James Hardie Industries PLC (JHX) 0 Q0 法說會逐字稿

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  • Louis Gries - CEO

  • Okay. Good morning, everybody. I guess as always, this briefing session will be recorded and archived and available on our website. Some of you may have seen that I had crutches coming in. I busted my foot. I'm not really looking for sympathy because we had a disappointing quarter. So I am going to go through the results pretty quick because I know there will be a lot of questions, so I want to make sure we leave enough time to get to all the questions.

  • These are the headline numbers. Obviously, fourth quarter net earnings, $20.1m was probably at the bottom end of what everyone was expecting. Our full year result, $169.7m without the asbestos and other adjustments, was also just below the bottom end. It was mainly driven by the U.S. There's a few other things as well, but the U.S., fourth quarter, the market was very soft, obviously. You're aware of that. And our sales and EBIT were lower -- much lower than last year, obviously, but lower than we would have expected for the quarter. Asia Pac had another strong quarter, so they finished off the year in good shape.

  • The full year in U.S. Fibre Cement was good. Considering the market conditions, the price held up. The market penetration, or what we call primary demand growth, was good through most of the year. And I think, overall, the financial results in a very steeply declining market was good. Asia Pac had a very good year right through, all four quarters. Obviously got help from FX, but also in Australian dollars. The Australian business had a good year and New Zealand as well. Cash flows were good for the year.

  • We did announce a flat dividend on last year, so it will be $0.20 for the full year. And we also announced, and I'll cover it later, we're closing our U.S. Hardie Pipe business. We will continue to operate our Australian Hardie Pipe business.

  • The numbers, as you've probably already seen, on the fourth quarter, volume was down 19%, sales was down 20%, so just a little less than flat on price. EBIT was down 41% and EBIT margin down seven points on last year, still in our range, but first time the fall in our range for several quarters now.

  • Full year, again, results were good full year, but the reality was every year -- every quarter slipped on the previous quarter. So it's the trend that's more concerning than the actual full year result. As you can see, sales and volume down around 10%, price up a little bit. EBIT down 13%, which was a pretty fantastic result, considering the market, and then EBIT margin still at 27.4% for the year.

  • The market conditions in the fourth quarter, you're probably all well aware of where the market was at as far as starts, what drives that. None of that is any surprise. The -- everything is pretty much playing out as we talked last quarter. The market's going to continue to come off. There's very few signs of optimism. The builders out there are obviously very concerned, as is almost everyone in the industry. We just don't know how low it's going to go. That probably hasn't changed much.

  • Our view was -- we did make a mistake in the fourth quarter that resulted in some lost EBIT dollars and inventories being a little higher than they should be, because we were still sitting at about 1m because our December order file was weak, but our January order file was pretty good. So in January, we felt we were going to be dealing with 1m starts. February and March, in particular March, were very poor on our order file. So we did take the business down more like 800,000 starts. So that's kind of what we're looking at right now.

  • We don't know that's where it's going to be. If it's lower than that, we'll have to move down with it. If it's a little bit higher than that, we can handle that much easier. I think the second sub bullet point -- or first sub bullet point is a good one. Normally, we see a build in March orders. We didn't see any build in March. Now, we have seen a bump in April orders, not near as dramatic as we normally get, but we did get an increase in April orders, and May orders have been similar to April.

  • We -- this was the first quarter, you'll see on our primary demand growth graph, that we didn't grow primary demand this year. And it is becoming more difficult to do that. Basically, all the builders are very much focused on how many dollars per house they can take out. We didn't lose market share. For the year, we gained market share. And we've had these quarters in the past where it's looked like it's gone flat or slightly negative. It's just a little bit early to tell if we're going to bounce right back and be back in positive market share growth next quarter or not. But certainly in fourth quarter, we didn't get any.

  • ColorPlus did grow year on year, which was the only product that did, which is a good sign for that product. It continues to grow in the north and in the south and the west. We've kind of tuned up those programs and we expect to get a little more traction there.

  • We are fighting higher costs, mainly on pulp, energy. Energy drives freight, but we also use energy in the facilities. Some of the other costs did flatten out. Cement's come off a little bit. Overall, higher cost. I think a lot of that's driven by the weaker dollar -- weaker U.S. dollar. Pulp in particular is bought around the world in U.S. dollars, so the manufacturers have to keep raising their U.S. prices in order to end up equal on the euro or other currencies.

  • So although that's flattened out recently, it was up about 11% over same quarter last year. Freight was up about 24% over the same quarter last year. So we are facing higher costs, even though our price -- net sales price is holding, there is pressure on our margin. Now, we have been holding our [contribution] margins well, because we've gotten some other savings in the organization.

  • The outlook, nothing new. It looks like R&R is going to be down a little bit. It's not going to be anything like new construction, but it will be down, in our opinion. Obviously, housing will continue to decline. In the reset we did in April, when we brought it down to 800,000, we did focus much more on how do we deliver better economics if it's really going this low? So in the previous resets [in the] business, as we'd seen a market decline, our focus was maintaining growth initiatives and delivering the EBIT targets -- EBIT margins at or above target.

  • We see that second part's going to get much harder, so we've looked at the growth initiatives we felt we could defer. None of them have been killed, but we felt we could defer until we see the bottom of the market and then start adding them back in. And again, at the center of our strategy is market share growth. And although it's more difficult in a [separate] market, we took very few people out of the field -- very few salespeople out of the field, because that is basically our primary focus right now, even though it's tougher to do.

  • That just gives you an idea what the history of the business graph looks like. We're now getting down to those housing start levels that we were in 1991 when we started the business. I guess there is -- you can see the difference in the slope between the housing starts and the volume and the revenue, obviously. We've done pretty well against a terrible market, basically.

  • And this is the primary demand growth chart I mentioned. [The dark lines are a moving average, so it buffers out some of the ups and downs. But you can see, fourth quarter we had zero or slightly negative, based on a flat R&R market. And that's probably a pretty conservative assumption.

  • I think you've probably seen the results from the big R&R retailers that are [all] same store about 9%. Or at least Home Depot was. I think they announced yesterday. And I think Lowe's is either ready to announce and -- or just did announce. And I think they would be pretty similar. So anyway, that's a conservative assumption, that the market is flat. So we might have done a little better than this chart shows.

  • But again, this is a concern. You can see,] when you look at the lines, they came together to a much greater degree when the decline started. Decline continues. We're not getting any increase in that gap. We do feel, when the market flattens out and everyone's got their cost model reset for -- from a builder's perspective, then we will get an increase in the gap. So that's what we're working towards.

  • As I said, the real positive for us is that selling prices have held up. As you know, most of the people in our industry, commodity price certainly have come off -- they've come off pretty quickly with their prices and pretty deep. We don't commodity price. We didn't run them up when the market was booming. We took our increases, but we didn't spike them like you would with a commodity product, and we haven't taken them down since.

  • Strategy hasn't changed. I think the only comment on this slide is some of those growth initiatives are being deferred or throttled back a bit. None of them are being killed. Everything that we have been funding we think is a long-term value creation opportunity for the Company. But we didn't see much risk with the Company -- with the industry reeling, we didn't see much risk that we wouldn't have those same opportunities when we want to come back and re-fund them, hopefully in nine to 12 months.

  • EBIT margin, as I said, still in our range. But you can see, after that one-off spike we had first quarter last year, it was up to 33%, which at the time we talked about not being sustainable. But we have come off the three quarters since then. Now, if you just keep drawing that line straight down, obviously it doesn't paint a good picture. But if you look at the chart, normally, you get a bounce back in the first and second quarter. And in the third and fourth quarter, which are winter months in the U.S., it's harder to get the EBIT margin. So we'll see how that goes, but we don't expect it to go straight down, that's for sure. We still think it's a viable target at the type of housing starts we're planning for. You start getting into worst-case scenarios and it's very hard to predict at that point.

  • So I think we've done a good job. Like I say, I think we made a mistake this quarter, in January, and it cost us some EBIT dollars, which isn't good, but it isn't the end of the world, because it wasn't $1 zillion or anything. But we also had more inventory than we'd like going into the season. So if we had to do it all over again, we probably would have operated a little bit differently in the fourth quarter.

  • But we are performing, as a business, the way we thought we would in the downturn. It's just, as it continues to decline, it's going to be harder and harder. So we've got all the plants set up. We've got our programs. We've reviewed everything. We've stayed pretty much ahead of the downturn until just that recent January move we missed. And I think we're probably right with it or a little bit ahead of it again. So I think we're in pretty good shape, relative to market conditions.

  • This just covers it a little bit. We have eliminated, since the 2006 year end numbers, about 19%. But actually, our peak employment was a little bit after that. But we have significantly reduced numbers in the plants, relating to capacity, obviously, and then in the SG&A area, where appropriate.

  • Asia Pac Fibre Cement, as I said, they're really coming off their best year in a lot of years. This was a very strong year. All the numbers are good. The market is okay here, but it's not helping the business. So sales up 3%, which is good. Of course, they get the benefit of the weak U.S. dollar, but even in Australian dollars are in good shape on net sales. EBIT margin, strong and everything tracking as we want it to track in this business. Full year result, you can see those numbers. They're just like the fourth quarter, maybe even a little bit better for the full year.

  • The strategy that we put in place -- I can't remember now, maybe three or four years, maybe five years ago now, we really have hit -- gained a lot of traction with the strategy and it's showing up in the results, which is a very good accomplishment by this business. Australia -- by the way, New Zealand has always been a really good business and it's gotten better over the last couple years. But most of the gains you see in the Asia Pac numbers are gains in Australia, so the Australian business is the one that's driving these numbers.

  • I guess these are just the stuff you already know. Like I said, slightly weaker, kind of flat. It's not hurting us, not helping us. Again, we get the gains on the FX the way we report in U.S. dollars. We are getting to a more differentiated position against our two direct competitors, who are more focused on commodity products. And we still have to fight it out on the commodity products, but on the differentiated products that are growing, we're value pricing those. So that helps.

  • Again, we're not looking for any big changes in the market down here. We think our business will continue to run well and we think the market will stay pretty much where it's at. Philippines will be a stronger market. Our Philippines business is fairly small, relative to the other two in the Asia Pac division. But it has not run as well as it should over the last eight or 10 months, so we're looking to fix that up a bit.

  • I mentioned the Hardie Pipe exit. I think most of you know, but we've been in this business not quite seven years now. It's a good concept. The product concept's good. We haven't been able to execute and, basically, the market hasn't showed us that they recognize the value in our product and are willing to pay for it. We did fix up most of the internal things, the manufacturing piece, the market development piece. We fixed that stuff up and it's still not going anywhere. We were, I think, positive EBIT for about six quarters in a row before the downturn hit. But I think it would always be a marginal business and doesn't deserve the focus that it's been getting, so we have closed the business as of today.

  • And Europe Fibre Cement, although still small, is still growing and looking like they're pushing into positive EBIT range. I'll hand it over to Russell.

  • Russell Chenu - CFO

  • Thank you, Louis, and good morning, ladies and gentlemen. 2008 gave us a solid operating performance for the year. We, as Louis has noted, had a very significant decline in U.S. market activity. But notwithstanding that, we came through with what we believe are very good results in the conditions.

  • In the results that I'll run through, the net operating profit was substantially affected by some non-cash adjustments for asbestos, asset impairments and also tax. In relation to asbestos, there's a $182.3m adverse movement in Q4 and $240m for the full year. Basically, the Q4 result is a change in KPMG Actuaries' estimate. And we had unfavorable currency movement as a result of the appreciation of the Australian dollar against the U.S. dollar in every quarter.

  • There are three major asset impairments that we took through the year. In Q4, we had the Pipe closure that we've announced today, producing an impairment charge of $25.4m and further $1.8m charge for closure costs, so there's $27.2m in total. Also in Q4, we had some adjustments to asset value for some assets that are associated with the production of materials. That produced a loss of $13.2m. And as previously announced with our Q3 results, we closed the Blandon, Pennsylvania plant and produced a $32.4m impairment charge and $1.4m of closure costs.

  • In addition, we had unfavorable tax adjustments at the end of the year amounting to $5.8m. They relate to what's a U.S. GAAP standard, called FIN48. FIN48 relates to accounting for uncertain tax positions. It took effect on April 1, '09 for James Hardie. And at the Q1 results, we announced that we'd see more volatility in our results as a result of the disciplines imposed by us -- or by that standard. So as we go through each quarter, we need to look at our uncertain tax positions and we've had some adjustments in Q4 as a result of the application of FIN48.

  • As Louis indicated, we had an unexpected increase in inventory levels during Q4. The normal seasonal pickup in demand that we experience in the spring, as the U.S. house-building season takes off, that did not occur in Q4. We've had some bumps subsequently, but it's certainly impacted inventory in the U.S. business at the end of March.

  • Notwithstanding that inventory build, as a Company, we still continued to have very strong cash generation, $319m for the Group as a whole, which is a record. And from a financial viewpoint, I think it's probably the highlight of the year. We declared a final dividend of $0.08 to give a total dividend for the year of $0.20 per share.

  • I think most of you will be aware that we've undertaken some share buyback activity during FY 2008. We announced a 10% buyback in August -- mid-August of last year. We've purchased 7.6% of the issued capital at an average price of $5.83 and we've spent $208m on share purchases. There have been no share purchases since the first of April. We have had some material benefits. There's been a greater than 3% accretion in EPS as a result of the share buyback and we estimate that there's been a 0.5% reduction in the Company's weighted average cost of capital.

  • In the subsequent slides, I'll go through the FY '08 results. But it's probably just worth noting that many of the comparatives are made more complex because they've been impacted by the fact that in FY 2007, at the year end, so that's just one year ago, we had an accounting gross up of asbestos, which affected EBIT. It affected EBITDA and it affected tax expense, as well as the final net operating result.

  • Prior to FY 2007 year end, we'd actually been accounting for asbestos on a net basis, but you might remember that, a little over a year ago, in fact 15 months ago, shareholders approved the final funding agreement. And as a result of that, under U.S. GAAP, we moved to a slightly different accounting basis. It didn't change any of the net numbers, but it did move the gross numbers around significantly. And so the FY 2007 comparatives are affected by that.

  • Also, there's been a significant movement in the U.S. dollar. It's depreciated against all of our relevant currencies, euro, A dollar, New Zealand dollar and Philippine peso. And so there's a lot of distortion in our results as a result of those foreign currency movements. And finally, we've had an actuarial reassessment at March 31, which saw a significant increase in the liability for asbestos.

  • But -- I'll try to highlight those, but just please bear those factors in mind as we go through. The reported results for Q4 appear on this slide. Net sales, a 13% decline, which, as Louis indicated, we're very happy with as an organization in terms of the performance, though obviously disappointed in terms of the outcome. Gross profit was down 20% to $107m for Q4.

  • SG&A expenses, up 15% to $60m. And there were a number of factors in that, including currency-related factors and the fact that we kept some initiatives going in the period, particularly in marketing in the U.S. business. Research and development was up by 34%. We had the impairment charges in Q4, two of the three items there, and the significant asbestos adjustment of $182m arising from the actuarial reassessment and further foreign exchange adverse movements.

  • The fact that we had that asbestos movement actually gave us a tax benefit of $36.8m in the quarter. And that's the result of recognition of the deferred tax asset, or the future income tax benefit, as it's more commonly known in Australia, as a result of that being tax-effective. The future tax deductions, in other words, on the payments that will be made in the future. The result of that, overall, was a net operating loss of $146m versus a $103m profit in Q4 '07. The $103m result in '07 included a very large favorable adjustment on asbestos.

  • Turning now to the results for Q4, on a normalized basis, the net operating loss of $146.9m after adjustments for asbestos, asset impairments and tax resulted in a net operating profit of $20.1m, which was pretty close to the guidance that we gave for the full year at Q3. Obviously, a very substantial turnaround from one year ago, a 61% downturn in earnings for that period.

  • Now for similar presentations on the full year earnings, the reported results showing net sales down by 5%. That's the downturn in the U.S. offset by currency gains and also sales improvements in the Asia Pac region. Gross profit down 8% to $530m. SG&A expenses, an adverse movement of 6% to $228m. R&D up slightly. $71m of impairment charges pretax in the U.S. business and asbestos adjustments totaling $240m. The $405m for last year reflects the grossing up that I referred to, in an accounting sense, and is a bit of a distorted number.

  • The income tax for this year came in at $36.1m for the quarter -- sorry, for the full year and the asbestos accounting gross up on tax last year produced $244m of benefit. So the net operating profit -- sorry, the net operating loss for the year was $71.6m, versus $151.7m. On a normalized basis, that $71.6m loss for FY '08 works through to a $170m profit after adjustment for asbestos, asset impairments and tax adjustments and that was compared with the $212m result a year ago, which was down 20%.

  • Turning now to segment revenues and, for Q4, you can see that U.S. Fibre Cement was down 20% to $232m. As we indicated, we didn't get that kick-up in sales in Q4 that we normally expect and that obviously had a major impact on the comparatives this year. The Asia Pac business had a sales increase of 14% to $73.5m and other results were pretty flat, to give a total that was down 13% to $313m. For the full year, U.S. Fibre Cement sales down 9%. Asia Pac up 19% to $300m, largely as a result of foreign exchange movements, but also some improvement as a result of achievements in the business. And the total was down 5% to $1.47b.

  • The segment EBIT for Q4, U.S. Fibre Cement, down a very large 41% to $50m. Asia Pac showing an improvement of 22% to nearly $11m. R&D expense up to $5m, to give a total segment EBIT of $53m, which was down 39%. General corporate expense was down by 25% for the quarter and the total EBIT, excluding asbestos and impairment charges, was down 42% to $40m. The other charges there relate to asbestos adjustments and impairments. And the total EBIT for the quarter was $181.5m loss, versus $216m a year ago.

  • The full year EBIT on a segmented basis shows a somewhat similar story. I won't run through all of the numbers, but the U.S. downturn of 13% only partially offset by improvements in some other parts of the business. And the total EBIT by segment was down 10% to $338m. We had an increase in corporate expenses for the full year, although the trend was in the right direction at the end of the year. And then, we had these very significant major adjustments to produce a total EBIT loss for the full year of $36.6m.

  • Looking a bit more closely at corporate costs, you can see in the breakdown that other costs, which is the line that measures the underlying level, was at $7.5m for the quarter, down from $9.1m in the prior year. And the overall costs were down by 25%. For the full year, not quite the same story. We had higher other costs in FY '08 than in FY '07, and that was the result of a number of consulting costs that we incurred early in the year. But by the end of the year, those projects had been completed and we finished up with a 6% increase for the full year.

  • Net interest income and expense. This is largely for the record, but there's one thing I think that is worth noting. And that is that, as a result of the extra debt we've taken on with the share buyback, $208m spent on that, the interest expense in Q4 was higher than the prior year and it was higher on a quarterly basis than the previous three quarters. So we've seen some increase in interest expense and we expect that to continue with our higher debt levels that we anticipate holding. The net interest expense is not a material item and so I won't spend any more time on it.

  • Income tax expense in Q4. There was, I guess, for some people, quite a surprising effective tax rate at 48%. A lot of that came from a number of one-off adjustments as we rounded out the full year results, but it was -- the ETR itself is a little bit exaggerated by the fact that the earnings pretax, at $38.6m, are very low and so you don't have to get much in the way of one-off adjustments at year end to produce what's a bit of a rogue number. It's not something that we anticipate will continue.

  • The full year result shows a slightly different outcome. It was 38% or very close to 38% ETR, versus 32.5% last year. That is quite an increase and it's an increase that we expect will hold. We've previously given guidance of about 35%, plus or minus 2% or 3%, and I think we'll probably continue at the upper end of that range. A number of factors contribute to that. Increased expense in the Netherlands and a change in the nature of the U.S. business all contribute to that.

  • EBITDA for Q4, we've dealt with most of this, but it was a significant loss -- EBITDA loss of $167m versus $202m in the previous year. That's an improvement of 17%, but a lot of factors, especially asbestos, contributing to both years. For the full year, the total EBITDA for the Group was $19.9m, compared with $35.9m EBITDA loss in FY '07, again impacted by adjustments. One thing that is noteworthy, perhaps, on this slide is the increase in depreciation and amortization, particularly in the U.S. business. That's reflecting the movement of a number of construction and project items into the operating assets and that is a feature that will continue to hold.

  • Cash flow for the full year. You can see here that, although we've had good cash generated by trading activities in both FY '07 and FY '08, in FY '07 we had a number of material payments or a couple of material payments below that line, which resulted in a negative net operating cash flow last year, FY '07. They included a $155m deposit with the Australian tax office and a $149m initial payment on the establishment of the asbestos fund. That produced a $67.1m net operating cash outflow.

  • That's been reversed this year. We've had net cash generation of $319m for the full year, including a $40m net operating cash flow in Q4, which we thought was a pretty good result, given the increase in inventory -- unscheduled increase in inventory that we had in the U.S.

  • Capital expenditure at $38.5m is down significantly from $92.6m in the prior year. That enabled us, as a result of reduced CapEx and higher cash generation, to increase the dividend. $126m paid in dividends in the year and $208m spent on the share buyback. As a result of all of that, we've had an increase in debt of $75m for the year. We're still carrying a very low level of debt, but it has increased.

  • CapEx for the full year is summarized here by business. The largest decrease was understandably in the U.S., where we are carrying substantial capacity. And at $38.5m, it's a major reduction for the business.

  • Key ratios, you can see here that, on a diluted business, EPS was down on the prior two years. That might be surprising, given the conditions that we've had in the business in the United States, in particular. Dividend paid was up - a $0.15 final dividend from FY '07 and a $0.12 interim dividend for FY '08, to give a total of $0.27.

  • Return on shareholders' funds was at 17.7%, which was down on the prior years, as a result of both higher shareholders' funds and also lower earnings. Return on capital employed not showing quite the same decline. EBIT and EBIT to sales also showing some decline, with the more challenging conditions in the U.S. business. And debt capacity ratio showing still continued strong performance, even though there's a slight change in those. But net debt payback at less than one year I think is an outstanding result, given that we've increased the debt.

  • So in summary, a very solid overall operating performance, given the conditions. I think the strong cash generation highlights the underlying strength of our Company. The net operating earnings were adversely affected by a number of non-cash adjustments and our financial position remains strong.

  • In the remaining few slides, I'd like to just give a little bit of detail on the asbestos arrangements. KPMG completed a updated actuarial report as of March 31. The discounted central estimate increased to AUD1.43b. As a result of KPMG's estimate and also our cash flow generation, our contribution to asbestos injuries compensation fund will be in the region of $100m to $110m, dependent on the -- U.S. dollars, that is, with the A dollar amount dependent on the A Dollar/U.S. dollar exchange rate in late June. And we'll either make a one-off -- one-time payment on July 1, 2008 or pay in quarterly installments through FY 2009, both of which are in accordance with the final funding agreement.

  • This time last year, KPMG estimated that the NPV for FY 2008, at the end of FY 2008, would be AUD1.375b. The change in the discount rate increased that liability -- sorry, reduced -- the higher discount rate reduced the liability by $40m. That's as a result of the increase in Australian government bond yields through the 12 months. And that gave a hypothetical position for March 31, 2008 of AUD1.335b.

  • As a result of a number of changes that KPMG has made, however, the overall actuarial estimate came in with an NPV of AUD1.426b. There's a reduction in claims costs and legal costs that KPMG has calculated will have a benefit of AUD72m in NPV terms. There's been an adverse movement in claim numbers, particularly for mesothelioma, which ticked up through the year, and the adjustment arising from that was AUD144.5m increase, in NPV terms, again. And then, all of the other items are much smaller and I won't focus on them, but the total increase in the net liability was AUD91.7m.

  • The next slide, 53, is a reconciliation on how we move from KPMG's estimate of the central estimate, on a discounted basis, through to the liability that we report in our financial statements. And you can see here the movements that have resulted from KPMG's estimates, as well as claims handling costs, other U.S. GAAP adjustments that we make and some of the costs internally within AICF that are not calculated within KPMG's estimate, which relates to asbestos liability alone. The effect of all of that is a net post-tax liability that's moved from AUD974.4m at 2007 to AUD1.03b. The exchange rate movement produced a much bigger movement in U.S. dollar terms, $158.8m in total.

  • This next slide just summarizes AICF's position at March 31 and also for the full year. The fund had a AUD123.4m in cash and short-term investments at the end of March. It will receive additional amounts based on our FY 2008 cash flows. We'll be paying at the 35% cash flow cap under the final funding agreement. And then, the bottom box on this slide shows that the claims paid during the year, in fact, were below KPMG's estimate as of a year ago. And legal costs were slightly higher and insurance and claim recoveries were somewhat higher to produce a significant variation against KPMG's estimate on total net claims for FY 2008.

  • That's the last slide. Finally, I'd just like to perhaps refer you to pages 20, 21 and 22 of our management discussion and analysis. Those three pages contain abbreviated financial statements for the full year that dis-aggregate the reported results into items affected by asbestos. And that gives, then, the core business performance in terms of cash flow, income and also the balance sheet items.

  • So it's time for questions and, Lou, do you want to come back and --?

  • Louis Gries - CEO

  • Okay. Thanks, Russell. Yes, we'll do the questions the same as we always do - investors first. I'll go in the room, on the phone and then we'll go to the media. So who wants to start it off?

  • Rohan Gallagher - Analyst

  • Good morning, Louis. Rohan Gallagher, Credit Suisse.

  • Louis Gries - CEO

  • Yes.

  • Rohan Gallagher - Analyst

  • Louis, I'm not sure what color they call it, Project Red, Green or Blue or whatever, but structurally you've still got the Netherlands head office. You've talked about restructuring that. The tax rate going up to 37%, 38% financially takes away the benefit of that. Can you just comment as to the status of that and your aspirations in regards to head office and the business structure going forward?

  • Louis Gries - CEO

  • Yes. The agreement with the Dutch Government ends in 2010, so we have been working toward a decision on whether to maintain a domicile in the Netherlands or move the domicile from the Netherlands. We've mentioned this was under review for several quarters now and it's still under review. We've looked at a wide range of options. Moving a corporation isn't easy. It's not simple. So we don't have a resolution at this point, but it is something we're addressing.

  • As you mention, Rohan, the tax rate for the Corporation in the Netherlands is not significantly lower than it would be in most jurisdictions, so tax is no longer providing a benefit in the Netherlands. And the treaty changed after we moved to the Netherlands, so from a management standpoint it's unfavorable as well. So we would anticipate that we would continue to study that and have it resolved before the expiration of the [FRR].

  • Yes.

  • Simon Thackray - Analyst

  • Lou, it's Simon Thackray, ABN AMRO. I just want to talk a little bit about your margin expectations. You said you'll be able to stay within the range you expect with this reset of the business model to 800,000, so that's the 20% to 25% range, all other things being equal. First of all, what are your cost assumptions about your input costs versus that volume in order to feel confident about those margins being held?

  • And secondly, what are your customers saying in terms of what are their expectations in the cycle? We're hearing discussion of them wanting to lock in price with their material suppliers now for two to three years from here. Can you give us some color on that, first of all?

  • Louis Gries - CEO

  • Yes, I can. On the cost side of our business, I guess we mentioned that pulp will be more expensive this year and I think that's largely driven by the weak U.S. dollar. So until that changes, I don't think pulp will come down very significantly. It has flattened out the last -- from Q4 to Q1, it looks like it's flattened out a bit.

  • Energy, you guys all know where energy is going. It affects us mostly in freight, but we do use gas, natural gas, for ColorPlus and we use power in the flat sheet process. As far as the other costs in the plant, cement should come off some because that's pretty much in free supply now. And -- so there's no other big movements, I don't think. Cement, we should get some help. Pulp, we'll get hurt. Energy, we'll get hurt. Freight, we'll get hurt.

  • Now, how do we hold our EBIT margin? The way we hold our EBIT margin is by holding our contribution margin per unit as much as we can, and we have been very successful right through the fourth quarter in doing that. We're getting some gains in the plants, even though the plants are coming down in volume, so you're getting less spreading of your fixed cost. We are getting some lower costs due to efficiencies on both the materials side and the machine side. So we're getting a few gains there. And then, obviously, when you take plants down, you always take your highest cost production down. So your average cost -- whenever you take your highest cost down, your average cost goes down a bit.

  • So the cost side will be challenging, but I think it's controllable. On the price side, the main decision makers on our product are builders and builders are usually subject to [moderate] pricing on building materials. So they're very used to the run up - when their profits are good, they take big increases on material price and when the market turns the other way they get big declines. Now, we've never been a commodity pricer in the 17 years we've been in business in the U.S., anyone that would take a price decrease without the hopes of more volume would not be representing their shareholders very well, so we will not do that.

  • Now. the request for two or three years of fixed pricing, Simon, [evidently] some -- you're referring to some builders' request, not specifically at Hardie. I think that's pretty typical in the industry, because prices are down, so obviously you want to lock them in. I think there's a lot of focus on the builders' side as far as how do they get their costs down or what they think they're going to -- the prices they're going to have to move inventory at.

  • Our product is not a product that helps the builder lower his costs. Our product is a product that helps a builder sell more houses. So although the purchasing people in these organizations are very focused on the cost of the product relative to other products, the real value we bring to the builders are on the marketing side of their business. So it's always our challenge to not only address purchasing concerns, but also address marketing opportunities.

  • Simon Thackray - Analyst

  • So if I can just add one question at the back of that, you talked about deferrals of the growth initiatives.

  • Louis Gries - CEO

  • Yes.

  • Simon Thackray - Analyst

  • Are we going to see that being reflected, obviously, in the SG&A line, the R&D line? Where are we going to see that (inaudible)?

  • Louis Gries - CEO

  • Yes, you'll see it in both of those lines.

  • Simon Thackray - Analyst

  • And that will help (inaudible).

  • Louis Gries - CEO

  • And you'll see it across the board. It will be across the board. It's in the MG&A as well, in our engineering. So what we try to do is obviously take our [tap] resources in the business and make sure they're in the highest impact positions in the business. So we won't be building a lot of plants over the next three or four years, because we have [planning] capacity. We're only running about 57% of our scheduled capacity. So some of our best people are actually in that construction organization, so we've moved them into other parts of the business where their engineering skill-sets can work for us. And then, obviously, people that had less impact in those roles have exited the Company.

  • Simon Thackray - Analyst

  • And I've just got one quick one for Russell.

  • Louis Gries - CEO

  • Yes.

  • Simon Thackray - Analyst

  • Just in terms of the calculation of the working capital and the contribution, Russell. Obviously, the volume's falling, running down inventories, etc. Notwithstanding the 4Q, what's in your calculation of working capital? Is it repeatable to get that kind of kick from cash flow this year?

  • Louis Gries - CEO

  • No. We wouldn't -- we will get a run down on inventory this year, I think, between March 31 fiscal year '08 close and next year, but there'll be less of an overall benefit on working capital decrease than there was this year.

  • Simon Thackray - Analyst

  • Thanks.

  • Doug Macphillamy - Analyst

  • Good day, Louis. Doug Macphillamy here from Macquarie. Just a quick question back on your costs. Could you just run us through in a little bit more detail what kind of contract pricing arrangements you have in place for gas and how you price your pulp?

  • Louis Gries - CEO

  • Yes. Pulp we buy in the global index for NBSK, so we buy at a discount to that. We negotiate those discounts with the specific vendors. Those discounts have gone up recently. We buy specialized pulp, so we don't buy a basic straight commodity, so we don't spot buy pulp at all. Gas, we don't have any long-term arrangements. And power, we obviously don't have any long-term arrangements on power either. So we basically go with the market.

  • Doug Macphillamy - Analyst

  • That's great. Thanks.

  • Louis Gries - CEO

  • Right behind you.

  • Andrew Scott - Analyst

  • Thanks, Louis. Andrew Scott, JP Morgan. Just two questions. First, on the fourth quarter, your sale price, the average price ticked back just a tiny bit. Can we assume that's nothing more than mix? And if that's the case, can you just run us through where we're seeing that move?

  • And then, one for Russell to follow on, just -- we see the (inaudible) proceedings start to ramp up towards the end of this year. Maybe if we could just get an indication of what we should expect on that cost side for a full year basis.

  • Louis Gries - CEO

  • Okay. On the price, I think it was two quarters ago I gave you guidance I thought it would be flat, which -- flat to me is plus one or two, minus one or two, and that's what it's been looking like since then. And this quarter was a heavier mix toward interior products, because the housing starts affect the exterior products more than the interior products. Interior products sell for around $500 a ton, where exterior products sell for much more than that.

  • So it was strictly a mix. We haven't moved prices on our [Hardie] line. As we continue to sell more ColorPlus, that tends to pull it up a bit. A small percentage of our builders have gone to Cemplank, so pulls it down a bit. That percentage is actually a little bit less than we thought it would be with the builders being so cost-conscious. We thought there'd be more movement towards Cemplank than there has been, but everything's working as we thought it would.

  • Obviously, in a market like this, everyone's trying to figure out how to make money, so you get a lot of push back on pricing on a regular basis, but I think we're pretty set in the market. People understand what they're buying when they're buying Hardie and they understand what they're buying when they buy a generic fiber cement and 80% of people buying fiber cement buy the Hardie brands, so --

  • Andrew Scott - Analyst

  • Russell, just on the (inaudible) costs?

  • Louis Gries - CEO

  • Yes, I can take care of (inaudible) costs. I'll tell you, it is going to ramp up, but we have no way of forecasting that. So we have talked about it internally to determine if we could put together a forecast, but it's totally out of our control, so we don't have a forecast for that. But with the hearing starting in September, you can expect that at least the third quarter it'll start ramping up and probably the second.

  • Andrew Scott - Analyst

  • Sorry, Lou, just one quick one on Australia and New Zealand. Just the mix you're seeing between resi and non-resi driving the volumes at the moment.

  • Louis Gries - CEO

  • I don't have that. Shane, do you want to give us an idea on how -- in Australia, how much of it is residential versus commercial?

  • Shane Dias - General Manager Australia

  • It's primarily residential. It's -- the market primarily is residential, so it's still our [pushing the] residential market that's driving our growth and profitability.

  • Andrew Scott - Analyst

  • Is it 90%, more, or --?

  • Shane Dias - General Manager Australia

  • Around there. Maybe between 80% and 90%, yes.

  • Louis Gries - CEO

  • New Zealand would probably be similar. Shane Dias, for those of you who don't know him, he runs the Australian business for us. Any other questions from investors in the room? Okay. How about on the phone?

  • Operator

  • Our first question comes from Emily Behncke from Deutsche Bank. Please go ahead.

  • Emily Behncke - Analyst

  • Thanks very much. Just a couple of questions, Louis, firstly around ColorPlus penetration. Just wondering how that's going in a softer market, bearing in mind that there has been some slowing in your market share growth. I'm just wondering if you can comment on the competitive behavior in -- from the likes of Nichiha and CertainTeed in the U.S.

  • And just finally, you mentioned that the 20% to 25% EBIT margin in the U.S. is achievable, provided the worst-case scenario doesn't play out. Just wondering -- you've lowered your housing start number to 800,000. Just wondering what the -- is the worst-case scenario somewhere around 600,000? If you can give us some color there.

  • Louis Gries - CEO

  • Okay, the last one first. The forecasters look like 800,000 is not a bad forecast. Some go to 1m and Goldman Sachs is down at 500,000, and Goldman Sachs is down at 500 for more than one year. So Goldman Sachs worst-case, all bets are off and I'm sure every business in the U.S. that has anything to do with housing will have to figure out how to reconfigure their business to do that. As far as the 800,000, I don't want to mislead you on the EBIT margin. I do believe we can hit that target, maybe even higher end of the target, but it's not a sure thing. It's a very difficult challenge in this market and as the market continues to come off we'll learn more and more.

  • Going back to ColorPlus, that's certainly a positive in the business, continues to be a positive. The north, I believe, is up to about 37% penetration across the whole north, much higher than that north of the Carolinas. Basically, where we sell a lot of prime board, the color penetration is slower, because the people on our product are very satisfied with our prime board. So bringing them to color is more of a discussion, because the value isn't so clear as opposed to selling color against vinyl. But it is there. Carolinas probably lead the pack on prime markets going to color. I think they're up to about 11%. And we're just now tweaking our programs across the south and the west and I think we'll get some traction -- greater traction this year than we had last year.

  • So there's no doubt in my mind color will continue to grow, because I think, as I've said before, the builder benefits, the homeowner benefits, Hardie benefits and our supply chain can also benefit. So it's a natural evolution for a lot of our customers to move from prime to color. It's just, again, a little difficult to get people making those type of decisions. Even when it doesn't cost them very much more money, it's difficult to get them to make those decisions in this type of market.

  • As far as competitive activity, yes, we have Nichiha, CertainTeed and Maxi. They're all discounters selling at or below the -- right around or below the Cemplank brand type pricing, and their focus seems to have been more on the national builders lately. We don't believe we're losing market share to them, although we are swapping builders with them. So your most price-conscious buyers are looking for the discounting, obviously, but, like I said, it moves around which of those builders ends up with which product line. So I think I answered all your questions, Emily. Any others?

  • Emily Behncke - Analyst

  • -- in order to get some increased conversions?

  • Louis Gries - CEO

  • Pardon me?

  • Emily Behncke - Analyst

  • Is it fair to say that, if the U.S. housing market stabilizes, you're likely to get some conversions over to fiber cement, more so than in a -- even in a flat market? You don't necessarily need a rising market in order to see a ramp-up in those -- in the market share.

  • Louis Gries - CEO

  • Yes, no, I think that's right. Just still in that flat market, everyone's got their builders business models set where they think if they build another house they'll make more money, because our proposal to them will be that they'll sell their houses faster if they use especially our ColorPlus product, because it's a good product for consumer. So if they're making profit per unit, then, yes, I think we'll start growing our primary demand faster. If they're actually still in a loss position per unit, then we really can't help them out that much.

  • Emily Behncke - Analyst

  • And maybe just one final question in terms of the cost competitiveness of fiber cement versus vinyl, given rising petrol prices. Are you seeing that the difference between fiber cement and vinyl on the wall, the gap is narrowing?

  • Louis Gries - CEO

  • Yes, I believe it probably is, because the material price of vinyl is going up with the fuel increases. But I still don't think it's significant enough to shift demand from vinyl to fiber cement, because we're still at a pretty significant premium, except against their high-end foam-back vinyls, which are a very small piece of the market.

  • Emily Behncke - Analyst

  • Okay. Thank you very much.

  • Louis Gries - CEO

  • Yes.

  • Operator

  • Our next question comes from the line of Matthew McNee from Goldman Sachs JBWere. Your line is open.

  • Matthew McNee - Analyst

  • Thanks. Just a quick question for Russell, just on the dividend. Russell, the second half was $0.08, the first half was $0.12, so a big drop in the dividend in the second half. And I think that's a payout ratio towards the lower end of that range that you've talked about before of 50% to 75%. Can you just give us an idea of what sort of payout or a bit more specifically what sort of payout you'll have next year? And can you just confirm that that's based on your pre-asbestos profit?

  • Russell Chenu - CFO

  • Matt, it was a year ago that we announced that the dividend payout ratio policy was moving to a range of 50% to 75% on the basis of pre-asbestos earnings. And at this point in time -- obviously, it's a matter for the Board to review each year or each half year, but at this point in time that policy remains in place.

  • Matthew McNee - Analyst

  • Russell, it's just a -- it looks to me like it was about 55% in the year just gone, about.

  • Russell Chenu - CFO

  • That's correct.

  • Matthew McNee - Analyst

  • And I would have thought when your earnings are depressed you'd be paying out more towards the higher end of the range. I'm just trying to figure out why you're paying out the bottom end of that range.

  • Russell Chenu - CFO

  • I'm not sure. I don't know why we'd change it from one year to another. Matt, it's a fact of life that credit markets are very tight at the moment. Equity is also very tight. So it reflects our view, I guess, of where the sector is and where our future performance might be. So yes, we've taken a conservative position, but I'm not sure that your payout ratio necessarily increases just because your profit's down.

  • Matthew McNee - Analyst

  • No worries. Thanks.

  • Operator

  • Our next question comes from Lou Capparelli from BlackRock.

  • Lou Capparelli - Analyst

  • Hi. This is -- given Matt's question, I'll ask this question first and then I'll move on to my next one. I'm looking at slide 49 and it's saying there that your dividend is $0.27. Is that a typo?

  • Louis Gries - CEO

  • No. That was what was actually paid out in fiscal year '08.

  • Lou Capparelli - Analyst

  • As opposed to what was declared for the two periods.

  • Louis Gries - CEO

  • Yes, that was --

  • Lou Capparelli - Analyst

  • Okay.

  • Louis Gries - CEO

  • Yes, okay.

  • Lou Capparelli - Analyst

  • All right. That's fine. All right, well, given that you're on the line, Louis, this one's for you. U.S. housing declined on my numbers around about 30% for the year, from about 1.8m to 1.3m, and you guys managed to see your volumes in the U.S. decline only 11%. If you're going for that 800,000 decline, that's about a 40% reduction on what the '08 year is. Do you expect your volumes to fall in the same sort of ratio as what you held it to in the '08 year, i.e. around about less than half the decline that you'd see in housing is what you'll experience in your volumes?

  • Louis Gries - CEO

  • Yes, it'll actually be tougher next year, Lou, but we're -- our formula is around that primary demand growth. We shoot for [around] 10%, so we hope we can buffer the loss of market by 10% pick-up in primary demand growth. We didn't quite get there last year. We'll shoot for the same thing this year, but we'll also -- I think it'll be harder this year than last year. So that's how it plays out.

  • We did increase our market share. For those of you guys [who] have your financial models, if you look at volume per housing start and factor in your R&R, you can see that our volume for housing start is going up, went up pretty good in 2008, in fiscal year 2008. I can't guarantee you, Lou, that we can do as well this year, but certainly that's what we're trying to do.

  • Lou Capparelli - Analyst

  • So Louis, just to understand the way you look at the world, if housing had fallen 28%, you're saying you ought to do 10% better than that, so you should have fallen 18% in volumes.

  • Louis Gries - CEO

  • No. The way the arithmetic works is if -- you picked a hard number for me, so I'm going to change it.

  • Lou Capparelli - Analyst

  • 30%. How's it -- let's say (inaudible) 30%.

  • Louis Gries - CEO

  • Yes. Market falls 30% in 2007, we were two-thirds tied to new housing, so then theoretically we should have fallen 20%, but we only fell 11%, so we grew primary demand growth by about 9%. That's the rough arithmetic, okay?

  • Lou Capparelli - Analyst

  • [Okay].

  • Louis Gries - CEO

  • Now, having said that, going into this year, we're no longer two-thirds -- no longer is our business two-thirds new construction, because so much of the new construction has gone away. So when we start publishing primary demand growth for fiscal year '09 at the end of the first quarter, we'll -- it'll be on a new base of the mix between R&R and new construction.

  • Lou Capparelli - Analyst

  • Which is no longer two-thirds, one-third. What's it closer to now? Half, half?

  • Louis Gries - CEO

  • It's not quite half, half. And I don't have the number right with me, so I don't want to guess at it, but it will be lower, obviously, with the [lower starts].

  • Lou Capparelli - Analyst

  • And you'd be assuming that the renovations and maintenance is roughly flat.

  • Louis Gries - CEO

  • Yes. I actually believe they're down somewhere between 5% and 10%.

  • Lou Capparelli - Analyst

  • Yes. So -- if what you're saying is right, though, you're not really increasing penetration. You're just simply benefiting from the fact that a bunch of your business is sold to non-new housing or to R&R.

  • Louis Gries - CEO

  • Again, I think the arithmetic I went through said that, if we held our position in R&R, meaning one-third of the market, we would have declined 20% and we only declined 11%. So I do believe the position's grown.

  • Lou Capparelli - Analyst

  • Sorry, yes. Yes, sorry. Thanks for the math lesson. I wasn't following, but I do now. Thank you.

  • Louis Gries - CEO

  • Sorry. All right.

  • Lou Capparelli - Analyst

  • That's it from me.

  • Louis Gries - CEO

  • All right. Any other --?

  • Operator

  • Our next question comes from Ben Chan from Merrill Lynch.

  • Ben Chan - Analyst

  • Hi, guys. Russell, just maybe a quick question for you. I missed what you said regarding the contribution to the fund this year. This year, can you just confirm that it's capped under the -- at 35%, so if the cap wasn't there you'd be contributing more? And then, again for next year, I suppose it's -- got to see what cash flow ends out at next year.

  • Louis Gries - CEO

  • Yes, I can probably -- I'm having trouble getting up and down, Ben, so I'll just (inaudible) question.

  • Ben Chan - Analyst

  • Yes, yes. No worries.

  • Louis Gries - CEO

  • We did hit our cap this year, so we had very good cash flow. Remember, last July, we did not make a payment. We made the initial payment, I think, in February or -- February. So we did hit our cap this year and next year it is a little bit early to project our cash flow for the year, so we haven't taken a position on that yet.

  • Ben Chan - Analyst

  • Yes, great. Thanks.

  • Operator

  • We have no further questions from investors over the phone.

  • Louis Gries - CEO

  • Okay. Thank you very much. We'll go to media questions. If investors want to stay, they're more than welcome or, if they want to exit, they're welcome to do that as well. And we do appreciate you coming. Okay. Ready for media questions.

  • Desley Coleman - Media

  • Hi there. Desley Coleman from ABC Lateline Business. I just wondered if we could get your view on where the U.S. economy is at the moment and the housing market and whether you think we're anywhere near a bottom.

  • Louis Gries - CEO

  • Yes. Well, you've probably asked the wrong guy, because I'm a fiber cement salesman anyway. But from our perspective, the way we're planning our business is we we're now anticipating U.S. housing starts being no better than 800,000. Okay? And if it slips below that, we will adjust, hopefully ahead of time, and, if it's better than that, we don't have much trouble adjusting up.

  • Now, I think all the external stuff you see on U.S. housing, there's a wide range of forecasts. Like I said, Goldman Sachs is down to 500,000 on single-family starts and others run up to 1m in total starts. So there's a wide range and we don't have any unique insight into the market, so we don't really have a strong position on where they're going to end up or how long. Now, for our business, we are planning that starts will be down the full year, so they're down till at least this time next year.

  • Desley Coleman - Media

  • Do you see a bottom anywhere soon? Are you --?

  • Louis Gries - CEO

  • Well, like I said, we think it's going to be at least a year. So it could be further out than that, but we don't have to look at our business further than that, so it's at least a year.

  • Desley Coleman - Media

  • Okay. And can I just ask one more question on the -- [we're just] seeing record oil prices and the U.S. dollar continuing to slide, can you just give us a bit more color on how that's going to impact your business?

  • Louis Gries - CEO

  • Well, like we said when the investors were in the room, we will face higher costs for freight. We have a heavy product, so our freight is a fairly significant part of our delivered cost, so we will have higher cost for freight as fuel continues to go up, if it continues to go up. And then we do -- we're not a big energy user in our facilities, but we do use reasonable amount of energy in our facilities, so we will have higher costs due to the increases in fuel.

  • Desley Coleman - Media

  • And can you also address the questions around in the Australian business and your plans for any kind of closures or anything in the Australian business?

  • Louis Gries - CEO

  • The Australian business is actually performing very well, so we wouldn't be considering any closures in our Australian business. Basically coming off a record year, much more differentiated position than they've had in the past, increasing their market share of all products, but especially establishing new share for differentiated products. So it's in very good shape.

  • Heather Gallette - Media

  • Hi. Heather [Gallette] from CNBC. Just wanted to know, if you could send one message to your shareholders regarding the result, what would it be?

  • Louis Gries - CEO

  • I think it's the same message as last quarter and it will probably be the same message as next quarter. It was a very good business in a very difficult market. So we're way outperforming our peers, but we're down on last year and we'll probably be down this year on fiscal year '08. But the business is performing very well.

  • Ian Higgins - Media

  • Yes, [Ian Higgins] from The Australian, Mr. Gries. I've got a couple of questions. First one is Project Red talks, as I read it, about selling off or [certainly] incorporating the Australian and New Zealand operations. I'm just wondering how you see that working and when it will happen.

  • Louis Gries - CEO

  • So actually, I didn't see the documents that you claim you have, but Project Red did not have a separation of our Asia Pac business or any other part of our business.

  • Ian Higgins - Media

  • It talks in black and white about selling Australia New Zealand business. In black and white.

  • Louis Gries - CEO

  • Okay. The reality is, where we're at on our domicile project, we have looked at several alternatives. First one, obviously, status quo, just stay in the Netherlands. Second one is you move -- or another option is you move to a country other than the Netherlands. Third one could be U.S. and fourth one could be Australia. Okay?

  • We're very preliminary on all these studies. There's been no plans to sell the Australian business, to sell the New Zealand business, to sell the Philippines business, to sell the U.S. business. We're just working through how we configure the Corporation long-term. There's no connection between the FFA and the Australian business, even though we have no plans to sell it. The FFA is an agreement with the JHI N.V. It's not an agreement with JHA.

  • Ian Higgins - Media

  • My second question is - either you or Mr. Chenu might like to answer it - is do you have full confidence in the management style of Rob Bredenkamp and are you confident in defeating the claim of racial discrimination in the Dutch Equal Treatment Commission?

  • Louis Gries - CEO

  • Okay. Obviously, I'm not going to comment on a specific manager in the business. As far as the reporting on the situation with a couple of employees in Amsterdam, it was fairly inaccurate in the articles that appeared. I think you wrote them, Ian. And it's a personnel matter that's been appropriately addressed. It's not a major issue for the Corporation in any way.

  • Ian Higgins - Media

  • Yes, I did write those stories. What was inaccurate? I tried several times to contact all the senior executives and they would not comment. So here's the chance. What was inaccurate?

  • Louis Gries - CEO

  • I think you know our policy is not to respond to you, because it normally gets turned around. So we respond to journalists, but only in a reasonable way, and we haven't found responding to you is reasonable.

  • Ian Higgins - Media

  • Can you guarantee that the Australian businesses will still be owned by James Hardie, wherever it is, as the parent company within three years?

  • Louis Gries - CEO

  • I'd have no plans to sell or recommend a sale of the Australian business, but I'm not going to guarantee that we're going to own any piece of our business three years from now.

  • Ian Higgins - Media

  • Thank you.

  • Louis Gries - CEO

  • Any other questions? On the phone?

  • Operator

  • -- appears to be no questions at this time.

  • Louis Gries - CEO

  • All right. Thank you very much.