction grows faster than R&R, which it does, say R&R is growing 4 to 5 now, and say new construction grew 6 to 8, maybe last year, I don’t know. What happens is, we sell more Cemplank, because in south, our new construction brand for big builders is Cemplank, which does have different price point than our Hardie brand.

So that was one of the mix things I was talking about. If we get - we will get another year, we believe where new construction grows faster than R&R and that’s just naturally kind of force your average price down a little bit..

All right. Thank you very much..

I get on to that question..

Your next question comes from Andrew Peros of Credit Suisse. Please go ahead..

Good morning. Thank you. Just a question around Windows and the European business, obviously still having a negative impact on margins.

Just wondering, how long do you think that will continue for before it starts to have a positive impact on the margins?.

So with Windows, we are looking for a new product line for Hardie, it’s obviously not fiber cement, it does touch our fiber cement model and that it has a similar customer and value proposition in the R&R market. But it’s standing for a large return down the road.

So going into the initiative, we knew we are going to lose X million dollars for the first, and to answer your question, it’s the first three years, we think it’s going to run negative EBITs.

And those negative EBITs will reduce significantly this year and then in fiscal year 2018, where we have got it drawn up right now is, they have reduced again or possibly go away here by sure, the following year would be somewhat positive. So it’s all expensed, so you’re seeing everything.

You’re not seeing a bunch of capital spending and everything behind the scenes on Windows. All you’re seeing is expense.

It’s not super big dollars for what we are trying to do, I think I don’t know if you guys know that, that runs under Mark Fisher, as Mark Fisher heads International and he has non-fiber cements that runs under his non-fiber cement responsibility. That team is separate from the US business.

We did that specifically, so we wouldn’t be paying an opportunity cost in the US business as we try to start up Windows business. And like I said, we had a little bumpy start. Few things were harder than we thought they were going to be. It took us three, four months to sort out some of that stuff.

But over the last six months, we feel like it’s a well-controlled initiative that’s kind of giving us what we want to see in the market and it’s also kind of given us the contribution margin at the unit level that we are looking for. But that contribution right now has not covered the fixed cost in the business, so that’s how you end with your loss.

But we are a positive contribution on the Windows we are producing and selling at this point..

Okay. Can I ask a question around US volumes, slightly differently and I appreciate them, it might be a little bit hard to answer.

But just wondering how much of the volume improvement that you saw was attributed to possibly the mild winter months that you saw over the last quarter and just kind of get some thoughts around that?.

Oh, mild weather. Yes, weather is not bad. The weather is not bad, we don’t talk about weather and I guess, we are only the exception when it’s bad, we don’t talk about it. But we don’t talk about it when it’s good either. But yes, I wouldn’t have a way of guessing.

I think [indiscernible] starts, completions, so I think you can pull that out of the US data. Obviously, we don’t think it’s driving our number. So it sound like there are no other markets there on fire because everyone is built through January and February. We just haven’t seen it.

But you can get it from US builders, you can get it from the data on completions, but I don’t have any specific information like a couple of percent came from that or whatever. But the weather has been okay this summer, it hasn’t been one of the bad ones..

Okay. Thanks..

Your next question comes from Keith Chau of JP Morgan. Please go ahead..

Good morning, Louis and Matt. Couple of questions from my end.

First one, Louis, just revisiting the mix impact on the coming year, I was just wondering that a few of your larger customers being the larger homebuilders or the end customers suggesting that first homebuyer activity has actually come back into the market and a few of the large guys are shifting their mix of products from move up into the entry level buy.

Is that likely to have a further effect on mix in years ahead, or do you think the shift from the move up buyer to the entry level buyers are going to have too much of an impact on price?.

Yes, that’s a good question. So when we weren’t - we clearly weren’t happy with our PDG, we tried to kind of go through all the arithmetic, already mentioned we went through the geographic mix, but we also went through the housing mix as well.

And just to remind everyone, when we are selling against vinyl, we are going to be much more biased to the top, so in the Midwest, Mid-Atlantic, Northeast Canada, we are going to be biased toward the top, and that’s where our market development programs are basically run.

When we are selling against hard sighting, then we are going to all the way through to market, we are going to go multifamily, starter home, first move, second move, semi and custom.

So it doesn’t affect us nationally - when one say that top is better than bottom or vice versa, it doesn’t affect us nationally, but it does affect us in the northern markets. Having said that, it’s not enough to worry about.

It’s not enough for us to change what we want to do and I don’t think it’s enough for investors to think this is going to be better than I thought or this isn’t going to be as good as I thought, because I think in the end, it’s going to level out at some point where either the country continues to spend more on housing or less on housing and it will settle in at a basic terminal opportunity of whatever it be X or Y, and then we are going to - 35% against that is going to give you a big number.

It’s still going to give you a big number, whether it’s X or Y and as you go through the business cycle, it changes and we don’t adjust much. So we don’t - most of you know, when we went into the downturn, we definitely moved resources off of new construction and put them on R&R.

So that kind of a big shift we wouldn’t make if we had a similar situation. But we wouldn’t say there was a forecast out that starter homes are going to lag to market for the next seven years.

We wouldn’t pull resources off starter homes, because our position in each of those categories is kind of what adds up to be in our value in the end and there is always going to be enough starter homes first move, second move, customs, they are always going to be enough that we are going to want to target it with our resources.

So I won’t worry about it. I can’t remember what the trend is right now. Over the years I always see these trends and I will be honest with you, when we sit down and talk every month or so about how the month went, it’s never, the wrong houses are being built, we did the wrong things. So we didn’t do things as well as we wanted to..

Okay. Thanks Louis.

And just a follow up question on some of the issues that you had done wrong that you have mentioned on the cost side, do you think the couple of issues on the manufacturing front, some bit more systematic being the manufacturing issues over the past kind of year or two that have now been resolved, some more sporadic local management system issue that you’ve just had.

Are there any internal issues - sorry, internal processes that you have put in place in order to prevent against risk mitigation strategy to prevent these issues from occurring because it seems as though the [indiscernible] there is a cost issue at some point during the year?.

That’s not a bad comment. I don’t know if we just tell you about our issues or other people don’t have issues like we have every 18 months, 24 months.

It seems like we are going to lose a ball mill on one place and then this thing wasn’t so much equipment related and then we lose ball mill in another place and so I’ll have to admit as good a manufacturers as we are, it’s kind of irritating.

Having said that, whenever we get into situation like that, we review the root cause, and we try and shore up our programs, both at the plant level and the oversight level. So we’ve certainly done that with the most recent event. Will it never happen again? I doubt. I think, we will have some bumps in the road.

I mean, the manufacturing story is pretty interesting. Matt kind of alluded to it.

When you look at the level of manufacturing efficiencies we are getting in the US businesses and to some extent prior to the startup at Carole Park and the Australian business as well, we are on a steady improvement curve on manufacturing efficiencies, unit cost, waste generation, machine utilization, delayed time, time between runs, all that stuff is good.

And then you have these bumps where all of a sudden you have - you just have an episode you shouldn’t have and it cost you a fair amount - enough money where you got to explain it and I think you got to explain it.

So yeah, I can’t guarantee, we wouldn’t have another one next year, but I do believe that our organization is kind of learning a lesson that you can aim, we like to say step change when you bring a plant from running, say, 300 million feet a year and that same plant three or four years later, it’s running 450 million feet, that’s step change, okay, but you can’t just do that, you got to do the incremental continuous improvement and have all the systems in place that make sure you don’t have the bad events, a ball bill [ph] blows up, they don’t literally blow up, they just stop working.

Ball mill goes out on your order type of situation we had recently, you just - so we just got to build it in, it’s got to be a tighter management system on the manufacturing side and that’s both at the plant level and the oversight level.

So I think Ryan who has US responsibility and Mark who has AsiaPac responsibility are committed kind of making sure we get that in place, but slight math says about is my bags, coming off of that event, I’m not going to tell you we’re never going to have another one.

So and you’re going to have to track us for a year, two years and then say, okay, I haven’t seen any of that stupid stuff happen, maybe they got it right. Okay.

What else?.

Thanks very much, Louis. Very helpful..

Your next question comes from James Rutledge of Morgan Stanley. Please go ahead..

Thanks and good morning. Just firstly, just circling back to your earlier comment about backerboard being a drag on average price mix. I guess, you’re implying there that backerboard is growing faster than your overall volumes, I assume that’s market share shift given you’re also saying that new constructions growing faster than R&R..

Yeah. New construction is growing faster than R&R. Backerboard, actually as it turned out for the year, it was ahead of exteriors most of the year and then I think it pulled pretty even with the good exteriors quarter in the fourth quarter.

So what you used to see year-on-year is exteriors outgrow backer, so we’d get some price improvement because of the exteriors outgrowing backer. Last year, as it turned out, they grew almost the same, so you got no benefit of that mix difference, it basically stayed even.

But, yes, Cemplank would be up in the south, not because of the percent of Cemplank, but because in a segment, but because the segment was bigger relative to the R&R segment.

I had really covered - a big, you get a big pull-up from ColorPlus because you basically produced no more boarding, you put a lot of value add on with the paint and we didn’t get that last year, so that was another situation. Some of that is like I said, geography, but some of that meaning we didn’t grow as well in the North as we wanted to.

If we did, we would have gotten that price improvement through mix, but some of it’s just even in the north, we’re not growing Color as a percentage of the total as well as we’d like, so that’s one of the areas Ryan and his guys are working on..

Okay. That’s great. Thanks.

Where would your partnership be currently on backerboard?.

Market share, is that what the question. Yeah, we’d be, I don’t know if we get that shown, I don’t know if we get that, he says, no. We’d be the biggest producer of backerboards in the US.

So you have basically three types of backerboards, you have fiber cement, which we would have 99 point something, you have glass mesh boards, when you add them altogether, the glass mesh boards would have a higher market share than fiber cement still and we - still like last year, we would have taken some market share from fiber glass mesh boards and then you have some gypsum kind of knockoff boards that don’t have a lot of share.

And then I guess you have DensShield with the glass mesh, which is a category that’s probably growing, because the patent came off. So, now several manufacturers have that technology, not just one.

So the long story as we have a very good position, it’s by far the largest in the industry, but we also see fiber glass mesh cement boards are and should give up share in the future and we think we’re the natural taker of that share. So we think we’ll grow it more even though we’re currently the biggest..

And given that you’re saying good growth rate return after, I think, it was two years ago where you took the large price increase, do you have any plans for price increases, more modest price increases over the next 12 months in that product?.

Yeah. 12 months, you’re probably getting into a window we’d look at again. So as far as this year, there may be a little tune-ups of pricing product lines, specific markets, but we wouldn’t take it across the market price increase.

And I don’t think we’ll look at it until I’m talking exteriors here, I don’t think we look at it until maybe December, January for implementation and maybe February, March, but I’m not saying we take it. Okay.

This is, as investors and managers in a company, sometimes you have, you aren’t 100% aligned on every little point and this is an area that management doesn’t feel the same anxiety about as some of our investors do. We think we need to price based on long-term penetration of our product.

We’re not necessarily annual takers of price, okay, we like our margins, we like our market position, what we really want to do is grow. Now, a lot of times, obviously, you can take price and grow.

That’s an ideal situation and we just felt like this year, we’d be giving up some to get the - give up some of the growth to get the price and we didn’t think that was a good tradeoff.

So I’m not saying we’ll raise our price in 12 months, but I’m saying we’ll certainly look at it as we do every year and then consider whether we should take price or not and it will depend a lot on our growth rate and the competition within our exciting category..

Okay. That’s great.

I just have one other question around SG&A, it looks like you’ve increased in the US, specifically within the March quarter by about $5 million, which is quite a ramp-up compared to the other quarters, do you think you’ve hit most of the kind of current run rate of investment in SG&A or do you think that’s further to go there?.

Yeah. I think Matt might be closer to that than me..

Yeah. We definitely stepped up the level of investment in the fourth quarter, most of that was in labor costs and most of that was in sales labor. We’ve got additional market and product programs that we started to ramp up in the second half of the year and I’d expect that to continue through at least the early part of fiscal ‘17.

Most of the investment is going directly into commercial phasing programs and sales and marketing and product and segment oriented program and personnel that we believe all should drive growth in the future.

So I think you saw a good size bump in the fourth quarter and you should expect that it will continue to grow a bit, it certainly won’t flatten out in at least in the first half of fiscal ‘17..

Okay. Thanks guys..

[Operator Instructions] Your next question comes from Matthew McNee of Goldman Sachs. Please go ahead..

Thanks, guys.

Just a couple of follow-up questions, Louis just on Carole Park, you had said that it has an AUD8 million impact, so all things being equal, heading in to ‘17, you should get AUD8 million higher impact there?.

I think that’s a fair assumption. That would be my assumption, but I haven’t specifically talked to the Australian business about that, but I’m sure that’s our assumption as well..

And that’s before obviously, you’ve got the actual benefit of the - having the plant as well?.

Yeah. We’ll start getting that benefit this year. I don’t think that benefit will kick in for the full year. So, we’ll start seeing lower unit costs and lower freight costs as we bring more products up to the new line.

But like you said, on a comp benefit, if we spend AUD8 million on a startup and we don’t have a startup this year, we should start with that AUD8 million. So you and I see this the same way..

Yeah.

And just on the Windows loss, is it 10 mil thereabouts or is it closer to the 10 and 5 for the full year?.

Is it closer to 10 and 5, it’s a game show or?.

Well, just trying to get a bit more info on that, making sure, I think you said it was too high..

That’s not a bad guess, so it’s between those numbers and I think we’ll have it again this year. So you can see if, between those numbers that we have at this year, then it’s becoming not such an issue for US business results..

Sorry, just to clarify, so it will be similar loss this year and ‘17, maybe half in ‘18, because I thought you said before that, I thought you’d be close to breakeven in ‘18, positive in ‘19 and the loss may be half this year..

I think you’re trying to confuse me about all these years. So ‘16, we just figured and you win the prize, because you picked two points that we’re in between and then my guess is, we’re going to have our EBIT loss and run the business the way we want to, so we’re going to do all the market work we want and have our EBIT loss.

And then the following year, I think you’re either getting very close to breakeven or you’re at breakeven by the end of the year. And just to give you an idea of what goes with that, it’s kind of doubling up of units, okay. So we get back to number of units and we’re looking to double that this year, and we’re looking to double again.

So, I think it’s a good plan, but believe me, we’re learning that, we’re learning that part of the market, we wouldn’t be good at it yet, we’re good at a few things and we have to build the capability, but again, you guys know how Hardie thinks about this stuff, if we’re going to have another big category like backerboards or exterior in the US, we want it to be a category that’s going to generate good profitability.

So you can’t go buy a $500 million revenue business and gift that. They just don’t exist in the US market, so we’re going to try and grow on. In order to grow on, you basically start with zero capability.

We’ve bought a parts manufacturer and we bought a windows assembler, both very small and we’re now in to the early stages of what we were like US in early 90s when we were trying to figure out how to make in market fiber cement in US market and you go up the capability curve and we’re growing up that capability curve in Windows.

It still looks like a good opportunity to us, our assumptions entering launching the initiatives are mainly being proved out.

We don’t have any that are like showstoppers though, we didn’t think about that, something you guys know that we were in fiber cement pipes for a while in the US, that’s a good example, we hit a showstopper couple of years into that initiative and we saw, we should have known that a couple of years ago, but we didn’t.

We’re not quite a couple of years in the windows, but most of our assumptions have proven out. Now, there is no guarantee that we’re going to be a big window producer.

There is no guarantee that we’re going to be successful with the initiative, but we’re doing a good job kind of exploring how you build a business model around fiber glass windows and generate returns that are well above our whacks, our investors would be happy with it and the scale is there in the end. So -.

And you’re more confident than you were 12 months ago?.

Yeah. I mean, just because of time. In other words, like I said a lot happens in that first year and nothing really bad happened, we didn’t stumble on anything that said, hey, we had this thing wrong, we can’t do it that way. So, so far, so good..

And one final question from me, Louis.

Last year, in the US, you talked about manufacturing efficiency program and talked about getting about 10% more products, same number of planned, putting what happened in the fourth quarter in that one plant, can you give us a bit of an update on how progressed you are through that 10% target, are you half way there, are you pretty much seeing all the benefits?.

Yeah. I mean, when you see Ryan, I think you’re going to see Ryan in Melbourne, I’ll be with him. But he’ll tell you, he’s probably almost all the way through the 10% and now he’s looking for more. So, we’re, Matt kind of covered it, we’re on a good trend line in manufacturing.

We definitely figured some things out that if kind of unlocked some of the potential of our the approach we take to high throughput, low cost fiber cement manufacturing and of course the value add piece with Color and a few other things now..

So again, putting aside all the uncontrollables on pulp prices and cement, like for like, would you expect to get lower manufacturing costs in ‘17 than ‘16 just because of that manufacturing improvement?.

Yeah. If everything was normalized, we’d probably get a AUD4 million startup. So if all your input costs are normalized, you’ve got a AUD4 million, though, I think we have AUD4 million worth of improvements, yeah, I would say, we do.

Now, you may not see it, depending on product mix and plant sourcing and all the rest of it, but we’ll definitely have that as - well, I shouldn’t say definitely, I can’t guarantee it, but that would certainly be our expectation..

Okay. No worries. Thanks.

Your next question comes from Kathryn Alexander of Citi. Please go ahead.

Hi, guys. Just a couple of questions for you. Firstly, on primary demand growth, I know in the past, you’ve articulated a short term target as 5% to 7%.

I’m just wondering, can you confirm, is this still the case, and approximately how long do you think it is before you can really strictly end up in this range?.

Yeah. Our target is 6% to 8% and I think we’d be able to tell you if we’re in that range in November..

Okay, great.

And just a last one, probably one for you Matt, can you just provide some CapEx guidance for ‘17?.

Yeah. I think for the next couple of years, not just fiscal ‘17, but probably for ‘18 as well, we’ll primarily be focused on maintenance CapEx. We’ve obviously got the planned city line that we’re commissioning this quarter. We’ve got a [indiscernible] in line that we’ve just about finished construction on and we’ll commission that.

So we’ve got the capacity in the network in the US. So we don’t see over the next couple of years, the need for brownfield, greenfield per se, obviously that’s all subject to market demand and market penetration. We’ll have the capacity expansion in the Philippines, which we’ve talked about with the Carole Park facility in Australia.

We feel like we’ve got adequate capacity taken care of, for Australia in the Australian market. So I think you should think about fiscal ‘17 primarily being a maintenance CapEx type year, with levels that look similar to fiscal ‘16 levels, again kind of plus or minus.

So if we’re around that AUD70 million, AUD75 million mark, you put a small range around that, that’s probably the level that you should expect for fiscal ‘17..

Okay. Great. Thanks so much..

There are no further questions at this time. I’ll now hand back to Mr. Gries for closing remarks..

All right. Thank you. I appreciate everyone joining our results call. Appreciate. Bye..