Thank you for standing by and welcome to the James Hardie Industries, JHX, Q1 FY 2022 Results Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Dr. Jack Truong, Chief Executive Officer. Please go ahead..

one, shift in demand from Cemplank products to Hardie brand experience where appropriate to driving penetration of ColorPlus technology products in R&R segments. And two and three expanded into adjacent markets with our market-led innovations.

On the right hand side, what you see here is significant impact this strategy has had on our recent financial results in North America. Our teams are partnering with our customers to drive a higher value product mix and you can see the results in Q1.

The blue line on this chart, representing percent volume growth for each quarter from fiscal year 2020 to Q1 of fiscal year 2022, the green bars represents percent price mix growth across the same time period.

If you focus on Q1 fiscal year 2022, you will observe the real impact that our strategy of driving high value product mix had on our financial results. Not only did we see strong volume growth at 21%, but equally important, we also saw a significant step change price mix growth of 7%.

What this indicate is that by partnering closely with our customers, we have seen successful in shifting through high value product mix and driving profitable growth. While not shown here, we have had similar success in Europe and Australia, New Zealand in delivering similar strong results.

Expansion of high value product mix for growing our overall volume along with lean manufacturing execution were the key drivers in offsetting input costs inflation and marketing investment in the first quarter. It enabled us to deliver a strong leverage to our bottom line in all three regions, North America, Europe and Asia Pacific.

Turning now to Page 9 for an update on innovation. In May of 2021, we announced the launch of three new global innovations, Hardie Textured Panels in North America, Hardie Fine Texture Cladding in Australia, and Hardie VL Plank in Europe. We had very good traction with market acceptance and penetration of all three products since the launch.

We continue to partner with our customers to drive awareness and adoption. Feedback from home owners and our customers in North America have been overwhelmingly positive. Hardie Textured Panels deliver the contemporary design solutions that fit any homestyle that homeowners want and need.

In addition, they offer protection properties such as durability, water resistance and fade resistance. What you see here are four examples of Hardie Textured Panels on two different homes in Oregon, one in California, and one in Utah.

What I'd like to point out here about these pictures is how Hardie Textured Panels are prominent in a variety of home designs, from contemporary look to coastal, to mixed design. Turning now to Page 10. Similar to North America, feedback from homeowners and customers in Australia are also very positive.

What you see on this page are four examples of Hardie Fine Texture Cladding in the Australian market, which as you can see help to augment the modern design look that is prominent throughout the continent.

As with Hardie Textured Panels in North America, Hardie Fine Texture Cladding offer endless design possibilities for homeowners while delivering on protection that homeowners need, durability, water resistance and non-combustibility. Moving to Page 11. In Europe, we also very pleased with the progress of Hardie VL Plank product.

Installers have been consistent in their positive feedback about the time savings the Hardie VL Plank offers compared to comparative solutions. Hardie VL Plank save approximately 20% on total installation time. On this page, you see examples of Hardie VL Plank in the UK and French markets.

Where I would put out is how Hardie VL Plank helped to protect and provide a mixed design modern look, which is becoming more popular with homeowners across the Western European continent.

We’re excited about these new innovations and how they will allow us to continue to penetrate and grow in large adjacent markets in each of our three operating regions. While we're excited about the early success of these three new innovations, our global innovation program is much bigger than just these three products.

Our innovation team is focused on our innovation pipeline to ensure we will have additional new innovations to provide endless design possibilities with superior durability and protection for the homeowners around the world. Turning to Page 12 for a summary of our global results for the first quarter.

This is now the ninth consecutive quarter we delivered consistent financial results, growth above market and strong returns. Specifically in the first quarter, we delivered global net sales of over US$843 million, which is 35% growth versus the prior corresponding period.

And we delivered a global adjusted net income of more than US$130 million, which is an increase of 50% over the prior corresponding period. Most important is that we delivered strong financial results in all three regions for four consecutive quarters.

As all three regions delivered exceptional double-digit growth in both net sales and in North America driven by strong momentum in high value product mix penetration and share gain we achieved net sales of more than US$577 million at 28% growth. EBIT more than US$169 million at 29% growth for a continued strong EBIT margin of 29.3% for the quarter.

In Europe, we deserve a four straight quarters of strong organic growth. Net sales are more than €103 million, 37% increase over the prior corresponding period, EBIT more than €13 million for very good EBIT margin of 13.1%.

In Asia-Pacific with strong performance in all three countries, we deliver net sales of A$184 million at 33% growth and EBIT to A$50 million at 50% growth and a strong EBIT margin of 27.4%.

Our strategy of driving penetration of high value product mix in all three regions along with lean manufacturing execution was the key drivers in delivering positive leverage to the bottom line in all three regions. This was achieved against the backdrop of high input cost inflation and higher investments in marketing innovation during the quarter.

I would like now to turn over to our CFO, Jason to provide additional detail on our financial results..

Thank you, Jack. Good morning, and good evening, everyone. I’ll start on Slide 14 with our global results. This is our fourth straight quarter with record global results including quarterly records for net sales, adjusted EBIT and adjusted net income.

This also marks the fourth consecutive quarter we’ve been able to deliver strong results in all three regions simultaneously. In the first quarter, each region again delivered double-digit net sales growth and double-digit EBIT growth while also expanding their adjusted EBIT margin.

In my view, our ability to expand global adjusted EBIT and EBITDA margins and our ability to drive leverage on our outstanding top line results is the real standout of our first quarter results.

We invested significantly in our strategic initiatives during the quarter with SG&A up 36% globally and like most companies, we have significant inflationary cost pressures. Yet, we were able to still drive margin expansion and drive leverage to the bottom line with adjusted net income improving 50% on a plus 35% net sales performance.

As I just mentioned, global net sales increased 35% to US$843.3 million.

This excellent top line results was driven by strong volume growth in all three regions totaling 25% percent global volume growth and net sales growth included 10% price mix improvement as our teams in all three regions successfully gain momentum and driving a higher value product mix.

Through continuous improvements of lean manufacturing globally and integration of our supply chain with our customers, we were able to translate that strong top line results into an even stronger bottom line outcome. Global adjusted EBIT improved 45% and global adjusted net income increased 50%.

Global adjusted net income in the first quarter of US$134.2 million represents another all-time record high for a quarter. And as I mentioned earlier, we were able to expand our global adjusted EBITDA margin by 110 basis points to 26% in the first quarter.

We continue to generate strong cash flow with operating cash flow of US$184.1 million in the first quarter. It is worth noting that these first quarter results are not reflective of simply comping and easy prior quarter due to COVID.

Our first quarter results last year included our global net sales down only 5%, adjusted EBIT flat and adjusted net income was only down 1% in the prior period. I will now review each region in more detail starting with North America on Page 15. In North America, the team delivered another outstanding quarter.

In the first quarter, net sales increased by 28% to US$577.1 million. This represents the highest net sales in one quarter ever achieved by the North American business. It is worth noting that this first quarter result was against a comp of flat last year.

This significant growth was driven by our continued focus to partner and integrate with our customers. In addition to strong volume growth, the team began gaining momentum and high value product mix penetration with our customers. Price mix improved by 7% and our expectation as we will deliver price mix improvement of 7% to 9% for the full year.

These outstanding top line results were coupled with even better adjusted EBIT growth, which increased by 29% in the quarter to US$169.3 million at an EBIT margin of 29.3%. The exceptional adjusted EBIT and margin results were driven by strong organic volume growth, particularly of high value products and continued LEAN manufacturing savings.

These margin accretive items were partially offset by our significant investment in growth initiatives and inflationary cost headwinds. The North America team continues to deliver consistent double-digit net sales growth at a step changed EBIT margin level. Turning now to Page 16, to discuss the European result.

In Europe, the team delivered a fourth straight quarter of strong results and a third straight quarter of double-digit net sales growth. In the first quarter, net sales increased 37% to €103.3 million. The team remains focused on high value product mix penetration with our customers.

Fiber Cement net sales increased 91% in the quarter, which contributed to a 9% improvement in price mix. The combination of strong volumes, improved price mix as well as lean improvements resulted in Europe adjusted EBIT margins expanding year-over-year to 13.1%.

Fiscal year 2022 represents the start of the fourth full year since the Fermacell acquisition. The European team is now fully integrated into James Hardie and they have started fiscal year 2022 with significant momentum. Let's now move to Page 17 to discuss Asia-Pacific. In the first quarter, net sales increased 33% in Australian dollars.

You will note that Asia-Pacific price mix was negative for the quarter. This was due to the significant shift in Philippine sales volumes, as a percentage of the total. In the prior first quarter, the Philippines was shut down for much of the period due to COVID restrictions.

However, in our Australia and New Zealand business, we are achieving similar results to that of North America and Europe with price mix growth of 6% as the teams have strong momentum and high-value product mix penetration with our customers.

The strong top line results in the first quarter were translated into even stronger bottom line results with adjusted EBIT growth of 50% to A$50.4 million at an EBIT margin of 27.4%. That is a 300 basis points of margin expansion versus the prior first quarter. Moving now to Page 18 to discuss operating cash flows and capital expenditures.

We had strong operating cash flow of US$184.1 million in the first quarter and the trailing 12-month operating cash flow was up 56% to US$781.8 million. On the right hand side of the slide, you see a summary of our capital expenditures. In the first quarter, capital expenditures totaled US$43.4 million.

Production at our Prattville, Alabama facility continues to ramp up and is on track to be the best startup in our history globally. Sheet machine one started saleable production in March, and sheet machine two begin saleable production in July.

We believe that additional capacity will help us to continue to drive profitable growth and gain market share throughout fiscal year 2022. Looking forward, we expect total capital expenditures to average between US$250 million to US$350 million per year over the three-year period of fiscal year 2022 through fiscal year 2024.

This is an increase to our prior capital expenditure guidance and reflects greater investment in future capacity, both brownfield and greenfield in all three regions as we continue to drive profitable growth.

Adding the right capacity at the right time, positions us to continue to drive market share gains and flow products to our customers and the end users. Moving to Page 19, we'll discuss capital management and allocation. Our strong capital structure and cash flows have been able to us to execute on all of our capital allocation objectives.

We continue to preserve a strong liquidity position and financial flexibility and we are positioned to continue to invest in organic growth, including capacity expansion, market-driven innovation and marketing directly to the homeowner.

We remain focused on investing in growth and returning capital to our shareholders while continuing to strengthen our balance sheet. Finally, let's turn to Page 20 to discuss guidance.

Our significant momentum and high-value product mix penetration in all three regions combined with continued market share gains and lean execution gives us confidence in raising the adjusted net income guidance range, while also committing to further investment in our growth initiatives.

We have raised our adjusted net income guidance to a range of US$550 million and US$590 million. The comparable figure for the prior year was US$458 million. The revised guidance range represents 20% to 29% year-on-year improvement in adjusted net income. Specific to our North America segment, we're providing two points of guidance.

First, for North American net sales for the full year fiscal year 2022, we expect growth greater than 20%, and we expect price mix growth of between 7% and 9%. We've also revised our guidance regarding cost of goods sold, inflation and investment in our strategic initiatives.

Globally, we are anticipating between US$120 million to US$150 million in cost of goods sold, inflationary headwinds in fiscal year 2022 versus fiscal year 2021. We have also increased our fiscal year 2022 expectation for investment in our growth initiatives.

We now expect to invest between US$100 million to US$120 million in strategic growth initiatives. Our first quarter results were exceptional. We delivered expansion in all three regions amongst the backdrop of global cost inflation and while investing aggressively in our strategic growth initiatives. We have now concluded our prepared remarks.

I'll hand it over to the Operator to commence the Q&A portion of today's meeting..

Thank you. [Operator Instructions] First question comes from Peter Steyn from Macquarie. Please go ahead..

Good evening, Jack and Jason. Thanks very much for your time and congrats on the results. So two questions, just got your CapEx guidance, Jason, you mentioned greenfield and brownfield intentions in all three regions.

Could you perhaps give us a little bit more detail there in terms of some of the nascent thinking, where the investment is likely to focus?.

Yes, Peter, obviously we're focused on high value product penetration. And so as we think about new capacity, it'll be through that lens as well as innovation. But as mentioned on the earlier, we do expect to have greenfield capacity expansion in all three regions, so in Australia, Europe, as well as North America..

So where you moving closer to 5% [indiscernible] in Europe, are we in the context of a sales performance?.

That is the plan, Peter..

Okay, perfect. And then my second question would just be around the cost guidance, obviously increasing that just curious on the SG&A and R&D spaces have largely a function of increased marketing spend.

And is that a consequence of better outcomes than what you've been expecting at the stage that you're wanting to ramp up that investment and press just a little bit of detail and sort of strategic thinking around that?.

Peter, that's a very good question. Yes. So as I had mentioned, the early results about campaign I've been very successful, allows us to really reach the right target groups, which really the Christine's the definitive female homeowners that fit our demographics as well as, they live in the homes that really need to be remodeled.

And then, so it is – so that's based on those data, we and the financial results that are coming out, that what we see is that there's a really good path for us to continue to not only continue with the program and accelerate and then expand throughout the U.S. as well as in other part of the world that we operate in.

And second is that we also have a full line of innovative products that that we plan to launch and commercialize. So it is about being able to drive growth with high margin and then be able to reinvest some of that to continue with that path..

Yes. Perfect. That makes sense. And in the meantime, you’ve got the capacity to very easily serve the market that’s coming at you as you see it and via incremental investment from a marketing point of view..

Correct..

Perfect. Thanks. I’ll leave it there. Appreciate it..

Thanks Peter..

Thank you. Your next question comes from Andrew Scott from Morgan Stanley. Please go ahead..

Jack and Jason, well done and great results. Just couple of questions. Jack given the market strength, just interested in your thoughts on announcing a second price increase for this year..

Well, Andrew, our plan has always been that we do value pricing and then so we will be taken our annual price increase about the same time every year. The only difference is that this past year, we moved our price increase up to really line with beginning of the calendar year. So it is our – that is our path..

Okay, understood. Just thought the market might have been strong enough to sustain a second increase..

Well, it is – our strategy is really about delivering more value to our consumers and customers and it’s really about making sure that we can market the high value products that deliver a strong value proposition to the homeowners. And that is our strategy.

And that’s what you saw in our Q1 results that we were able to get that price mix to go higher, much higher than the normal price increase – invoice, price increase for the sake of invoice price increase..

Absolutely. It was a great outcome there. Just second question. We can’t talk about industrial companies in that moment without focusing on supply chain. So just interested, can you talk about any specific inputs for you that are not just seeing price appreciation, but actually difficulty in obtaining those supply.

And in terms of your supply to customers, how is that tracking? Maybe if you can talk about service metrics, whether it’s delivery in full or other metrics, please?.

Yes. I think Andrew, if you look at our – I think Slide 8 or 9, that that really show the volume growth that we have in North America, the past seven or eight quarters. So we’re able to deliver volume to the marketplace in North America in double digit and we’ll continue to do so.

And just as you know, that we have Prattville, I think Jason mentioned that the start up of Prattville line 1 is going well and we just started line 2.

And together with a leaned approach and then our supply chain integration in our customers that would allow us to essentially make the right products that the market needs, and then be able to flow the product from our production line to the marketplace.

So these are the key initiatives that that we have in driving within our company to ensure that we serve the markets on what the products can deliver the value..

Okay. Thank you. That’s great..

Thank you..

Thanks, Andrew..

Thank you. Your next question comes from Lee Power from UBS. Please go ahead..

Hi Jack. Hi Jason. I was expecting to see COGS guidance maybe drive some of the impact upgrade. Can you just talk a little bit about what you seeing there now that that COGS inflation guides to the top end of the rage, maybe around freight and pulp, just because it seems like a lot of them had started declining? So I’d just love to get your thoughts.

Thank you..

Yes, Lee it’s a good question. So I’d say it’s more of a narrowing of a range than increasing. So obviously, we have three more months of actuals under our belt and better site lines into the future. Certainly pulp and freight haven’t – while they haven’t gotten down significantly, they’ve normalized a bit.

The other piece of that guidance would be our expectations around volumes have increased since the last time we spoke and that that guidance is in total dollars. So that’s go in the opposite direction..

Okay. That makes sense. Thank you. And then maybe can you just talk about Australian manufacturing.

Have you seen any impact through lockdown at Roseville?.

No. Fortunately we're able to continue to run our plant in Australia both in Roseville and Carole Park to be able to serve our customers..

Cool. Thank you..

Thank you. Your next question comes from Lisa Huynh from Citi. Please go ahead..

Hi, good morning, Jack. Good morning, Jason. I'm just interested in the ASP uplift you guys saw in North America. I guess, can we kind of talk about that in a little bit more detail about contribution to the ASP uplift we saw from pulling forward the annual price increase, but also higher value products..

Yeah, so this is really the first full quarter that we really fully execute at the high value product mix penetration. So the way to think about that is really two-third of what we've seen there is related to price, competitor price and one-third to the mix.

And as we have indicated at the Investors Day as well as last quarter earnings, that the num number one, that we would shift the market from the siding brand of Cemplank into Hardie brand.

And then second is that as we penetrate more into the repair and remodeling market, particularly remodel and that our colder products is where we offer the highest value proposition to the markets and so as we invest it in marketing and reaching the home owners, and really tell that story about the superior products that James Hardie has and that really drove a lot of the growth of our color products..

Yeah. Thanks Jack. And I guess as a follow-up, of the ASP improvement that's been driven by the higher value products, would you – it sounds like a large proportion of that is transitioning the customer base from Cemplank to the standard Hardie board rather than a big uptake of the textured panels as it currently stands.

It's still early days to understand?.

That's correct. So the way to think about it, Lisa is that in the first quarter results, a lot of that was due to the transition from Cemplank to Hardy brand plank, so Hardy brand products. And then second is the Hardy brand exterior with color plus technology. Maybe that's what the product that we penetrate into remodeling segments.

And then there's a little bit of the new market led innovation in there. But it's still too early for that to gain some momentum as part of the overall mix yet, but as time goes on, we should expect to see that the color products were continuing to accelerate and then of course with the market led innovations..

Thanks..

Thank you. Your next question comes from Sophie Spartalis from Bank of America. Please go ahead..

Good morning. Just regard to the manufacturing strategy going forward. It seems that you've pulled on a lot of the brownfield and greenfield to capacity just from a top down level.

Are you still envisaging having particular plant producing particular products and how do you expect to service market or will it be a more of a I guess integrated network servicing sort of full country? Can you just walk through the strategy there, please..

Yeah, it should also, certainly the greenfield and brownfield capacity of the bigger patch for three week region, we don't move product from one region to another region. So as we begin now to really to accelerate our growth in any of the sides, our business today now is a lot bigger than it was three, four years ago.

And that the growth rate that we would expect to plan for is that we – that we are really getting in into this stage or it is about having more of what we call the focus factory or a certain plant or really dedicated to do certain type of products so that we have a more integrated network to serve our market a lot better..

Okay. So you're going down the route of dedicated plan for different products servicing the entire U.S.

region?.

Correct. So for example, I think we haven't announced in the last quarter earnings that the – some of your plant in South Carolina that we're about to recommission and that plant will be pretty much dedicated to producing our siding brand products, for example..

Okay. That's clear. Thanks, Jack. And then just in terms of the geographical mix that you now seeing for these higher value product initiatives, are you gaining share in sort of your traditionally weaker market team, maybe just provide some color as to where the volumes are going up particularly in the U.S.

and Europe?.

Yes. Because – doing with the recent COVID environment, the consumer behavior has really changed. Let me walk you through it. There's a couple of examples. In the U.S., we have more and more people want to remodel their homes because the price of home is going up.

And then certainly new construction has not been built enough homes to satisfy the needs in the marketplace. And so there's been a heightened awareness. That's what need for homeowners to do stay put, and then remodel their home. So that's – so we can see a lot more of the remodeling activities.

And so if we're able to reach those homeowners and we're about to want to remodel, and that's just where a lot more of our high value products, like the Hardie brand exterior with color, that where we can deliver different, so many different types of designs that would fit the homeowner's needs. And until someone in new – in Northeast of the U S.

is going to have the shingles with cedar shape type of look or the wood look. And then someone in the West Coast of the U.S. can have a more than marker and a flat look. And we do have those products now that can satisfy those needs.

And then if you move across to Europe, for right now there's – in Germany, for example, it's a lot more folks that like to re-remodel their condo, their apartments, because that's really the living behavior in Germany, for example.

And so when that happens, what we see more and more people would like to use the fiber gypsum product from James Hardie particularly in the flooring products or our products are very durable. It is one board that can deliver on the impact resistance, the acoustics attenuation properties, as well as the compliant with the fire rating code.

So it's really a lot of these behaviors are happening now is really play into our strength and having the diverse portfolio of products that can satisfy those changing consumer needs..

Okay. That's great. Thanks, Jack..

Thank you. Your next question comes from Simon Thackray from Jefferies. Please. Go ahead..

Thank you very much. Good morning, Jack. Good morning, Jason..

Hi, Simon. Good morning..

Good morning..

Good morning. Good morning. Just wanting to explore a little bit more, the mixed shift that you observed the cut you do have 7% in North America in particular with Cemplank, just want to understand how much of that that shift was by convincing folks that a significant price rise in the commodity board was occurring.

What was the sort of extent of price rise or price lift that you saw in commodity board that helped convince products also to move towards a value product – branded product?.

Simon, is more of the fact that we're able now to communicate the value that we deliver not only to throughout direct customers, but also to the home owners and the builders in that with the Hardie brand exterior products we have a much better service.

And at the same time, our product have much better – the Hardie brand products have much better warranty for the homeowners. And those are really key value that we're able to move the market from Cemplank to Hardie brand.

And also at the same time Cemplank brand is more of the fiber brand is not so much of a brand that would deliver more value to the consumers and homeowners.

And then through the Hardie brand experience they can upgrade to different combination with colors and then really have the total exterior of the home that have many different types of designs that various homeowners around the country really want and need, which is not – that Cemplank brand. Yes..

So, the value, it was really the value proposition that did the shift more so than pushing out on price in Cemplank to convince people that value proposition metrics?.

Yes. First – first and foremost is really about having the home owners really be able to have different designs based on a broad portfolio of Hardie brand products. I mean, the Cemplank also very narrow brand. And also at the same time we also took some really big price increase on Cemplank at the same time to make sure that we can narrow that gap.

So is the combination of that really push it across..

Yes, no. That make that make sense. You said, in your comments, previously prospect to expectations were 4% to 6% and now 7% to 9%, which is showing great confidence and great traction with the strategy.

You – I’m interested from both of you how that upgrade to price mix is also influencing your thoughts around CapEx and capacity going back to [indiscernible] original question, to what extent has that sort of increased your ambitions or accelerated your ambitions for capacity and CapEx for the business to meet future demand?.

Well, I think Simon, and a couple of things that really mean that this is what we mentioned in our Investor Day, is that we’re now in the position of driving – creating and driving demand of our products and through market indirectly to the homeowners and then of course, through innovation because, the re-remodeling market is a very large market in the geography that we operate in, and up into now is for the exterior of the homes is no brand, and no company really talk to the homeowners and really show them the different benefits that the product can deliver.

And we are that’s how strategy is really about driving demand of our high value products directly to the home owners and be able to bring that demand to our customers.

So it is a – the early success that we have is really give us some really good confidence that as we continue to drive more profitable growth, that we can reinvest in marketing and innovation and then to be able to be in a position to accelerate growth.

And through that, we know that we have to look very hard at our capacity plan and to make sure that we have the right planning in place to be able to be in a position to grow at that level..

That’s super helpful, Jack. And just against that background, I mean, the home builders have talked about capacity constraints.

We talked about them in Australia and New Zealand and increasingly in Europe, has that been a limiter, or do you think that’s a limit on some of the volume aspirations? Are there bottlenecks in industry that are perhaps even holding back what are very impressive numbers in this quarter? Is there, is there any sort of, not concerns, but are there any sort of speed limiters within the industry, the construction industry for you guys, but you can see this year?.

Simon is really about as we look at capacity and then set expansion of our footprint and growth, we want to make sure that that because now that we have building the capability to communicate directly and marketing directly to the homeowners you want me to show that we market and sell high value products as opposed to market and sell a low-end stuff.

And that really add little value to the homeowners. So, we’re – as we make this transition to drive growth is it’s important that, that we would as stick our strategy for really driving growth of those key products, as opposed to just grab volume just for sake of volume..

Sure.

But, sorry, I think what I was saying is, are you seeing any industry bottlenecks, any industry constraints on just being able to actually physically do the work, get the work done?.

Yes. Certainly. Certainly the trend of lack of skilled labor is still pretty strong limiting factor, and I think that's really been faced across all geographies..

Thanks Jack. Thanks Jason. Appreciate it..

Thanks..

Thank you. Your next question comes from Daniel Kang from CLSA. Please. Go ahead..

Hey Jack. Hey Jason..

Hey Daniel..

We welcome back..

Thank you. Ready to do that. Just I had – I guess a question on North America, really strong performance now the record result, sells up 28% but either with only a similar amount by 29%. So we're not seeing that operating leverage come through.

Is that due to primarily just the reinvestment and growth initiatives?.

That's correct, Daniel. We have a very big market and integrated marketing campaign that we started really about the beginning of the year and then it accelerate through the quarter, and that will come continue to be a key driver for profit growth in our company.

And to that, that is what you saw is the – not as much in leverage to the bottom line as you see in other regions. And also at the same time we have this also comp two to the backdrop of very high inflation on input costs that we experienced during the quarter..

Got it. And then the price mix performance in a very impressive, just very early in the campaign both in North America and ANZ. You provide us some guidance for North America 7% to 9%, which makes sense as a campaign? Jason mentioned it accelerates.

Should we expect it's similar to [indiscernible] for ANZ from 6% towards that 7% to 9% level?.

It is too early to tell yet in ANZ, Daniel, because the key driver that we have in North America that we started, consumer marketing campaigns just about the beginning of the year. So we'll get in that momentum here in the U.S. and we have yet to start in Australia, so is it that remained to be seen..

Right. I'll live with that. Thanks very much, Jack..

Thank you. Your next question comes from Keith Chau from MST Marquee. Please go ahead..

Good evening, Jack and Jason. Just, my first question focusing on the North America division, a great outcome for the period, obviously. Just wondering if you can give us some steer on how exteriors and interiors volumes are tracking in the second quarter to date.

And for the first quarter, just completed with any particular standout regions in the U.S.

we saw outside's growth, or whether there were any competitive sub-straights you think you took share from a higher rate than what you'd normally consider?.

Well, I think for first of all your, the first question, Keith, is that in North America, we see very, very strong growth in the lowest area, and it's no surprise in that the area or the color product gains a lot of penetration. And that's also the area that high concentration of remodeling type of jobs.

So it is an area that, that we are to gain a lot of momentum during this past quarter, along with, of course in our traditional area..

Sorry, Jack, did you say the lower U.S.?.

The low – in the lowest, which is the Northeast, Canada and Pacific Northwest..

Okay. Great. And sorry, just going back on the interiors and exteriors growth in the period to-date.

Can you give us a bit of a steer on where – whether it's tracking at the moment?.

Well – so our focus is really on really drive high value product mix. So we – we now look at the total volume and we're running around mid teens..

Yes. Okay, cool. And then just to follow-up on the question on CapEx and the potential European plant and periods gone by, you've always been a fan of kind of setting key milestones before setting new targets.

One example being the EBIT margin target for the North American Fiber Cement division, so in that context, if you look at intentions to put on a fiber cement plant in Europe, what are some of the key milestones that you'd want to see as a management team for that business to be tracking that before formally committing to a plants – fiber cement plant in Europe?.

What is right now, the key that we are – in that we keep that internal confidential right now.

But certainly I can share is this – is that the target that we set out for Europe back in February, 2019 in terms of having the exit EBIT margin coming out at the end of this year, there'll be in that 14% range is kind of the first milestone that, we really want to and to get to do.

we were to have the right, the operating approach to put investment for fiber cement, because to really get to that level, it means that we needed to have certain amount of revenue in fiber cement at the right mix that will allow it to accelerate to our ambition of having the €1 billion business, of total business in Europe with 20% EBIT margin by 2029..

That’s right. Thanks very much, Jack. I appreciate your time..

Thank you..

Thank you. Your next question comes from Peter Wilson from Credit Suisse. Please go ahead..

Thanks, morning. Would you mind giving us market commentary, specifically commentary on the repair and remodel market in North America because in recent weeks there's been a bit of mixed commentary from U.S. companies. Some saying that the R&R market is still very strong and others saying that demand is starting to come off.

So just interested in what you're saying right now in that R&R segment?.

Good morning, Peter. That we – what we actually see is R&R market is quite strong. I mean what we saw particularly this past quarter is that the market – we estimate the market growth R&R is roughly 15% in U.S.

particularly and also given that the, I think someone asked about, the effects of COVID, then Delta variant, so – is still a lot of folks are still want to work from home. And so there's a heightened need to continue to remodel their homes.

And also at the same time, there's a not enough of new home been built to do satisfy the needs of all of the demand for homes out there. And so the low interest rates – is still here. So we still, we see a lot of key indicators that continue to point to a strong on our market going forward..

Okay. Good.

And then in the context of your expectation in North America to deliver above market growth this year, can you speak about the customer piece right now in North America? Because I imagine, how do you there are some very happy customers, but for some of the other suppliers who, capacity constrained and have castles on allocation, that there's some pretty dissatisfied customers.

Can you speak to, what it's like on the ground there now and how that customer pays feed into your expectations sort of rest of the year?.

Well, I think that the key first – is that we continue to add more value to our customers by in insurance, our customers make more money, selling our products and our competition and that means that we need our job and our role is to create demand about a high value products with the home owners, so that we can bring that demand to our customers to return and to sales for them and then sales for us.

And at the same time, as we integrate our supply chain with our customers is it's allowed us to serve the market throughout customers better than our competition.

So those are the key – two key values that we're delivering to our customers to ensure that we continue to add more value to them, so that we continue to build stronger partnership every day with our customers. Not only in North America, but it's also in Asia Pacific and also in Europe.

And if you see that our results across all three geographies really been – really strong for the last four quarters..

Good. Okay. Thanks Jack. I'll leave it there. Cheers..

Cheers..

Thank you. Your next question comes from Paul Quinn from RBC Capital Markets. Please go ahead..

Yes. Thanks very much. Just two easy questions, one, great to hear that Prattville is coming up nicely.

Just if you could remind us what the volume addition to that plant is on a North American basis?.

Yes, Paul. On a nameplate capacity basis, both those lines are 300 million standard fee nameplate capacity..

Each..

Each. Correct, so total for those first two sheet machines in Prattville is 600 million standard fee, nameplate..

Okay. And then just on ColorPlus, if you could give us an indication, I mean, that seemed like one of the areas for growth for ASP, what the market penetration is.

So what ColorPlus is, as a percentage of already branded products?.

It is still relatively lower than the now expectation patient. And it's really frankly hasn't grown – that mix hasn't grown during the past few years, so it is a big focus for us. And the key driver for us is really being able to market and reach directly to the targeted homeowners to be able to tell that value story.

And that is really the key initiative of consumer market we're driving to degree – accelerate the growth of Color, because that use to be a big opportunity for our company going forward. But typically when – with the remodeling segment is a growth segment that we see..

Okay.

So to help us track, where are you at now then?.

I don't think we disclosed that….

In brown numbers….

Yes, we certainly don't disclose the split of ColorPlus versus Hardie Paul..

Okay.

So there is basically no way for us to track the growth of ColorPlus, right?.

Not today. But I think where contractors worry about how high value product mix that we just closed. We just include the Hardie brand exteriors, the Hardie brand exterior with ColorPlus, and then they assume with all the Hardie brand market led innovations..

All right. Thanks..

Thanks, Paul..

Thank you. There are no further questions at this time. I'll now hand back to Dr. Truong for closing remarks..

Well. So before we end the call, I would just like to take the opportunity to extend my gratitude and thanks to all James Hardie colleagues from around the world, our exceptional financial results in the first quarter of fiscal year 2022, a direct result of their continued execution of our global strategy together as a global company.

These outstanding first quarter results are another indication that we are truly a new James Hardie company. A company that continued to leverage on its global reach, its global capabilities and its global scale to execute together and deliver on our financial results consistently.

I'm excited for the remaining of the fiscal year 2022 and beyond as we continue this next phase of profit growth. Thank you and have good night and good morning..

Thank you. That does conclude our conference for today. Thank you for participating, you may now..