SlideShare a Scribd company logo

2Presentation James Hardie

J
Joshua C
1 of 20
Download to read offline
James Hardie Industries Limited
James Hardie Industries Limited
Lecturer: Stephen Lim
Group members:
Shaun R. Stewart 12064681
Luke Rowles 10742029
Joshua Chhay 10276374
Xin Xiao 11870957
Raed Al-Bader 11669761
MD Feisul Kahir 11070226
Table of Content
• Introduction of James Hardie’s Activities,Strategies and Market Segment
• Key accounting policies of James Hardie
• Evaluate the flexibility management
• Evaluation of Accounting strategy employed
• Evaluate the quality of the disclosure
• Potential questionable accounting numbers
• Undo Accounting Distortions
• Financial press discussion
• Conclusion
1.Company’s activities and strategies
• James Hardie Industries Public Limited
Company operates in the
construction and building materials
sector
• Founded in Melbourne, Australia in
1888 the company is now
incorporated in Ireland, however it is
listed on the ASX with stock code JHX
• Core to the strategy of James Hardie
has been to invest in high-return
organic growth with a focusing on
capacity expansion across the US
and Australian businesses
Market Segment
• Key profit driver: Manufacturing and
distributing fibre cement products
throughout Australia ,the Asian
Pacific region, the USA and Europe
• Competitive advantage:
Development of its research
capabilities to develop
differentiated, unique and superior
products.
2. Key Accounting Polices

Recommended

Financial Reporting James Hardie Group Assignment (1)
Financial Reporting James Hardie Group Assignment (1)Financial Reporting James Hardie Group Assignment (1)
Financial Reporting James Hardie Group Assignment (1)Joshua C
 
Dabur Q4FY14 results in line with expectations by Motilal Oswal
Dabur Q4FY14 results in line with expectations by Motilal OswalDabur Q4FY14 results in line with expectations by Motilal Oswal
Dabur Q4FY14 results in line with expectations by Motilal OswalIndiaNotes.com
 
merck 4Q07 Earnings Release
merck  	4Q07 Earnings Releasemerck  	4Q07 Earnings Release
merck 4Q07 Earnings Releasefinance11
 
Cipla Balance Sheet analysis
Cipla Balance Sheet analysisCipla Balance Sheet analysis
Cipla Balance Sheet analysisNewGate India
 
Analysis of financial statement of asianpaints ltd
Analysis of financial statement of asianpaints ltdAnalysis of financial statement of asianpaints ltd
Analysis of financial statement of asianpaints ltdBrijin Jacob
 
20180620 sauc oppenheimer consumer conference widescreen final
20180620 sauc oppenheimer consumer conference widescreen final20180620 sauc oppenheimer consumer conference widescreen final
20180620 sauc oppenheimer consumer conference widescreen finaldrhincorporated
 
Topic 10 Financial Statement Analysis
Topic 10 Financial Statement AnalysisTopic 10 Financial Statement Analysis
Topic 10 Financial Statement Analysisguest441011
 
9.5.17 cc & webcast deck final
9.5.17 cc & webcast deck   final9.5.17 cc & webcast deck   final
9.5.17 cc & webcast deck finalirdaseke
 

More Related Content

What's hot

Financial Accounting Project
Financial Accounting ProjectFinancial Accounting Project
Financial Accounting ProjectArpit Tandon
 
Haseeb project fm new
Haseeb project fm newHaseeb project fm new
Haseeb project fm newMoezza A
 
Ratio Analysis of Coca-Cola
Ratio Analysis of Coca-ColaRatio Analysis of Coca-Cola
Ratio Analysis of Coca-ColaWajid Ali
 
Nike Financial Analysis
Nike Financial AnalysisNike Financial Analysis
Nike Financial AnalysisTyler L. Hough
 
July 10th, 2017 investor presentation
July 10th, 2017   investor presentationJuly 10th, 2017   investor presentation
July 10th, 2017 investor presentationirdaseke
 
Financial ratios (with example of ICI)
Financial ratios (with example of ICI)Financial ratios (with example of ICI)
Financial ratios (with example of ICI)IRFAN UR REHMAN
 
Financial analysis of_sbi
Financial analysis of_sbiFinancial analysis of_sbi
Financial analysis of_sbiVishal Kapoor
 
Fourth Quarter and Year End 2014 Financial Results Investor Call
Fourth Quarter and Year End 2014 Financial Results Investor CallFourth Quarter and Year End 2014 Financial Results Investor Call
Fourth Quarter and Year End 2014 Financial Results Investor CallSquareTwoFinancial
 
ACC 423 Effective Communication/tutorialrank.com
 ACC 423 Effective Communication/tutorialrank.com ACC 423 Effective Communication/tutorialrank.com
ACC 423 Effective Communication/tutorialrank.comjonhson247
 
q2_2008_presentation
q2_2008_presentationq2_2008_presentation
q2_2008_presentationfinance44
 

What's hot (20)

Financial Accounting Project
Financial Accounting ProjectFinancial Accounting Project
Financial Accounting Project
 
Haseeb project fm new
Haseeb project fm newHaseeb project fm new
Haseeb project fm new
 
3Q 2017 Earnings Conference Call Presentation
3Q 2017 Earnings Conference Call Presentation 3Q 2017 Earnings Conference Call Presentation
3Q 2017 Earnings Conference Call Presentation
 
Ratio Analysis of Coca-Cola
Ratio Analysis of Coca-ColaRatio Analysis of Coca-Cola
Ratio Analysis of Coca-Cola
 
Nike Financial Analysis
Nike Financial AnalysisNike Financial Analysis
Nike Financial Analysis
 
The Principal Financial Group 101
The Principal Financial Group 101The Principal Financial Group 101
The Principal Financial Group 101
 
July 10th, 2017 investor presentation
July 10th, 2017   investor presentationJuly 10th, 2017   investor presentation
July 10th, 2017 investor presentation
 
Financial ratios (with example of ICI)
Financial ratios (with example of ICI)Financial ratios (with example of ICI)
Financial ratios (with example of ICI)
 
Ratios
RatiosRatios
Ratios
 
4Q 2013 Earnings Conference Call Presentation
4Q 2013 Earnings Conference Call Presentation4Q 2013 Earnings Conference Call Presentation
4Q 2013 Earnings Conference Call Presentation
 
Financial analysis of_sbi
Financial analysis of_sbiFinancial analysis of_sbi
Financial analysis of_sbi
 
The Principal Financial Group 101
The Principal Financial Group 101The Principal Financial Group 101
The Principal Financial Group 101
 
Financial Management Ch 06
Financial Management Ch 06Financial Management Ch 06
Financial Management Ch 06
 
The Principal Financial Group 101
The Principal Financial Group 101The Principal Financial Group 101
The Principal Financial Group 101
 
Principal Financial Group 101
Principal Financial Group 101Principal Financial Group 101
Principal Financial Group 101
 
Ebl 4
Ebl 4Ebl 4
Ebl 4
 
Fourth Quarter and Year End 2014 Financial Results Investor Call
Fourth Quarter and Year End 2014 Financial Results Investor CallFourth Quarter and Year End 2014 Financial Results Investor Call
Fourth Quarter and Year End 2014 Financial Results Investor Call
 
Elb 7docx
Elb 7docxElb 7docx
Elb 7docx
 
ACC 423 Effective Communication/tutorialrank.com
 ACC 423 Effective Communication/tutorialrank.com ACC 423 Effective Communication/tutorialrank.com
ACC 423 Effective Communication/tutorialrank.com
 
q2_2008_presentation
q2_2008_presentationq2_2008_presentation
q2_2008_presentation
 

Similar to 2Presentation James Hardie

Analysis Of Accounts Receivable Balances
Analysis Of Accounts Receivable BalancesAnalysis Of Accounts Receivable Balances
Analysis Of Accounts Receivable BalancesMelissa Luster
 
Q4 fy17 earnings presentation v f
Q4 fy17 earnings presentation v fQ4 fy17 earnings presentation v f
Q4 fy17 earnings presentation v fir_westrock
 
Financial and technical regulations issued by insurance authority
Financial and technical regulations   issued by insurance authorityFinancial and technical regulations   issued by insurance authority
Financial and technical regulations issued by insurance authorityAftab Hasan
 
Q3 presentation v1 (1)
Q3 presentation v1 (1)Q3 presentation v1 (1)
Q3 presentation v1 (1)Corning_Owens
 
Running head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docx
Running head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docxRunning head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docx
Running head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docxcharisellington63520
 
Greenfield Seitz: Fact Sheet 2015
Greenfield Seitz: Fact Sheet 2015Greenfield Seitz: Fact Sheet 2015
Greenfield Seitz: Fact Sheet 2015stugreenfield
 
Building A Fortress Balance Sheet
Building A Fortress Balance SheetBuilding A Fortress Balance Sheet
Building A Fortress Balance SheetDonna Butler
 
Accounting principles
Accounting principlesAccounting principles
Accounting principlesSurbakty
 
PHX Corporate Presentation June 2023
PHX Corporate Presentation June 2023PHX Corporate Presentation June 2023
PHX Corporate Presentation June 2023PanhandleOilandGas
 
An Annual Report On Balance Sheet And Income Statement
An Annual Report On Balance Sheet And Income StatementAn Annual Report On Balance Sheet And Income Statement
An Annual Report On Balance Sheet And Income StatementAngel Ashford
 
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Re...
Rye Select Broad Market  Xl Portfolio Limited   With Independent Auditors  Re...Rye Select Broad Market  Xl Portfolio Limited   With Independent Auditors  Re...
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Re...aspt
 
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...guest14816
 
Ratio analysis
Ratio analysisRatio analysis
Ratio analysisIxaKhan123
 
4 q18 earnings deck
4 q18 earnings deck4 q18 earnings deck
4 q18 earnings deckadpinvestors
 
PHX Corporate Presentation November 2023
PHX Corporate Presentation November 2023PHX Corporate Presentation November 2023
PHX Corporate Presentation November 2023PanhandleOilandGas
 
Masonite q2 2014 earnings call presentation final
Masonite q2 2014 earnings call presentation finalMasonite q2 2014 earnings call presentation final
Masonite q2 2014 earnings call presentation finalmasoniteinvestors
 
Sun investor presentation may 2018 final
Sun investor presentation may 2018 finalSun investor presentation may 2018 final
Sun investor presentation may 2018 finalSunocoLP
 
Accounting cycle
Accounting cycleAccounting cycle
Accounting cyclebalti13
 

Similar to 2Presentation James Hardie (20)

Analysis Of Accounts Receivable Balances
Analysis Of Accounts Receivable BalancesAnalysis Of Accounts Receivable Balances
Analysis Of Accounts Receivable Balances
 
Q4 fy17 earnings presentation v f
Q4 fy17 earnings presentation v fQ4 fy17 earnings presentation v f
Q4 fy17 earnings presentation v f
 
Financial and technical regulations issued by insurance authority
Financial and technical regulations   issued by insurance authorityFinancial and technical regulations   issued by insurance authority
Financial and technical regulations issued by insurance authority
 
Q3 presentation v1 (1)
Q3 presentation v1 (1)Q3 presentation v1 (1)
Q3 presentation v1 (1)
 
Running head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docx
Running head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docxRunning head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docx
Running head NAYBROSTRAND COMPANY1NAYBROSTRAND COMPANY 3.docx
 
Greenfield Seitz: Fact Sheet 2015
Greenfield Seitz: Fact Sheet 2015Greenfield Seitz: Fact Sheet 2015
Greenfield Seitz: Fact Sheet 2015
 
Building A Fortress Balance Sheet
Building A Fortress Balance SheetBuilding A Fortress Balance Sheet
Building A Fortress Balance Sheet
 
Accounting principles
Accounting principlesAccounting principles
Accounting principles
 
Fa gaap
Fa gaapFa gaap
Fa gaap
 
PHX Corporate Presentation June 2023
PHX Corporate Presentation June 2023PHX Corporate Presentation June 2023
PHX Corporate Presentation June 2023
 
An Annual Report On Balance Sheet And Income Statement
An Annual Report On Balance Sheet And Income StatementAn Annual Report On Balance Sheet And Income Statement
An Annual Report On Balance Sheet And Income Statement
 
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Re...
Rye Select Broad Market  Xl Portfolio Limited   With Independent Auditors  Re...Rye Select Broad Market  Xl Portfolio Limited   With Independent Auditors  Re...
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Re...
 
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...
Rye Select Broad Market Xl Portfolio Limited With Independent Auditors Report...
 
Ratio analysis
Ratio analysisRatio analysis
Ratio analysis
 
Q1 presentation v1
Q1 presentation v1Q1 presentation v1
Q1 presentation v1
 
4 q18 earnings deck
4 q18 earnings deck4 q18 earnings deck
4 q18 earnings deck
 
PHX Corporate Presentation November 2023
PHX Corporate Presentation November 2023PHX Corporate Presentation November 2023
PHX Corporate Presentation November 2023
 
Masonite q2 2014 earnings call presentation final
Masonite q2 2014 earnings call presentation finalMasonite q2 2014 earnings call presentation final
Masonite q2 2014 earnings call presentation final
 
Sun investor presentation may 2018 final
Sun investor presentation may 2018 finalSun investor presentation may 2018 final
Sun investor presentation may 2018 final
 
Accounting cycle
Accounting cycleAccounting cycle
Accounting cycle
 

2Presentation James Hardie

  • 2. James Hardie Industries Limited Lecturer: Stephen Lim Group members: Shaun R. Stewart 12064681 Luke Rowles 10742029 Joshua Chhay 10276374 Xin Xiao 11870957 Raed Al-Bader 11669761 MD Feisul Kahir 11070226
  • 3. Table of Content • Introduction of James Hardie’s Activities,Strategies and Market Segment • Key accounting policies of James Hardie • Evaluate the flexibility management • Evaluation of Accounting strategy employed • Evaluate the quality of the disclosure • Potential questionable accounting numbers • Undo Accounting Distortions • Financial press discussion • Conclusion
  • 4. 1.Company’s activities and strategies • James Hardie Industries Public Limited Company operates in the construction and building materials sector • Founded in Melbourne, Australia in 1888 the company is now incorporated in Ireland, however it is listed on the ASX with stock code JHX • Core to the strategy of James Hardie has been to invest in high-return organic growth with a focusing on capacity expansion across the US and Australian businesses
  • 5. Market Segment • Key profit driver: Manufacturing and distributing fibre cement products throughout Australia ,the Asian Pacific region, the USA and Europe • Competitive advantage: Development of its research capabilities to develop differentiated, unique and superior products.
  • 9. 4. Disclosure Strategy DOCUMENT DETAIL Amended & Restated Final Funding Agreement This agreement is intended to ensure “JHISE Group's commercial viability and success will provide the basis for the long term funding of the claims which are to be subject to those funding arrangements” Valuation of Asbestos-Related Disease Liabilities of former James Hardie entities (“the Liable Entities”) to be met by the AICF Trust Prepared for Asbestos Injuries Compensation Fund Limited (“AICFL”): This actuarial estimation of the Asbestos Liability is the detailed basis for the liability appearing on balance sheet. Asbestos Injuries Compensation Fund Limited (“AICFL”) Statutory Financial Statements The annual report for the Asbestos compensation fund, which also forms part of the JHX consolidated annual report. JHX is required to pay annually 35% of Free Cash Flow as defined by the agreement as “net cash provided by operating activities (as calculated in accordance with US GAAP, paid to the AICF.
  • 10. Management Remuneration Policy STI 20% Individual Performance Plan (STI): 1 -3 year performance targets set internally via matrix dependent upon business stream 80% Company Performance Plan: 1 -3 year performance targets set internally via matrix with industry peer comparison.  Revenue Growth  EBIT (indexed to housing starts) excluding asbestos, asset impairments, ASIC expenses and New Zealand product liability.  Above the 75th percentile (top 25%) of peer group performance in Revenue and Profitability. LTI 40% Return on Capital Employed (ROCE) RSUs – an indicator of growth in the value of the Company’s capital efficiency over time; 30% Relative Total Shareholder Return (TSR) RSUs – an indicator of the Company’s performance relative to its US peers; Above the 75th percentile (top 25%) of peer group performance in Revenue and Profitability. 30% Internal Individual Scorecard LTI – an indicator of each senior executive’s contribution to the Company achieving its long-term strategic goals.
  • 11. Accounting Strategy The AFFA allows a framework to partial quantification. The combined liability is forecast annually by external KPMG Actuaries for a central estimate, then NPV adjustments are disclosed for: • Inflation (discounted for future inflation) • Discounted (return on funds in escrow and operations owed but not yet paid) • Net of anticipated Insurance Recoveries The impact of such adjustments reduces the liability by almost half in 2014 from Gross Amount $3,132m to $1,870m. (US $billions) 2012 2013 2014 Central Estimate $1.58 $1.69 $1.87 Management Adopted Estimate $1.66 $1.69 $1.71
  • 12. Asbestos Offset Asset ITEM INCOME TAX RECEIVABLE & INSURANCE RECEIVABLE DESCRIPTION The Tax Receivable estimate is clearly a theoretical asset dependent upon future positive income. Under US GAAP Tax Receivables are allowed to be recognised in full and revalued over time. Insurance Receivable is Audited under terms of the AFFA as it was seen as a measure which could be manipulated to reduce the cash outflow to ACIF due to a clause in the AFFA in which JHX must maintain capital acceptable to undertake its business. STRATEGY Valuation of these items is not documented or implied in the notes to the accounts as these items are complex to estimate due to their contingent relationship with the Asbestos Liability estimate which itself is fraught with complex assumptions regarding timing and value. OUTCOME These items offset the large Asbestos Liability held on balance sheet improving the Equity Ratio and Current Ratio.
  • 13. Asbestos Expense ITEM ASBESTOS ADJUSTMENTS DESCRIPTION Actuarial estimates of the Asbestos liability are reassessed each year and changes in the liability estimate are expensed each year. STRATEGY 1. The Asbestos Liability is re-estimated annually by KPMG Actuaries. 2. The company uses the ‘Asset and Liability method’ to assess deferred Tax Assets and Liabilities allowing the accrual of Tax Assets OUTCOME 1. Increases in the Actuarial Estimate of Asbestos Liability are expensed each year. 2. This decreases Net Profit creating a Tax Shield, and regularly originates a deferred Tax Asset to offset against Tax Expenses in current and future trading years.
  • 14. 5. Quality of the Disclosure  Financial Information • All relevant statements have been provided. • Prepared in accordance with US GAAP. Management is required to make assumptions that affect the amount of assets and liabilities. • The assets, liabilities, revenues and expense are stated in US Dollar.  Non-Financial information • All related reports have been provided including the auditor’s report by Ernst & Young.
  • 15. 5. Quality of the Disclosure  Other Information • Operation scope • Production • Asbestos Injuries Compensation.  Supplementary Material • Amended & Restated Final Funding Agreement (AFFA). • Valuation of Asbestos-Related Disease Liabilities of former James Hardie entities. • AICF Annual Financial Statements
  • 16. 6.Potential Questionable Accounting Numbers 1. Management discretion presenting the Asbestos Liability 2. US GAAP requirements when recognising provisions are comparatively more aggressive when compared to IFRS when realising a provision: - The realisation must have 75% or greater probability –(IFRS uses a 50% probability) - Amount of loss can be reasonably estimated - Use best estimate, or Lowest Range – (IFRS requires a Mid-Range if no best estimate) 3. The Asbestos liability is offset against related assets Insurance Receivable and Unrealized Tax Assets that are heavily contingent on the liability itself and other future events such as Net Profit and Compensation Claims. (US $billions) 2012 2013 2014 Assumptions Central Estimate by Actuary $1.5 8 $1.6 9 $1.87 Inflated Discounted Post-Insurance Recovery Management Adopted Estimate $1.6 6 $1.6 9 $1.71 Uninflated Undiscounted Pre-Insurance Recovery
  • 17. 7. Undoing Distortions The inclusion of such adjustments reduces the liability by almost half in 2014 from Gross Amount $3,132m to $1,870m. CURRENT ASBESTOS ASSETS 109.1 CURRENT ASBESTOS LIABILITIES 185.8 CORRECTION Restricted Cash & Equivalents - Asbestos 60.2 Current Portion of Long Term Debt- Asbestos 47.0 47.0 Restricted Short Term Investments - Asbestos 0.1 Asbestos Liability 134.5 134.5 Insurance Receivable - Asbestos 28.0 Workers Compensation - Asbestos 4.3 4.3 Workers Compensation - Asbestos 4.3 Deferred Income Taxes - Asbestos 16.5 NON-CURRENT ASBESTOS ASSETS 700.9 NON - CURRENT ASBESTOS LIABILITIES 1,619.3 Insurance Receivable - Asbestos 198.1 Asbestos Liability 1,571.7 2,950.5 Workers Compensation - Asbestos 47.6 Workers Compensation - Asbestos 47.6 47.6 Deferred Income Taxes 455.2 TOTAL ASBESTOS ASSETS 810.0 TOTAL ASBESTOS LIABILITIES 1,805.1 3,183.9 NET ASBESTOS LIABILITIES 995.1 2,373.9
  • 18. 7. Undoing Distortions P&L $,000 CORRECTION Net Sales 1,493.8 1,493.8 COGS -987.4 -987.4 GROSS PROFIT 506.4 506.4 General Admin Expenses -224.4 -224.4 Research Expenses -33.1 -33.1 Asset impairments - Asbestos Adjustments -195.8 0 Net Interest -1.1 -1.1 Other Income 2.6 2.6 Income before Taxes 54.6 250.4 Income Tax Benefit 44.9 0* Net Profit 99.5 250.4 *Tax benefit treatment incalculable due to non-disclosure in the financials
  • 19. 8.Financial Press Discussion  Binsted (2015a) in the Sydney Morning Herald highlights the 11% rise in third-quarter adjusted profit to $US48.6m, even in light of an underwhelming United States housing recovery.  Binsted (2015b) in a further article in the Sydney Morning Herald illustrates that taxpayers may need to cover any asbestos related payouts if contributions from James Hardie were insufficient to cover claims.  Towards the end of 2014 there was much discussion around James Hardie’s tax minimisation efforts, with Aston (2014) highlighting in the Sydney Morning Herald that James Hardie has “paid an average of $0 in corporate tax over the past decade”.