Boral Limited Level 3, 40 Mount Street North Sydney NSW ... · Our vision is to transform Boral for...

13 September 2016 The Manager, Listings Australian Securities Exchange ASX Market Announcements Exchange Centre 20 Bridge Street Sydney NSW 2000

Dear Sir We attach copies of slides on Boral's US operations being presented to members of the investment community in San Antonio on 13 September 2016.

Yours faithfully

Dominic Millgate Company Secretary

Boral Limited Level 3, 40 Mount Street North Sydney NSW 2060 PO Box 1228 North Sydney NSW 2059

T: +61 (02) 9220 6300 F: +61 (02) 9233 6605

www.boral.com.au

Boral Limited ABN 13 008 421 761

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Cladding Roofing

MaterialsLight Building Products

BORAL USAInvestor Day 2016, San Antonio

13 September 2016

BORAL USA INVESTOR DAY 2016

1. From 1 July 2016 Boral Australia comprises the Construction Materials & Cement and Building Products divisions

Our vision is to transform Boral for performance excellence and sustainable growth

Our goals are to deliver:

• World class health and safety outcomes based on Zero Harm

• Returns that exceed the cost of capital through the cycle

• More sustainable growth

Boral Australia1 USG Boral Boral USA

• Maintain and strengthen our leading, integrated construction materials position and optimise returns across all businesses

• Benefits from significant pipeline of major roads and infrastructure work

• Organic growth over the medium and long term through:

o Innovation

o Asian economic growth

o Product penetration for interior linings and related products

• Growing earnings through cyclical market recovery and new product development

• Disciplined approach to assessing strategically aligned M&A opportunities

2

Our Strategic PrioritiesTransforming Boral

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2016 US Site Visit – San Antonio, Texas

Texas is a Brick, Fly Ash and Roofing state, where Boral’s Fly Ash based R&D work began

3

14

2

1

3

1

1

3 3

1 22

1 62 2

5

5 4 5

4

1

1

11

41

1

92

5

5

9

61

1

1

5

1

SOUTH

WEST

NORTH-EASTMIDWEST

OPERATING FOOTPRINT(total number of operations)

2

13

12 Bricks

Roof Tiles

Cultured Stone

Building Products Distribution Centres41

Composites

Concrete and Quarries

Fly Ash

2

29

9

Head office of Boral’s Fly Ash business

Boral Material Technologies (BMT) R&D centre started in San Antonio, in 1998

BMT’s early R&D work underpins the development of Boral’s Fly Ash based composite building products

Boral’s newest research facility, The Boral Discovery Centre, opened in San Antonio in 2016

Accordingly, today’s presentations will cover Boral’s US portfolio, with greater emphasis on Fly Ash, Composites (Trim & Siding) and Innovation with an update on Bricks, Stone and Roofing

San Antonio, Texas

BORAL USA INVESTOR DAY 2016BORAL USA

Boral USA ScheduleTuesday, September 13

Time Event Speaker

8:30 a.m. – 11:00 a.m. PresentationsDavid Mariner, President & CEO, Boral USAUS Management Team

11:15 a.m. – 12:00 p.m. Lunch

12:00 p.m. – 12:30 p.m.Depart to Boral Discovery Center

12:30 p.m. – 2:00 p.m.Safety Briefing and Tour

Joel Charlton Russell Hill Discovery Center Team

2:00 p.m. Depart

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Content

Boral USA Overview

Strategic Update

US Overview

Bricks Joint Venture

Fly Ash, Innovation, Light Building Products

Stone, Roofing

Appendix

Economic and Housing Update

Financial Results


Boral USA Team

Oren PostCFO

Chris Fenwick President Roofing

Terry Peterson President Materials

Paul Samples President Bricks

Keith Depew President Stone

Patrick O’BoyleVP Growth & Performance

Brian Below President

Light Building Products

Dave Mariner President and CEO

Joel Charlton EGM Innovation

Boral USA Boral Limited

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Boral USA has Leading Market Positions and a National Footprint#1 in Brick, Clay Tile, Concrete Tile and Manufactured Stone; #2 in Fly Ash;#3 in Construction Materials in Denver, Colorado

1. Based on split of FY2016 external revenue for Boral USA2. Roads, highways, subdivisions and bridges3. SOUTH consists of AL, AR, DE, FL, GA, KY, LA, MD, MS, NC, OK, SC, TN, TX, WV, VA | NORTHEAST consists of CT,

MA, ME, NH, NJ, NY, PA, RI, VT | MIDWEST consists of IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI | WEST consists of AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY. States italicised in green are the states in which Boral operates and are included in Boral’s US Revenue chart.

4. Does not include Forterra Bricks Assets

5423

23Cladding(includes Bricks, Cultured Stone and Trim & Siding)

Fly Ash & Construction Materials

Roofing

OPERATING FOOTPRINT3,4

(total number of operations)

2

13

12 Bricks

Roof Tiles

Cultured Stone

Building Products Distribution Centres

41

Composites

Concrete and Quarries

Fly Ash

2

29

9

Share of Revenue1, %

by b

usin

ess

by m

arke

t seg

men

t

59

7

12

126 4

Single-family dwellings

Multi-family dwellings

Repair & remodel

Non-residential

RHS&B2Other

14

2

1

3

1

1

3 3

1 22

1 62 2

5

5 4 5

4

1

1

11

41

1

92

5

5

9

61

1

1

5

1

SOUTH

WEST

NORTH-EASTMIDWEST

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3.3

0.6 0.7 0.70.4 0.8

0.3

FY10 FY11 FY12 FY13 FY14 FY15 FY16

Employee and Contractor LTIFR1

Employee and Contractor RIFR2

15.0

8.8 8.57.3

5.7 6.1 5.2


1. Lost Time Injury Frequency Rates (per million hours worked)2. Reportable Injury Frequency Rates (per million hours worked)

Continued focus on risk identification, employee engagement

FY16 - record number of hazard awareness and near miss reports, 19% higher than FY15

FY16 - best year in Boral USA’s safety performance

Goal is ZERO HARM TODAY

0.12%

0.07%

0.01%

0.06%0.04%

0.01% 0.01%


% of Total Hours Lost to Injury

Lowest Recorded

Zero Harm Safety CultureRecordable Incident Frequency Rate down 14% to 5.2 – all-time low for Boral

Lowest Recorded

FY16 vs FY10:Hours Worked: 6.3m, up 89%Hours Lost: 720, down 77%

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results


Boral USAContinued progress in all business units

Cladding Roofing

# 1 in Bricks, Stone, Stucco

Announced Bricks Joint Venture

Designed auto de-molding process, enhancing safety and increasing labor efficiency

Generating margin improvement through new product launches

Lowering reliance on housing and fixed cost manufacturing

#1 in Concrete and Clay Roof Tile

Completed closure and sale of Gilroy, CA facility

Moved light weight product line to Stockton, CA

Price increasing as demand grows

Upgrading line in Lake Wales, FL to better serve customers

Optimize SG&A positions for increased profitability


Boral Composites (poly-ash) Trim & Siding, Versetta®

New Versetta capacity in Napa leading to 10 new distribution outlets

Added ~150 stocking dealer locations to reach ~650 total

Added 120,000 sq ft warehouse and processing facility for Boral Composites

Implementing accelerated sales plan

Growth capital project to double production capacity for composite products

Boral USA

Opened new US$4m Innovation Factory in San Antonio, Texas

Added manufacturing line for Boral Versetta Stone® in Napa, California

US$6.2m acquisition of roof tile making equipment and distribution yard in Texas

Increase manufacturing capacity at Boral TruExterior®

Siding and Trim facility in Salisbury, North Carolina

Continuing to assess strategic M&A opportunities, with a disciplined approach

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Fly Ash & Materials

#2 in Fly Ash, #3 in Materials (Denver)

Completion of Franklin St. ready mix concrete plant

Opened new Holton/Morton quarry

Opened new sand and gravel aggregate operation in Ft. Lupton, CO

Maintaining volumes despite disruptions in energy industry

Solid price performance in competitive markets

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Strategic RoadmapGrowing earnings through cyclical market recovery, product development, and continuing to maintain a disciplined approach to strategically aligned M&A opportunities

Continue focus on margin enhancement, i.e. price improvement, operating cost

improvements

Divest non-core construction materials business in Colorado when appropriate

Drive increased value through recently announced Bricks Joint Venture

Optimize portfolio to maximize profitability

Invest in innovation

2

Strategically aligned M&A opportunities

3

Grow capabilities of Innovation Factory

Deliver new products to market

Develop new platforms

Invest in new composite manufacturing technology

Identify opportunities that align with Boral’s portfolio and strategic objectives, including:

‒ Ability to diversify Boral’s market exposures beyond single family housing

‒ Opportunities to leverage emerging trends, targeting products early in life cycle

‒ Less capital intensive businesses, with a more flexible, variable cost structure

‒ Earnings accretive opportunities

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San Antonio, TX

2016 Analyst Site Visit

Boral acquired Monex in 1997

and merged into Fly Ash division

Early R&D focused on ash and concrete

Established state-of-the-art

R&D center

Combined proforma FY2017 annual EBITDA of ~US$25-$30 million

Delivers cost synergies ramping up to ~US$25m+ by year 4

Plant network optimisation

Improved utilisation of freight and distribution

Streamlined selling, marketing and administration costs

Procurement cost savings

Discovery Center

Executing our Strategic RoadmapOptimizing portfolio through the Bricks JV while leveraging our Innovation Factory to strengthen Light Building Products (LBP)

Bricks Joint Venture Evolution of LBP from Boral’s Fly Ash Heritage

Created patent-protected, new to world poly-ash composite technology that established Boral’s LBP business

Next generation focused on

engineered products

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results


Bricks Joint Venture Overview

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54 5

4

Combined FY2017 annual proforma

EBITDA of ~US$25-$30 million

2,639 million SBE (standard brick

equivalent) manufacturing capacity

‒ 2,291m SBE in current operation

‒ 348m SBE mothballed

27 clay brick manufacturing operations (including 4 mothballed operations)

2 concrete brick manufacturing operations(including 1 mothballed operation)

41 Building Products Distribution Centres

~1,380 combined employee base

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1122

22

55

11

33

Ontario

Quebec

2

OPERATING FOOTPRINT (total number of operations)

12 Clay Bricks

Concrete Bricks

Building Products Distribution Centres

41

Boral Forterra

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Transaction Rationale

Create a more efficient and better positioned business to compete in the broader cladding market through the cycle

Optimise combined manufacturing capacity and leverage distribution network to better serve customers

Deliver cost synergies, which are expected to be ~US$25 million+ p.a. by year 4 through:

‒ Plant network optimisation

‒ Improved utilisation of freight and distribution

‒ Streamlined selling, marketing and administration costs

‒ Procurement cost savings

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Transaction Structure

Forterra BrickForterra Brick Ownership will be 50/50

Jointly represented Board

Joint venture to be co-managed by Boral and Forterra

No upfront cash

JV is expected to be self funding

North American Bricks JV

North American Bricks JV50% 50%

Includes:

Forterra Brick clay and concrete brick

manufacturing, marketing and sales businesses in the USA

and Canada

Includes:

Forterra Brick clay and concrete brick

manufacturing, marketing and sales businesses in the USA

and Canada

Includes:

Boral USA clay brick and clay paver manufacturing,

marketing and sales and Boral Building

Products Distribution Centres

Includes:

Boral USA clay brick and clay paver manufacturing,

marketing and sales and Boral Building

Products Distribution Centres

BoralBoral

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results


Fly Ash Background

History:

Romans used volcanic ash in building construction

In 1937, fly ash used in concrete construction

Production:

Created in coal-fired power plants

Fine particles rise with flue gasses

Particles collected in bag house

Quality and Types:

Quality depends on coal source, combustion process

Two types:

‒ Class C – self cementing

‒ Class F – requires activator

Fly Ash

One World Trade Center, New York

Burj Khalifa, Dubai

Roman Colosseum

Fly Ash Use Today

Utility Supply

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Utilities’ Coal Combustion Produces Ash

Bottom Ash

Fly AshPulverized coal is burned to generate electricity.The fine particles of coal residue “fly up” into thestacks with flue gases and are removed byelectrostatic precipitators and fabric filter baghouses.

Coal makes up ~38% of total fuel generation in the U.S.

Key coal supply regions include Central Appalachia and Wyoming’s Powder River Basin

~500 power plants using coal

~600m tons of coal were used in 2016

Utilities

Fly ash captured in “bag house” of utility

1. Energy Information Administration

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Marketer’s RoleMarketers serve two customers: 1) utilities - motivated by low cost electricity production; 2) end user - focused on quality, cost, and availability

End UsersUtilities

Utility Marketer

Low capital

Availability

Quality material

Volume / royalties

Low cost production

Electricity demand

1 2

End users motivated by:

‒ Low landed cost, single sourced supply, consistent quality

Marketers motivated by:

‒ Consistent supply, competitive freight

Marketer End User

Consistent supply

Landed cost

Consistent quality

Royalty implications

Average selling price

Supply / freight

Marketer’s Value Connect the

Utility to End User

Utilities motivated by production costs and demand

Marketers motivated by:

‒ Manageable royalties and minimum volumes

‒ Supply availability (seasonality)

‒ Consistent quality

20Boral is a leading Fly Ash marketer in the US

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Multiple Applications for AshBoral has four key areas for growth; cement / ready mix represents the largest opportunity while engineered products provide significant upside

Applications Market Opportunity

Site Services and Disposal

Cement and Ready Mix

Asphalt and Mineral Filler

Engineered Products

1. Average replacement of 17% in ready mix producers who use fly ash; overall industry average is 10%

Cement and Ready Mix: Cement substitute in ready mix; upside opportunity as cement substitution pushes levels above 17%1

Asphalt and Mineral Filler: Applications tied to infrastructure; upside exists by expanding government specifications

Engineered Products: Downstream filler for products such as Boral Composites; upside includes expanding into new applications and industries leveraging Boral Innovation Factory

Site Service and Disposal: Service allows marketer to build long term relationship with utility; source specific driven by geography and ash quality

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Market Size2

(millions of tons)Market Segments

(type)

BORAL USA

Cementitious Materials1: Size and SegmentThe cementitious market is currently ~120 million tons, and forecast to grow to ~180m tons by FY2022

New Res foundations

Non-Res foundations, sidewalks

~41% of US demand

New Construction

Infrastructure

Roads / Highways

Oil Field

Soil Stabilization

~59% of US demand ‐

50

100

150

200

250

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY22

Maintenance and Repair

Non‐Building

Non‐Residential

Residential

1. Cementitious materials includes cement, fly ash, slag, limestone fines and silica fumes2. NAHB, Moody’s, Dodge, Management Estimates

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Cement Demand Drives Fly Ash OpportunityCement consumption in ready mix will drive significant increase in Ash volume; Ash remains competitively priced against cement

-

20

40

60

80

100

120

140

160

180

200

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

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FY

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14

FY

15

FY

16

FY

17

FY

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FY

19

FY

20

FY

21

FY

22

Non-Building

Residential

Non-Residential

1. Portland Cement Association: 2015 Market Intelligence Report2. Estimated industry Fly Ash ASP, Cement ASP: Bureau of Labor Statistics

Cement Demand1

(millions of tons)

7% CAGR

Cement and Fly Ash Pricing2

0%

20%

40%

60%

80%

100%

120%

140%

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

Jun-

05

Nov

-05

Apr

-06

Sep

-06

Fe

b-07

Jul-0

7

Dec

-07

May

-08

Oct

-08

Mar

-09

Aug

-09

Jan-

10

Jun-

10

Nov

-10

Apr

-11

Sep

-11

Fe

b-12

Jul-1

2

Dec

-12

May

-13

Oct

-13

Mar

-14

Aug

-14

Jan-

15

Jun-

15

Cement$ per Ton

Fly Ash$ per Ton

Forecast

23

~$80 to $100 per ton+20% vs. 2005

~$30 to $35 per ton+50% vs. 2005


Fly Ash Demand Continues to GrowFly Ash demand expected to grow over the next 20 years driven by cement, ready mix and other beneficial use (fillers)

14

20

28 29

2427

3033

36

0

5

10

15

20

25

30

35

40

1995 2000 2005 2010 2015 2020 2025 2030 2035

Fly Ash Demand1

Mill

ions

of T

ons

Forecast

1. The American Coal Ash Association: Key Findings 2015 Coal Combustion Products; Demand for all products, including ready mix concrete2. Increase in production in 2005-2010 driven by concrete oil field demand during last business cycle; decline through 2015 driven by lower construction activity during economic recovery

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Landscape of MarketersMultiple marketers primarily focused in the East and the Midwest

HeadwatersBoral

Select Marketers

SEFA GroupSeparation Technologies

Mineral Resource TechnologiesLafarge

CharahOthers

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Fly Ash Marketers1

1. Management estimates as of 2015


Fly Ash: Strategic IntentSecure existing ash supply, obtain additional supply, and invest in storage; improve returns with continued recovery of construction market

Bottom ash stockpile –San Antonio

Boral Site

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#2 national fly ash player, regionally focused in Texas, Georgia, Florida, and Colorado

Pricing influenced by cement

Opportunity is in new geographies, expanded supply, expanded storage, distribution, and new product applications

Business Overview:Industry Structure and Outlook

Category Size (mid-cycle) US$1.2b

Market Exposure Infrastructure / new construction

Core market is ready mix / infrastructure

Business heavily tied to Texas, Georgia, Florida

Growth potential in new applications

Organic Strategy

Continue to price competitively with cement

Pursue effective management and growth of supply

Leverage high value fillers

Innovation Strategy

Sustainable Development: Product Applications

Industry Structure and Business Road Map

Boral Terminal

Boral Source

~59% Infrastructure~59% Infrastructure

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1. Safety

LTIFR1 rate from 2.8 in FY15 to zero in FY16

MTIFR2 rate from 8.5 in FY15 to 5.5 in FY16

2. SGA and Business Optimization

Restructured organization

Integrated shared services

3. Price and Margin

ASP increases in last 4 years

Influenced by cement price increases

4. Innovate for Beneficial Use

Backing system for carpet / synthetic turf

Fly Ash Beneficiation Optimization

Products / Services

Fly Ash: Business HighlightsExpansion into new uses and engineered applications has improved the business’s performance through the cycle

Site Services and Disposal

Cement and Ready Mix Asphalt and Mineral Filler

Engineered Products

Celceram®Highly Reactive Pozzolans

1. Lost time injury frequency rate per million hours worked2. Medical treatment injury frequency rate per million hours worked

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New supply contracts

New storage facilities

Expansion into new products / industries

Price competitively based on market conditions

Expand supply / storage

Expand site service footprint

New product applications

Margin improvement initiatives

Opportunities Actions

StorageSite ServicesReady Mix

BORAL USA

Fly Ash: Opportunities and ActionsExecuting on key initiatives to grow supply, expand applications, and improve margins

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results


Boral’s Innovation Evolution

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2004 – 2006Development of fly ash

for new markets

1998 – 2003Boral establishes R&D Center in 1998 (Monex)

2007 – 2011R&D pivots towards

building products

2012 – 2016Innovation Factory

established

Fly ash and coal combustion Cement and concrete Ash processing and

beneficiation

Ash processing Functional fillers Multiple filled resin systems

Poly-ash technology created First-of-kind Boral

Composites plant built TruExterior® trim introduced

TruExterior® product extensions

Transformational growth activities

Light building products

1,200 sq ft Bruanig Lab, adjacent to plant

15,000 sq ft Arion Pkwy Lab

30,000 sq ft state-of-the-art Discovery Center

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Discovery Center doors opened February 2016

LBP continues strong growth

‒ Creation of Innovation Factory has significantly increased Boral’s patentportfolio

‒ USA now has over 100 granted or pending patents

New Business Innovation

New Product Innovation

Product Extensions

Brand NewCustomers/Needs

Emerging Customers/Needs

ExistingCustomers/Needs

ExistingCapabilities

EmergingCapabilities

New to WorldCapabilities

Incremental Transformational

Innovation Factory, San Antonio, Texas

Oct 2013 - 2X Trim Jul 2014 - Siding

Nov 2014 - Skirt Board Aug 2015 - Bevel

Innovation Factory Strategy

Select Products

Innovation UpdateDiscovery Center opens; Light Building Products (LBP) makes further progress


Boral’s Poly-Ash Technology Platform Proving its Versatility for Growth

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Trim Products

Siding Products

Potential Opportunities

Shiplap Siding

Bevel Siding

Channel Siding

Wide Format Products

Shutters Moulding

Trim

Skirt Board

Bead Board

2x Trim

Poly-Ash Technology

Boral’s proprietary Poly-Ash technology continues to open new category opportunities

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Exte

rnal

Mar

ket D

riven Performance Proprietary technology providing new value proposition

Good aesthetics and high durability

Ease of Use Light weight Handles and works like wood Low labor

Sustainable High recycle content, reduced embodied energy, and low carbon

footprint Durable, low maintenance

Inte

rnal

Bus

ines

s D

riven

Geographic Diversity

National appeal and very transportable Customizable Global potential

Market Diversity Opens new channels Distributed across residential, commercial and R&R

Growth Potential Revenue potential Opportunity in > $1b markets

Cost High ROA business model Flexible manufacturing

Key Driver Impact to Customer and Business

Boral’s Poly-Ash Composites Business Aligning with Market TrendsProducts designed to match market trends and align with Boral’s growth strategy

Current

Emerging

Exploratory

Poly-Ash Platform


Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results

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Light Building Products (LBP)Transformational business with low assets and significant ROFE potential


Combination of Boral Composites and Versetta®

Growth platform based on proprietary technology

High returns through cycle

Current US Portfolio Light Building Products

High assets, high energy

High fixed cost platform

Residential focus

Mature markets

Disruptive, rapid growth technology

Low asset base, low energy

Variable cost based manufacturing

Balanced market segments (repair and remodel and non-residential)

Significant ROFE potential

Boral Composites Versetta®

35


Business Overview:

BORAL USA

Light Building Products: Strategic IntentMarket leader for high performance, innovative, “green” product solutions across new residential construction, light commercial, and repair and remodel segments

Industry Structure and Outlook


Market Exposures R&R, new residential and non-residential

High R&R exposure

Composites gaining share vs. wood, trend to continue

Opportunity to extend technologies into new markets and platforms

Organic Strategy

Continue driving 2 step distributor growth

Expand into new geographies

Optimize costs and performance

New products

Innovation Strategy

Develop new products and categories


36

Stone manufacturing

Manufacturing and Distribution Network

Composite manufacturing

Light Building Products wholesale distributors

Napa, CASalisbury, NC

Chester, SC

Market adoption continues to be strong

National presence with high R&R focus

Opportunity to accelerate growth with sales and marketing investment

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Market Awareness

Light Building Products: FY2017 Commercial InitiativesMulti-faceted strategy to increase market awareness

Channel InitiativesNational Initiatives Content Marketing Initiative

PR and editorial coverage

News releases

Print and digital advertising

Mobile training events

Katz roadshow global sponsorship

Dealer buy-in and engagement

Online content library

Digital marketing assets

Thought leadership and brand advocacy

37


Light Building Products: FY2017 Commercial Initiatives (cont.)New product launches are planned to deliver significant growth in FY2017

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Siding and Trim

Trim

2X Trim Bevel Siding

Bead Board

Siding CollectionSkirt Board

Versetta

Graphite

Mission Point

Accessories

Universal Corner

Versetta Stone Panel

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U.S. Cladding and Other Exterior2

(market size US$)

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Trim

Light Building Products:Vinyl, Fiber Cement, Shutters, Decking, Hardscapes

Light Building Products: Windows, Doors and Wood

Stone, Brick, Stucco

$6.2b

$1.8b$24.5b

Opportunity $15.9b

Boral’s current market segments

$8.0b

1. Selling, general and administration2. Market analysis, McGraw Hill housing starts, NAHB, management estimates

Light Building Products: Business HighlightsEmerging from start-up mode, LBP is quickly gaining scale and positioned to contribute meaningful earnings to the business over time

1. Safety

5 years without an LTI

2. Sales and Marketing

Accelerating investment in SGA1

Multi‐pronged marketing initiative

3. Manufacturing

Operating efficiency improvements

Investing to double capacity in FY17

4. Products and Technology

Siding products well received

New product offerings launching in FY17

Additional market opportunities available as technology platform expands, e.g. moulding, sheets/substrates, shutters etc.


FY13

FY16

Light Building Products: Opportunities and ActionsExecuting on key initiatives to aggressively grow scale

Market adoption to continue rapid growth

Manufacturing efficiency and cost improvements

Timing of new manufacturing capacity

Rapid product development

Expansion of geographies, channels, segments

Accelerated investment in sales and marketing

Manufacturing initiatives deliver margin gains

Opened Boral Composites Finishing Plant in FY16 Q2; Additional Boral Composites capacity coming online FY17 Q3

Expanding product portfolio to full exterior wrap


LBP Revenue Growth ($m)

Boral Composites Finishing Plant

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results


1. NAHB, Moody’s, Dodge, Management Estimates

Market Size1

(millions of sq ft)Market Segments

(type)

BORAL USA

Stone: Size and SegmentStone market is currently ~789m sq ft, includes natural and manufactured stone.Non-residential accounts for ~38% of the industry and is more stable through the cycle

42

‐

200

400

600

800

1,000

1,200

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

Non‐Residential

New Residential

Repair & Remodel

Tiered categories: premium, mid-grade, and economy

Big builders driving trend

High cyclical market segment

New Residential

Non-Residential

Exterior accents

Interior accents

Low cyclical market segment

Repair & Remodel

Positive outdoor living market trend

Perpetual interior refresh / remodel cycle

Exterior accents

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Stone: Segment Leader in Manufactured Stone VeneerEast and West variable manufacturing capacity allows for flexing production based on demand

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Stone Veneer Manufacturers

Mexico

West Region

Midwest Region

Southwest Region

Southeast Region

Northeast Region

Ontario

BoralHeadwatersCoronadoEnvironmental

National Competitors

PlyGem

CenturionLonestarBoulder CreekSunset

Regional / Large Local

J&M StoneTejas StoneHarriStoneHorizon

Landmark StoneQuarry RidgeQuality StoneCanyonSuncrestTexas StoneAnatoly StoneNorthstar

Heritage


Business Overview:

BORAL USA

Stone: Strategic IntentManufactured stone veneer leader across residential new construction, light commercial, and repair and remodel segments


Category Size (mid-cycle) US$2.3b1

Market Exposures New residential, Non-residential and R&R

US and Canada

Regional competition

Regionalized product preferences

Expanding market

Organic Strategy

Execute – Better/Best

Resale and accessory growth

Continue new brand penetration

Innovative product development

Innovation Strategy

Sustainable development: process improvement


442015 Designer Cultured Stone Collection

1. Industry size includes natural stone

Leading brand manufactured stone veneer

Diversified segment including new construction, interior/exterior, and repair and remodel

Geographic exposure – US and Canada

Opportunity in optimizing network, expanding sales offering (good, better, best), product development, innovation

Non-residential, multi-family, repair and remodel

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Product Line Expansion

Stone: Business HighlightsInnovative manufacturing solutions and execution of sales and marketing initiatives have contributed to significant year-over-year earnings improvement

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1. Safety

LTIFR1 between zero and 0.8 for 5 years running


Sales optimization and efficiency

E‐Business, Web, Marketing

3. Manufacturing Optimization

Increased operational performance

Low cost automation

4. Price, Margin, and Resale

3 years of price improvement in competitive environment

Continued gross margin improvement

1. Lost time injury frequency rate per million hours worked



BORAL USA

Stone: Opportunities and ActionsExecuting on short and medium term growth strategy driving margin improvement

46

Safety strategy execution

Flexible operations and fixed cost optimization

Product development innovation

Marketing excellence

Accessory expansion

Continued focus on Zero Harm Today

Optimized production ramp-up

Margin focus

Grow interior market space

Accelerate growth

Drain-N-Dry LathCarbon - Pro-Fit® Modera™ LedgestoneBlack Rundle Pro-Fit® Alpine LedgestoneFor

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix


Financial Results


1. Source: ARMA, NAHB, Moody’s, Dodge, Management Estimates

Market Size1

(millions of squares)

~1.5 million roofs / year

Cyclical driven

Production builder

Lower price / margin

Less complicated sale

New Residential

Reroof

3.8 million roofs / year

Stable and growing

~120 million homes

Re-roofer

Higher price / margin

Complicated sale

Market Segments(type)

‐

20

40

60

80

100

120

140

160

180

200

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Non‐Residential

New Residential

Reroof

BORAL USA

Roofing: Size and SegmentThe pitched roof market is currently ~118 million squares; the size, stability, and profitability of the Reroof market is desirable

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Trinidad

BORAL USA

Roofing: Market Leader in Concrete and Clay TileOver the past 8 years, a significant housing downturn has negatively impacted the Roof Tile Industry; Boral’s performance will improve as the housing market recovers

Concrete Clay

Concrete PlantClay Plant

Boral Plants

Satellite Yard

49

Roof Tile Manufacturers


Market leader in roof tile, but only 1% to 2% of total North America roofing

Heavily tied to four states and new construction (production builders)

Opportunity in new geographies, products, and market segments

Hand Stacking Tile Pitched Roof Solutions

Concrete

Clay

Trinidad

80% in New Construction80% in New Construction

80% in 4 States80% in 4 States

Business Overview:

BORAL USA

Roofing: Strategic IntentProvide full offering of high-end pitched roof solutions that will enable Boral to grow and diversify into new geographies and market segments

Satellite Yards



Market Exposures New residential

Growth tied to national builders

CA, FL, AZ, NV significant upside in housing starts

Further conversion of Asphalt

Organic Strategy

Update manufacturing with automation

Geographic expansion and total roof system

Continued accessories growth

Innovation Strategy

Sustainable Development: Process improvement


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1. Safety

LTIFR1 rate of zero for 5 years running

MTIFR2 rate from 5.5 in FY15 to 3.3 in FY16


Restructured organization

E‐Business, customer service, HR, etc.

3. Manufacturing Optimization

17 to 9 plants, volume maintained

Operating efficiency improvements

4. Price, Margin and Resale

ASP increases in last 4 years in strong competitive environment

Resale 3x in last 5 years

Product Line Sales

Roofing: Business HighlightsAt similar activity levels and significantly below long-term average demand; Boral Roofing has substantially improved earnings since pre-acquisition

Tile

Resale% of Sales

511. Lost time injury frequency rate per million hours worked2. Medical treatment injury frequency rate per million hours worked


Fewer hours lost to injury

Market and product line expansion

Increased roof component sales

Manufacturing network optimization

Overhead cost improvements

Growth of new residential in core markets

On boarding new hires injury free

Managing ramp-up in utilization

Margin improvement initiatives


Hand Stacking TileGilroy to Stockton ConversionPitched Roof Solutions

BORAL USA

Roofing: Opportunities and ActionsExecuting on key initiatives to increase profit margin and share of roof

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Boral USA – Well positioned for growth

Strong management team, track record

Leading market positions with national footprint

Fundamentals signal healthy market growth over next 5+ years

Delivering results from investment in innovation

Continuing to assess strategic M&A opportunities with a disciplined approach

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1

2

3

4

5


Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix

Economic & Housing Update

Financial Results

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Economic and Housing Summary

Sustainable recovery

Recovery supported by:

Economy

Affordability

Housing supply and demand

Demographics

No indication of a pause or change to shape of recovery

Ample room for continued growth

SUPPORTS Growth is steady, and there are strong

indicators that it will continue

Labor markets are tight

Consumer wages, buying power increasing

Affordability is high

Market is undersupplied

Single family homes needed to meet demand

Demand outpacing supply

Millennials need starter homes in short term

Baby boomers need next home in long term

Economic Outlook

1

Housing Fundamentals

Demographics

2

3

55


1. GDP Growing and Wages RisingGrowing economy and high employment are starting to drive real wage growth

1. Sources: Bureau of Economic Analysis, Bureau of Labor Statistics

56

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1980

Q2

1981

Q4

1983

Q2

1984

Q4

1986

Q2

1987

Q4

1989

Q2

1990

Q4

1992

Q2

1993

Q4

1995

Q2

1996

Q4

1998

Q2

1999

Q4

2001

Q2

2002

Q4

2004

Q2

2005

Q4

2007

Q2

2008

Q4

2010

Q2

2011

Q4

2013

Q2

2014

Q4

2016

Q2

US Real GDP Growth1

(YOY % Growth)

2016Q2 increased at a rate of 1.2% annually

Unemployment Rate1

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1982

Q2

1984

Q2

1986

Q2

1988

Q2

1990

Q2

1992

Q2

1994

Q2

1996

Q2

1998

Q2

2000

Q2

2002

Q2

2004

Q2

2006

Q2

2008

Q2

2010

Q2

2012

Q2

2014

Q2

2016

Q2

LT Avg 5.8%1948 - 2016

Growing economy coupled with steady job growth should drive higher wage growth and household formations

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2. Affordability Near All Time HighAffordability remains high, low rates have driven demand and pricing upwards

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1983

Q2

1985

Q2

1987

Q2

1989

Q2

1991

Q2

1993

Q2

1995

Q2

1997

Q2

1999

Q2

2001

Q2

2003

Q2

2005

Q2

2007

Q2

2009

Q2

2011

Q2

2013

Q2

2015

Q2

2016

Q2

30 Year Fixed Mortgage Rate1

(%)

Rates to remain low as FOMC adjusts Fed Funds rate at slow pace

4.4% below long term average

LT Avg 8.0% 1980 - 2016

1. Sources: Moody’s Analytics, National Association of Realtors

0

50

100

150

200

250

1984

Q1

1986

Q1

1988

Q1

1990

Q1

1992

Q1

1994

Q1

1996

Q1

1998

Q1

2000

Q1

2002

Q1

2004

Q1

2006

Q1

2008

Q1

2010

Q1

2012

Q1

2014

Q1

2016

Q1

Housing Affordability Index1

(Index)

Affordability will remain high driven by low rates and wage growth

LT Average 125 (1971 – 2016)

Above = More AffordableBelow = Less Affordable

~29% higher than long term average

57


2. and 3. Demand Outpacing SupplyHousing stock undersupplied as demand continues to rise driven by millennials and baby boomers

-

100

200

300

400

500

600

1964

Q2

1966

Q2

1968

Q2

1970

Q2

1972

Q2

1974

Q2

1976

Q2

1978

Q2

1980

Q2

1982

Q2

1984

Q2

1986

Q2

1988

Q2

1990

Q2

1992

Q2

1994

Q2

1996

Q2

1998

Q2

2000

Q2

2002

Q2

2004

Q2

2006

Q2

2008

Q2

2010

Q2

2012

Q2

2014

Q2

2016

Q2

New Housing Stock Inventory1

(New homes millions)

New residential inventory currently ~23% below the long term average

LT Avg 1963 - 2016

581. Sources: US Census, Harvard Joint Center for Housing studies, Pew Research Center2. Millennials born in: 1981-1997; Generation X: 1965-1980; Baby Boomers: 1946-1964; Silent Generation: 1928-1945; Greatest Generation: before 1928

% of Adult Population1,2

2%

27%

32%

27%

12%

36%

30%

24%

9%

1%

Year 2014

Year 2020

Millennials

Baby Boomers

Generation X

Silent GenerationGreatest Generation

Millennials

Baby Boomers

Generation X

Silent GenerationGreatest GenerationF

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Historic Total Housing StartsCurrent cycle near long term cyclical low; fundamentals support continued improvement

0.0

0.5

1.0

1.5

2.0

2.5

FY

70

FY

72

FY

74

FY

76

FY

78

FY

80

FY

82

FY

84

FY

86

FY

88

FY

90

FY

92

FY

94

FY

96

FY

98

FY

00

FY

02

FY

04

FY

06

FY

08

FY

10

FY

12

FY

14

FY

16

FY732.3m starts

FY782.0m starts FY86

1.8m starts

FY062.0m starts

Long term average

FY161.2m starts

Long Term Housing Starts1

FY751.1m starts FY82

0.9m starts

FY911.0m starts

FY110.6m starts

Hou

sing

Sta

rts

Mill

ions

Recessions59

1. Sources: Census Bureau


Market OutlookResidential and non-residential momentum to continue in FY2017; strong growth forecast in both markets through next 3 to 5 years

New Residential Starts1

1. Historical Housing Starts: Census Bureau2. Residential Forecast: Average of NAHB, MBA, Dodge, Wells Fargo, NAR, Fannie Mae and Freddie Mac3. Non Residential Activity: McGraw Hill / Dodge – 1992 Value

External forecasters2 expect average of ~1.3m starts in FY2017

0.0

0.5

1.0

1.5

2.0

2.5

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

Forecast2Actual

Sta

rts

mill

ions

0

20

40

60

80

100

120

140

160

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

Non

Res

iden

tial C

onst

ruct

ion

$s b

illio

n

Actual

Non Residential Activity3

60

Forecast3

Expected growth of ~16% for the Non-Residential segment in FY2017

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Content

Boral USA Overview

Strategic Update

US Overview



Stone, Roofing

Appendix

Economic & Housing Update

Financial Results


5

32

FY2016 Financial ResultsStrong profit growth; continuing to benefit from market recovery

1. Excluding significant items; ROFE may differ slightly in AUD and USD due to FX conversion2. Cost reduction & other includes production volume leverage and one-off land sale

Revenue

$751m 8%

EBIT

$32m from US$5m

US$m FY16 FY15 Variance

Revenue 751 695 8%

EBITDA1 68 42 63%

EBIT1 32 5

EBIT ROS, % 4.2 0.7

Net Assets 659 634

ROFE1, % 4.9 0.8

EBIT Variance (US$m)

FY15 EBIT1 Vol

ume

Pric

e

FY16EBIT1C

ost

Esc

alat

ion

Cos

t R

educ

tion

& O

ther

2

US$ revenue up 8% to US$751m; continuing to benefit from increased housing construction

EBIT of US$32m, up US$27m, due to volume and price growth and one-off land sale of US$7m

Cladding revenue up 8% to US$405m

- Bricks: revenue up supported by re-sale product revenue growth; volumes up 4%, average prices up 1%

- Cultured Stone: volumes up 7%, average prices up 2%

- Trim & Siding: volume and price growth; manufacturing and marketing accelerated; targeting break-even in FY2017

Roofing: volumes up 11% with higher growth in traditional Tile States; average prices steady

Fly Ash & Construction Materials: pricing gains as well as strength in Denver construction market

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EBIT and Housing StartsPositive results at lower level of housing starts

$103

$139

$75

($25)

($81)($91) ($99)

($87)

($66)

($35)

$5

$321

2,016 2,036

1,546

1,132

646 594 570 687

872 954 1,054

1,150

‐1,800

‐1,200

‐600

0

600

1,200

1,800

2,400

($150)

($100)

($50)

$0

$50

$100

$150

$200

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Total US Housing Starts

EBIT

EBIT (US$m) vs Housing Starts (‘000)

Portfolio additions from historic: 50% Monier Lifetile & Cultured Stone, Boral Composites

Portfolio additions from historic: 50% Monier Lifetile & Cultured Stone, Boral Composites

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1. Includes one-off $7m land sale


FY2016 Performance DriversImprovement driven by higher volumes, price growth, and cost and asset management

1. Brick States: Texas, Oklahoma, Arkansas, Lousisanna, Kentucky, Tennessee, Mississippi, Alabama, Georgia, South Carolina, North Carolina (Source: Dodge) Stone: Total United States starts (Source: Census)Tile States: California, Nevada, Arizona, Florida (Source: Dodge)

2. Volume and ASP are concrete only

Total Starts1

Single Family Starts1

Volume Price Revenue EBIT Utilization

Bricks Up 4% Up 6% Up to 55%

Stone Up 9% Up 13% Up to 40%

Roofing Up 9% Up 16% Up to 31%

Composites - - -

Materials2 - - -

Fly Ash - - -

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FY2017 Outlook for Boral USA:

Expect further growth in EBIT on the back of increased housing activity

If market improvement trajectory of past three years of ~10% continues, expect ~1.26m housing starts in FY2017

Continued growth of Boral’s Light Building Products

FY2017 Outlook

65


Disclaimer

66

The material contained in this document is a presentation of information about the Group’s activities current at the date of the presentation, 13 September 2016. It is provided in summary form and does not purport to be complete. It should be read in conjunction with the Group’s periodic reporting and other announcements lodged with the Australian Securities Exchange (ASX).

To the extent that this document may contain forward-looking statements, such statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release.

This document is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor.F

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Boral Limited Level 3, 40 Mount Street North Sydney NSW ... · Our vision is to transform Boral for...

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