Boral USA

Transcription

Boral USA

Boral USA
Brick Plant, Terre Haute, Indiana
US Tile Plant, Ione, California
President, Boral USA , Emery Severin
Construction Materials, Oklahoma
Sacramento 17 & 18 September 2008
Agenda
Wednesday 17 September

11.00am
12.00pm

1.00pm
2.00pm
6.30pm
Thursday 18 September

Before 8.00am
8.00am
9.00am

4.00pm
USA Analyst Site Visit 2008
Registration & Tea
Eric Belsky, Executive Director of Harvard’s Joint Center
for Housing Studies - Demographics and Demand (via video
conference)
Lunch
Management Presentation – Boral USA
Reception & Dinner with USA Management
- L Wine Lounge & Urban Kitchen
Hotel check out
Breakfast Buffet & Tour Briefing
Bus leaves Le Rivage for Site Visits
- Tour of Local Housing Development, Sacramento
- Tour of US Tile (clay tile) Plant, Ione (lunch)
- Tour of MoniefLifetile (concrete tile) Plant, Stockton
Tour Ends in San Francisco
Transfers provided to:
- San Francisco International Airport
- downtown San Francisco
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Boral Hosts

Emery Severin President, Boral USA

Jeff Smith
Vice President & CFO, Boral USA

Bob Kepford
President, US Bricks

Mike Penny
President & CEO, MonierLifetile

Steve Gast
President, US Tile

David Plummer President, US Construction Materials

Russel Hill
Vice President, Technology and Development

Chris Fenwick
Director, Planning & Development

Penny Berger
Manager, Corporate & Investor Relations
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Introducing the Boral US Management Team
President, Boral USA
VP & CFO, Boral
USA
Emery Severin
President, Bricks
Bob Kepford
Jeff Smith
VP, Human
Resources
President, USCM
Mike Lewis
David Plummer
President,
MonierLifetile
VP, General Council
Ernie McLean
Mike Penny
VP, Technology &
Development
President, USTile
Steve Gast
Russell Hill
Director, Planning &
Development
Chris Fenwick
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Outline
Wednesday 17 September

2.00pm – 3.30pm

3.30pm – 3.40pm
Afternoon Tea – Product Development Showcase

3.40pm – 4.10pm
Boral Bricks

4.10pm – 4.50pm
Roof Tiles
- MonierLifetile
- US Tile

4.50pm – 5.20pm

Boral USA Overview and Q&A
Emery Severin
Bob Kepford
(20 minutes)
(20 minutes)
Mike Penny
Steve Gast
Construction Materials
David Plummer
5.20pm – 5.40pm
Innovation
Russell Hill
5.40pm
Summary and Q&A
Emery Severin
6.15pm
Depart hotel for dinner at L Wine Lounge & Urban Kitchen
Thursday 18 September

8.00am – 9.00am
Buffet Breakfast, Tour Briefing & Check Out
Steve Gast
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Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Rightsizing for Market Conditions

Perform & Grow Strategy

Sustainability
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Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Sustainability
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Boral USA is a focused building products & construction materials supplier,
developing leading positions in US markets with favourable industry structure
and demographics.
FY08
Revenues
EBITDA
Employees
Operating sites
EBIT ROFE
USA
A$671m
A$11m
2,208
106
(3.4)%
Australia
A$4,317m
A$657m
10,236
499
13.3%
FY08 Boral Ltd EBITDA split by segment
USA
Building Products,
Australia
25%
2% 2% Asia
Construction Materials,
Australia
71%
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4
In FY06, 27% of Boral’s EBITDA earnings were from the USA but with the US housing
downturn this declined to 2% in FY08. EBIT has reduced from A$186m profit to a
A$27m loss.
USA
EBIT contribution split by geography
Asia
Building Products,
Australia
Construction
Materials,
Australia
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
USA
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Boral has leading market positions in the USA, with revenues from 24 main
states but from as many as 43 states.
Washington
Oregon
Michigan
Indiana
Nevada
Colorado
Missouri
Kentucky
California
North Carolina
Oklahoma
Tennessee
Arizona
Arkansas
South Carolina
Mississippi
Alabama
Texas
Georgia
Florida
USA
Bricks
Clay Roof Tiles
Concrete Roof Tiles
Fly Ash
Denver Concrete
Oklahoma City Concrete
#1
#1
#1
#2
#3
#2
Mexico
Brick States
Tile States
BMTI Flyash
USA Brick Corporate
USA Brick Distribution
USA Brick Production
MonierLifetile Concrete Roof tiles
US Tile Clay Roof Tiles
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Boral’s USA Operations
Bricks
24 brick plants across 15 locations in eight states, primarily in the southeastern and
southwestern USA
80% of bricks and pavers sold through network of 53 direct selling sites, the remainder
through a strong network of independent distributors

Roof Tiles
MonierLifetile – 50% joint venture; 14 concrete roof tile plants in western and south-western
states and Florida
US Tile – largest clay roof tile producer with plants in Southern and Northern California
Trinidad – 50% joint venture; clay roof tile plant for importation into Florida market

BMTI – Fly ash; 38 locations including operations at 26 electrical utility plants, 7 fly ash
terminals and 5 sales offices throughout the US
Denver – 3 aggregate locations, 8 concrete plants and 2 concrete masonry plants
Oklahoma City - acquired August 2007; 4 sand plants, a limestone quarry & 18 concrete plants

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Boral’s US asset base has grown since demerger and ROFE steadily
improved through FY06; but FY07 and FY08 ROFE heavily impacted by
decline in housing.
Average US$ Funds Employed and Return on Average Funds Employed1
US$m
Average Funds Employed
Return on average funds employed
800
24%
700
20%
600
16%
500
400
12%
300
8%
200
4%
100
0%
0
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
FY97
FY96
-8%
FY95
-200
FY94
-4%
FY93
-100
1. FY05 result onward has been adjusted for adoption of A-IFRS
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In FY08 Boral USA’s exposure was ~ 74% to new dwelling construction.
FY08 USA Revenue1
Estimated US$ Exposure by Market Segment
Dwellings 74%
Non-dwellings 18%
Engineering,
Construction, & Other
8%
1. Includes 50% share of revenues of MonierLifetile & Trinidad JVs which are equity accounted and do not appear in
consolidated accounts
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Since demerger ~45% of Boral’s growth capex has gone into Construction
Materials, Australia - Boral’s largest profit contributor; a further ~25% to the USA.
Growth & Acquisition Capital Expenditure
(A$ millions)1
FY00-FY08 Growth & Acquisition Capital
Expenditure1 by Segment
500
400
300
Asia
USA
100
Building Products,
Australia
Construction Materials, Australia
Construction
Materials, Australia
Building Products, Australia
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
0
FY08
200
USA
Asia
1. Excludes investment in ABL
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~43% of growth capex in the US has gone into Construction Materials with a
further ~17% into brick direct distribution, helpful during the housing downturn…
FY00-FY08 USA Growth & Acquisition
Capital Expenditure by Segment
Brick direct distribution
Assisted brick business to
maintain market share with
improved margins
17%
40%
43%
Brick & roof tile manufacturing
capacity and upgrades
Replacing old, high cost capacity and will
operate at high utilisation in FY2009
Improved US business
Will assist in meeting unfulfilled demand
performance through the housing
downturn by diversifying exposure
beyond dwellings
and future growth when markets recover
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…transforming our portfolio, but still highly exposed to new single family
construction which is down 63%* from peak...
US Revenue1 split by business
1,000
Revenue (US$ millions)
900
800
Concrete Roof Tiles
Clay Roof Tiles
Bricks Distributors
700
600
500
Bricks Direct
400
300
200
100
0
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
* McGraw Hill: Single Family Housing starts Quarterly Peak to Trough
1. Includes 50% share of revenues of MonierLifetile & Trinidad JVs which are equity accounted and do not appear in consolidated
accounts
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…and positioning Boral well in key long-term US growth states, with strong
market positions, competitive cost structures and long-term reserves.

Leading market positions (#1 or #2 in all markets, except #3 in Denver)

Located in high long-term growth states

Well located and long-term reserve positions

Well located on the cost curve relative to peers

Value creating ROFE margins over the housing cycle
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Boral USA has strong, long-term reserve positions.
Bricks & US Tile
Clay
Aggregates - Colorado
Aggregates - Oklahoma
109m tonnes
41m tonnes
58m tonnes
>35 years
~31 years
>40 years
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Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Sustainability
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FY08 US$ EBITDA down 90% due to continued severe decline in housing
activity.
FY07 % ∆
EBITDA A$m
607
699
(13)
225
EBITDA
10
102
(90)
200
A$m
FY08
Sales1
671
883
(24)
11
129
(91)
813
EBITDA/sales %
1.7
14.6
EBIT/sales %
(4.0)
10.7
ROFE %
(3.4)
11.6
50
5%
25
0
0%
FY08
789
10%
75
FY07
Funds employed
100
FY06
95 (129)
15%
125
FY05
(27)
150
FY04
EBIT
20%
175
FY03
EBITDA
FY07 % ∆
EBITDA / sales
25%
FY02
Sales1
FY01
FY08
FY00
US$m
FY05 result onward has been adjusted for adoption of A-IFRS
1. MonierLifetile & Trinidad JVs are equity accounted – Boral’s share of revenue do not appear in consolidated accounts.
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Overall Boral US exposure to new dwellings is ~ 74%, therefore heavily
impacted by the current downturn. Each business division has a different
mix of market exposure, with Bricks and MonierLifetile impacted the most.
FY08 Revenue
FY08 Revenue
Estimated % Exposure by Market Segment
Estimated US$ Exposure by Market Segment
Bricks
Bricks
US Tile
US Tile*
MonierLifetile
MonierLifetile*
Construction
Materials
Construction
Materials
Boral US
Boral US*
0%
20%
40%
60%
80%
100%
0
100
% Exposure
200
300
400
500
600
700
FY08 Revenue (US$ millions)
Residential Construction
Non-Residential Construction
Roads, Highways, Subdivisions, and Bridges
Other
Residential Construction
Non-Residential Construction
Roads, Highways, Subdivisions, and Bridges
Other
* Includes 50% share of revenues of MonierLifetile & Trinidad JVs which are equity accounted and do not appear in
consolidated accounts
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Year-on-year volumes continued to decline in FY08 for all businesses.
External revenues
US$m
FY08 FY07 % ∆
USA
US Bricks
1H08: 197
2H08: 149
1H08: 13
Clay Tiles12H08: 12
Est. %
Exposure
to New
Dwellings
Volume ∆
%
FY08 vs FY07
Volume ∆
%
FY08 vs FY06
346
478
(28)
90%
(27)
(36)
25
27
(8)
90%
(11)
(23)
98%
(42)
(62)
Concrete
Tiles1
1H08: 57
2H08: 54
111
116
(4)
40%
Const.
Materials
1H08: 66
2H08: 60
125
78
61
44%
TOTAL1
1H08: 333
2H08: 275
607
699
(13)
74%
Fly Ash
1. MonierLifetile & Trinidad JVs are equity accounted – Boral’s share of revenue do not appear in consolidated accounts.
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We have maintained disciplined price management despite weaker housing
volumes.
FY08 vs FY07
Price ∆
Bricks
-2%

Industry has actively decreased capacity and
managed inventories; prices holding, except
isolated pockets
Concrete Tile
-5%

Overcapacity on the West Coast; new capacity in
Florida; independent player attempting actively to
grow volume / share through lower price
Clay Tile
+4%

Modest price increase in March 2008, improved
product mix and higher value product
BMTI - Flyash
+5%

Prices following cement
Construction
Materials
+4%

Prices following cement
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During FY08 overhead reductions were made in October 07, followed by
developing and implementing accelerated step change programs in
MonierLifetile ($12.5m*) and Bricks ($30m), with full benefits expected from FY09.
Bricks
MonierLifetile*
FY08 Impact
US$7m
US$6m
Cost savings realised
US$5m
One-off program costs
FY08 one-off performance
improvement program costs separation and consulting
(US$4m)
Write-down of specialty brick plant
and equipment assets (US$5m)
(US$4m)
FY2008 program impacts
* Based on 50% share of MonierLifetile cost down program benefits
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Working capital and SIB capex managed to conserve cash.
Working Capital
FY08 vs FY07
Bricks inventory
Concrete roof tile inventory
Days sales outstanding
SIB as % depreciation
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Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Sustainability
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13
We are approaching 3 years in the current US housing downturn.
USA dwelling starts cycles peak to peak
(Seasonally adjusted, moving annual total, ‘000)
2,400
November 2005 2.08m
2,200
Current Downturn
2,000
February 1973 to March 1979
1,800
July 2008 1.10m
December 1978 to October 1984
1,600
1,400
October 1986 to May 1993
1,200
1,000
July seasonally
adjusted: 0.97m
800
1
2
3
4
5
6
7
8
Years
Source: US Census
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The US housing market continues to experience a major downturn, the key
feature is the dramatic decline in single family starts.
Total US dwelling starts (‘000)1
2,600
2,600
2,400
2,400
2,200
2,200
Total Housing Starts
2,000
2,000
1,800
1,800
1,600
1,600
1,400
1,400
1,200
1,200
1,000
1,000
Single Family
Housing Starts
800
800
600
600
400
400
200
200
Multi Family Housing Starts
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
0
1960
0
Economy Wide Recessions
1. Seasonally adjusted annualized monthly starts from US Census
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Current downturn appears to be the most severe post the Great Depression.
Total declines from individual peaks measured to levels 33 months after peak
Starts
∆ single family
housing starts (%)
Price
Sales
∆ multi family
housing starts (%)
∆ new single
family sales (%)
∆ existing single
family sales (%)
30
∆ NAR real existing
median single family
house prices (%)
24
20
16
8
10
4
0
-4
-4
-10
-7
-12
-20
-17
-30
-20
-28
-40
-41
-31
-37
-38
-42
-50
-56
-60
-70
In all other
downturns
home prices
recovered to
peak pricing
before 33
months
-50
-65
-80
-81
-90
Current
DOWNTURN:
1991
1982
1975
Sources: US Census Bureau; BEA; NAR; FHFB; Three-month moving averages
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The US housing downturn started in the tile states impacting MonierLifetile
around May 2006.
Peak to Current
% change in Dwellings Starts
Jun-08 qtr vs Sep-05 qtr
WA
0 to -9%
-10 to -19%
-20 to -29%
-30 to -39%
-40 to -49%
-50 to -59%
-60 to -69%
-70 to -79%
-80 to -89%
NV
MO
CO
CA
AZ
TX
FL
MonierLifetile plants
US Tile plants
Mexico
Source: US Dodge data for single and multi family units
Trinidad
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The housing downturn impacted bricks hard in around October 2006.
Peak to Current
% change in Dwellings Starts
Jun-08 qtr vs Sep-05 qtr
MI
IA
IL
KS
OH
IN
WV
MO
VA
KY
OK
TN
AR
MD DE
NC
SC
TX
LA
MS
AL
GA
Boral Brick plants
0 to -9%
-10 to -19%
-20 to -29%
-30 to -39%
-40 to -49%
-50 to -59%
-60 to -69%
-70 to -79%
-80 to -89%
Source: US Dodge data for single and multi family units
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Underlying demand and current excess inventories will determine market
equilibrium.
Underlying Demand Over Business Cycle (2005-14)
Demographic Drivers of Underlying Demand
Economic Drivers of Demand
(Gives 10 Year Picture)
(Determines the Timing)
Population Growth
Immigration
Interstate migration
Household Growth
14.6m
Equilibrium with
Second Homes
Single / Multi
Family Mix
Change in Vacant
Units
Underlying
Demand
Re-urbanization
Non-res conversion
Deterioration
Demolition /
Disaster
1.6m
Net Removals
3.3m
19.5m
Assuming all variables in
equilibrium, experts suggest
housing starts should be at
an annualized rate of 1.95m
for 2005-14, however many
factors impact actual starts.
Excess Housing
Stock
Affordability
Consumer
Confidence
Macro Economic
Conditions
New Starts
Excess New Stock
Excess Vacant Stock
Housing Prices
Cost of Financing
Belief that house
values will
appreciate
Unemployment Rate
Disposable Income
Source: Joint Center for Housing Studies of Harvard University
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Recap Harvard Housing - Annual underlying demand of ~1.80m* US housing
starts is based on expected household growth, second homes and
replenishment homes.
Projection for Long-Run Demand for New Housing1, 2005-2014
Household growth
Additional second homes & ∆ vacancies
Net removals
Total2
14.6m
1.6m
3.3m
19.5m
Housing starts (millions)
US Housing Underlying Demand
(Including manufactured housing)
25
18.0
20
19.5
17.6
17.0
Net removals
Second homes
& vacancies
15
10
Household growth
5
0
1974-83
1984-93
1994-03
2005-14
* Excludes manufactured homes which brings up underlying demand of housing starts to 1.95m
1. Joint Center for Housing Studies of Harvard University
2. This includes 1.5m of manufactured housing
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Starts are running well below underlying demand. They are absorbing previous
overbuild and now competing with excess “vacant for sale” inventory.
Total US Dwelling Starts (‘000)1 and Underlying Demand2
Average Starts: 1,626
Underlying Demand: 1,800
2,400
2,200
Needed to absorb
excess new
dwellings stock
2,000
1,800
1,600
1,400
1,200
Total Housing Starts1
Underlying Demand2
1,000
Needed to absorb
existing vacant for sale
dwellings
800
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
600
1. Seasonally adjusted annualized monthly starts from US Census
2. Joint Center for Housing Studies of Harvard University; Underlying Demand excluding manufactured housing placements
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Homebuyers buy monthly payments not mortgages. During the peak, people
bought houses they really couldn’t afford, leading to default when rates reset…
Affordability Curve
Monthly Payment
600
$2,000 pm
$3,000 - $4,000 pm
Typical Mortgage Size (US$‘000’s):
~ US$2,000 Monthly Payment
550
Teaser
Rate
500
Reset
Rate
Affordable
Affordable housing
housing became
became
unaffordable
unaffordable as
as rates
rates reset
reset
450
400
Today’s
Today’s rates
rates and
and mortgage
mortgage standards
standards mean
mean
smaller
smaller mortgages
mortgages are
are available,
available, and
and this
this is
is
the
the range
range they
they should
should have
have been
been at
at all
all along
along
350
300
250
Typical 30 yr Mortgage
200
Interest Only Mortgage
150
3
4
5
6
7
8
9
10
11
12
Mortgage Rate (%)
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35
…resulting in higher foreclosures, which has driven the market down well
beyond a cyclical supply demand imbalance.
Total Households Entering Foreclosure
August 20081
WA
ND
MT
MN
SD
ID
OR
UT
IA
IL
CO
KS
MO
CA
AZ
ME
WI
WY
NE
NV
Percent of Households Entering Foreclosure
August 20081
OK
NM
AR
MI
WV
TN
MS AL GA
TX
PA
IN OH
KY
WA
ND
MT
NY
NE
NV
VA
UT
CO
CA
LA
NM
MI
NY
IA
IL
KS
OK
AZ
ME
WI
WY
NC
SC
MN
SD
ID
OR
IN
MO
AR
WV
TN
TX
VA
NC
MS AL GA
FL
PA
OH
KY
SC
LA
FL
0 - 500
500 – 1,000
1,000 – 5,000
5,000 – 10,000
10,000 – 20,000
20,000 – 35,000
35,000 – 55,000
> 55,000
< 0.10%
0.10% - 0.20%
0.20% - 0.40%
0.40% - 0.60%
> 0.60%
1. Source: www.realtytrac.com
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Creating an overhang of excess “vacant for sale” homes now competing
against new home sales…
Number of excess housing units
(Thousands)
1,400
New for Sale
1,200
Existing Vacant for Sale
1,000
800
600
400
CY08Q2
CY08Q1
CY07Q4
CY07Q3
CY07Q2
CY07Q1
CY06Q4
CY06Q3
CY06Q2
CY06Q1
CY05Q4
CY05Q3
CY05Q2
CY05Q1
CY04Q4
CY04Q3
CY04Q2
0
CY04Q1
200
Sources: U.S. Census (Total Existing Vacant and New for Sale less 1995 to 2005 historic average)
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Good news is that new home inventory continues to correct at an accelerated
rate, however existing homes remain the main concern.
Housing Stock
Housing Stock
(Months of supply)
(Count, millions, seasonally adjusted)
12
1.0
Excess:
+2.5m
Existing Dwelling Unsold Stock
11
Existing Dwelling
Unsold Stock (RHS)
0.9
10
9
Excess:
7+ months
8
7
6
Excess:
0.20m
5
4
Houses Sold During Month
4.0
0.7
3.5
0.6
3.0
2.5
0.5
Excess:
+0.10m
0.4
New Dwelling Unsold Stock
0.2
2
0
New Dwelling Unsold
Stock (LHS)
01
02
03
04
05
06
07
08
8
Existing Dwelling Sales (RHS)
1.4
7
1.2
6
1.0
5
0.8
4
0.6
3
0.4
1.0
0.5
0.0
0.0
00
2.0
(Annualised count, millions)
1.6
1.5
0.1
1
4.5
0.8
0.3
3
5.0
00 01 02 03 04
05 06 07 08
New Dwelling Sales (LHS)
0.2
2
1
0.0
0
00 01 02 03 04 05 06 07 08
Source: US Census Bureau, National Realtors Association
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19
Affordability, consumer confidence, and macro economic conditions will
determine the turning point and speed of recovery.
Underlying Demand Over Business Cycle (2005-14)
Demographic Drivers of Underlying Demand
Economic Drivers of Demand
(Gives 10 Year Picture)
(Determines the Timing)
Population Growth
Immigration
Interstate migration
Household Growth
14.6m
Equilibrium with
Second Homes
Single / Multi
Family Mix
Change in Vacant
Units
Underlying
Demand
1.6m
Re-urbanization
Housing Prices
Cost of Financing
Affordability
19.5m
Net Removals
3.3m
Non-res conversion
Deterioration
Demolition /
Disaster
New Starts
Excess New Stock
Excess Vacant Stock
Excess Housing
Stock
Consumer
Confidence
Assuming all variables in
equilibrium, experts suggest
housing starts should be at
an annualized rate of 1.95m
for 2005-14, however many
factors impact actual starts.
Belief that house
values will
appreciate
Macro Economic
Conditions
Unemployment Rate
Disposable Income
Source: Joint Center for Housing Studies of Harvard University
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39
Home prices are falling quite rapidly improving affordability and will encourage
buyers back into the market.
S&P/Case-Shiller® Home Price Index – June 2008
350
Tile states have continued to
decline, but at a slower rate
over last month.
300
200
150
Brick states appear to
have stabilized over the
last 6 months.
1993
1995
1997
1999
2001
2003
2005
Last
Month
Los Angeles
-28.5%
-16.0%
-1.4%
Miami
-34.4%
-18.1%
-1.7%
Tampa
-26.5%
-12.5%
-1.2%
San Francisco
-26.8%
-15.5%
-1.8%
Denver
-6.2%
+0.5%
+2.1%
Atlanta
-8.3%
-1.6%
+0.5%
Charlotte
-1.6%
+1.3%
+0.4%
Dallas
-3.2%
+1.3%
+0.6%
2007
CM*
Brick
Markets
100
0
1991
Last 6
Months
Roof Tile
Markets
250
50
Peak to
Trough
City
*CM is Construction Materials Market
2009
Source: Standard & Poor’s
40
40
20
While 30 years fixed mortgages are around 6% …
They are higher than teaser rates from subprime times
However they are low by historic standards
Fed Funds Target Rate
12.00
30 year fixed
rate
mortgage
10.00
8.00
6.00
Fed Funds
Target Rate
4.00
1991–1993
-56%
2.00
Aug 07
5.25%
17 successive
rate increases
2001–2002
-73%
2007-2008
-62%
Apr 08
2.00%
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
0.00
41
41
… rates may boost buying power, but access to credit is tightening.
But buyers can afford less with more stringent lending standards
Fewer loans are being originated
2,000
80%
1,600
1,200
Mortgage Loan
Originations (RHS)
40%
800
20%
400
% of Banks Tightening
Credit Standards (LHS)
2Q2008
4Q2007
2Q2007
4Q2006
2Q2006
4Q2005
2Q2005
4Q2004
2Q2004
4Q2003
2Q2003
4Q2002
2Q2002
4Q2001
2Q2001
4Q2000
2Q2000
-20%
0
4Q1999
0%
Including Refinance
60%
Mortgage Originations (US$ Bil)
% of Banks Tightening Credit Standards
Underwriting Standards vs. Mortgage Originations
100%
-400
Source: Federal Reserve Board, Senior Loan Officer Survey (60 largest banks), Mortgage Bankers Association
42
42
21
While the economy is not good, it has not gone into recession.
12.0%
2,200
10.8%
2,000
9.6%
1,800
8.4%
1,600
1,400
7.2%
1,200
6.0%
1,000
4.8%
800
3.6%
600
2.4%
400
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
0.0%
1980
1.2%
0
1978
200
National Unemployment Rate
Consumer Confidence / Total Housing Starts
Consumer Confidence / Housing Starts (left side) & Unemployment (right side)
2,400
Economic Recessions
Source: US Census, Michigan Consumer Sentiment Index – MCSI, US Department of Labor’s Bureau of Labor Statistics
43
43
Summary: Affordability is improving, but consumer confidence and access
to financing are the major hurdles in the short term.
Home prices are decreasing, improving affordability
2.
The ability of a median income family to buy a home is improving
3.
Mortgage rates are relatively low and affordable, but size of
mortgages are lower leading to smaller home purchases
Credit
4.
Credit standards are tight and access difficult
Price
1.
Interest
Rates
The summary is mixed:
Result:
Two things that will help a potential buyer regain confidence in the market is a
feeling of employment security and a belief that a newly purchased home will not
fall in value.
44
44
22
Summary: We’ve adjusted for lower mix of single family and lower
homeownership rates, because either buyers qualify for a lower mortgage, or
are not eligible and therefore must rent.
Housing Starts Mix (Single Family versus Multi Family)
100%
80%
Multi Family Housing Starts (LHS)
75%
20 year average (1987-2007)
80%
80% Single Family
70%
70%
30 year average (1958-1987)
66% Single Family
60%
% Homeownership Rate
% Housing Starts Type
90%
65%
50%
Homeownership Rate (RHS)
Single Family Housing Starts (LHS)
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
60%
1960
40%
Source: US Census
45
45
Summary: Last December when we spoke, we believed Industry Forecasters
were optimistic. We forecasted starts to be around current levels, hence our
more aggressive approach to rightsizing in the second half of FY08.
Average Decline in Starts Forecasts
FY09
FY10
FY11
FY12
Dodge (2Q08)
0.97
1.12
1.34
1.54
Wachovia (August 2008)
0.93
NAR1 (August 2008)
0.84
NAHB2
0.83
(August 2008)
0.92
Fannie Mae (August 2008)
0.89
Freddie Mac (August 2008)
0.96
MBA3 (August 2008)
0.91
1.05
Average (excludes Dodge)
0.89
0.99
1.42
1.74
FY13
August 2007 to August 2008
FY09 Average Starts Forecasts
1.59
1.90
1.02
Housing Starts (million’s)
Current Estimated
Forecasts
1.50
1.35
1.20
-37%
1.05
0.90
0.75
0.60
1.41
1.21
0.45
0.89
0.30
0.15
1.42
1.74
1.90
0.00
Aug '07
Dec '07
Aug '08
1. NAR - National Association of Realtors
2. NAHB - National Association of Home Builders
3. MBA - Mortgage Bankers Association
46
46
23
Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Sustainability
47
47
We have responded aggressively to the rapidly declining volumes.

Price management

Reduced fixed costs and overheads

Reduced capacity and variable costs

Control inventory and capital spend
48
48
24
PRICE: We have maintained disciplined price management despite weaker
housing volumes.
FY08 vs FY07
Price Initiatives /
Energy Recovery
Price ∆
Price ∆
Bricks
-2%
+5%
Concrete Tile
-5%
Clay Tile
+4%
BMTI - Flyash
+5%
Construction
Materials
+4%

Implemented fuel surcharge to
offset high transportation and
production fuel costs,
experiencing acceptance by
market
+7%

Incremental price increase
+2%

Price includes delivery surcharge
49
49
COSTS: Accelerated step change programs in the USA are 90% complete in
MonierLifetile & 50% complete in Bricks, with full benefits expected from FY09.
US$31.5m
US$42.5m
Bricks
MonierLifetile*
US$24m
US$30m
US$7.5m
US$7m
US$6m
Cost savings realised
US$12.5m
US$5m
(US$4m)
One-off program costs
FY2008 program impacts
Incremental benefits
in FY2009
* Based on 50% share of MonierLifetile cost down program benefits
Total program benefits
50
50
25
COSTS: Boral US will see the benefit from accelerated step change
initiatives in FY09 to get results fast.
MonierLifetile: Project Escalator ~US$12.5m 1
Revenue
Variable Costs
Fixed Costs
SG&A
Other Savings Initiatives
Total Benefits
Bricks: Project Next Level II ~US$30m
SGA
Reduction
Network
Optimization
Sales
Plant
Efficiency
Logistics
Efficiency
1. Based on 50% share of MonierLifetile cost down program benefits
Procurement
Initiatives
Production
OH
Alt Fuels
Rightsizing
Total Benefits
51
51
COSTS: Total headcount has declined ~36%* from FY06 through the FY08
Boral US: Headcount (FTE) – Year End
4,500
4,000
36% Reduction
3,500
3,000
Oklahoma City
US Tile JV
Corporate
US Tile
2,500
2,000
1,500
MonierLifetile
1,000
500
Bricks
0
FY06
FY07
FY08
*Excludes FTEs in Oklahoma concrete and quarry operations (acquired August 2007) and in Trinidad JV (started in FY07).
Chart includes 100% of employees in MonierLifetile and Trinidad JVs.
52
52
26
CAPACITY: MonierLifetile currently operating at around 27% of capacity,
whilst US Tile operating at around 48% of capacity.
MonierLifetile
1H FY07
1H FY09 estimate
2H FY08
Plant
Gilroy, CA
Jul
Aug
Jul
Aug
Sep
Oct
Nov
Dec
Denver, CO
Boca Raton, FL
Henderson, NV
Kansas, MO
Katy, TX
Lake Wales #1, FL
Lake Wales #2, FL
Pompano Beach, FL
Tacoma, FL
Lathrop, CA
Phoenix, AZ
Rialto, CA
Stockton, CA
US Tile
1H FY07
1H FY09 estimate
2H FY08
Sep
Oct
Nov
Dec
Corona - Line 4
Corona - Line 5
Commissioning Phase
Ione
Trinidad
Slowed
At Capacity
Temp. Close
Mothballed
53
53
CAPACITY: Bricks has optimized the network compared to FY08 at lower
capacity, currently operating at around 40%.
US Bricks Capacity Planning
1H FY07
1H FY09 estimate
2H FY08
Jul
Plant
Aug
Sep
Oct
Nov
Dec
Augusta Plant 013
Augusta Plant 014
Augusta Plant 015
Augusta Plant 016
Lexington 030
Salisbury Plant 081
Salisbury Plant 082
Van Wyck W/M 041
Van Wyck W/M 042
Macon, GA 020
Phenix City W/M 141
Phenix City W/M 143
Phenix City W/M 144
Phenix City W/M 145
Smyrna Plant 091
Bessemer Plant 165
Bessemer Plant 166
Gleason 060
Macon, MS 050
Ramp Up - commissioning
Terre Haute, IN 070
Henderson 100
Marshall 110
Muskogee 120
Union City 130
At Capacity
Slowed
Temp. Close
Mothballed
Twin Kilns
54
54
27
Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Sustainability
55
55
Boral’s US strategy is defined into three business segments in line with
competencies from which to build a growth platform.
Focused building products & construction materials supplier developing leading
positions in US markets with favorable industry structure & demographic trends
Perform
Roof Tile
High long-term
growth
Attractive market
structure with short
term challenge in
concrete roof tile
Retain a leading
position
Geographic and
Business Line
Focus
Primary Wall
Cladding
Attractive market
structure
Retain a leading
position in bricks
Grow
complementary
siding products
through distribution
Grow
Construction
Materials
Grow regionally
from existing
businesses
Invest / acquire in
markets with good
industry structure
& demographic
growth
56
56
28
Perform Recap: Our focus on performance has been to adapt to the downturn
in FY09.

Price and margin management

Reduced capacity and variable costs

Control inventory

Reduced fixed costs and overheads

Accelerated step change in Bricks & MonierLifetile, and now
Construction Materials (includes PEP targets)

Better customer service through supply chain and logistics

Improved cost position from alternative energy

Back office and system development
57
57
Grow: Since demerger ~25% of Boral’s growth capex has been invested in
the US.
US$m
Denver
Oklahoma
Reserves
78
84
10
Bricks
Franklin Brick
Salisbury & Augusta
Union City
Terre Haute
66
10
35
55
US Tile
Trinidad JV
Ione
6
30
40%
43%
17%
MonierLifetile – 50% share
Katy
3
Lake Wales
16
FY00-FY08 USA Growth & Acquisition
Capital Expenditure by Segment
Brick and roof tile manufacturing capacity
& upgrades
Brick direct distribution
58
58
29
While some investments may have been late in the most recent building cycle, we will
have low cost capacity in Bricks and Roofing to meet the market as it returns to
underlying demand.
Bricks: Terre Haute,
IN – greenfield plant
with low cost position
Clay Tiles: Ione,
CA – greenfield
plant with low cost
position
IN
CA
OK
Construction Materials: OKC,
OK – new market entry
… moving through the next cycle margins improve as a result of growth benefits
59
59
Boral USA is doing more to develop innovation as a “Third Leg” of growth.
PATHWAYS TO GROWTH
STATUS
Organic Growth
Boral has regularly invested in organic
growth. But returns take time to develop.
Acquisition
Acquisitions represent ~60% of Boral USA’s
growth spend and have been helpful during
the housing downturn.
Innovation &
Technology
Innovation and technology development
can represent highly value creating
opportunities.
60
60
30
Boral USA Overview

Business Profile

Recent Performance

Market Conditions

Sustainability
61
61
Boral USA’s key sustainability efforts continue to be priorities.
Common across all Boral US divisions

Health and Safety

Energy and Greenhouse gas emissions

Water Conservation

Waste Management

Employee Relations and Communication

Community Relations
Developed a
comprehensive
environmental plan with
emphasis on reduction
of greenhouse gas
emissions.
62
62
31
Boral USA safety performance has improved but % hours lost reflect carryover hours from the previous year’s injuries.
Lost Time Injury Frequency Rate (LTIFR)1
Percent Hours Lost
7.47
0.25%
6.24
0.17%
0.15%
3.78
3.04
2.67
0.11%
0.11%
FY05
FY06
0.14%
1.51
FY03
FY04
FY05
FY06
FY07
FY08
FY03
FY04
FY07
FY08
Recordable Incident Frequency Rate (RIFR)1
38.51
34.42
31.20
27.29
25.91
21.00
1. Per 1 million hours worked
FY03
FY04
FY05
FY06
FY07
FY08
63
63
Environmental Performance: Most of the CO2 emissions generated by Boral
USA come from Bricks and so do the abatement opportunities.
FY2008 CO2-e emissions (thousands) inventory by division and energy source1
2,454
Other
Petrol
LPG
Diesel
Electricity
Natural gas
Diesel
11%
Petrol
2%
Other
2%
Natural Gas
59%
USA
Coal
Electricity
26%
475
364
352
Calcination
116
Cement
ACM
Clay & Concrete
Products
USA
Plasterboard
29
Timber
1. For Boral’s 100% owned business
64
64
32
Alternative fuels, using renewable / waste energy sources reduces greenhouse
emissions and are economically attractive.
Direct Injection
Landfill Gas
New Technologies
1978 to …
2005 to …
2007 to …
EVOLUTION
PLANTS
Salisbury
Augusta 5
Augusta 6 (body additive)
Gleason (body additive)
Phenix City 144 (sawdust)
Phenix City 145 (sawdust)
Union City (new plant – 10/06)
Terre Haute (new plant – 03/08)
Augusta 4 (woodchips/gasification)
Gleason (woodchips/gasification)
Green font denotes new initiatives.
Boral Brick’s
% Alternative fuel usage
35%
30%
25%
20%
15%
10%
5%
0%
FY04
FY07
FY08
FY09e
65
65
Community Relations
HomeAid
– US Tile has donated roof tiles for shelter for abused and
neglected children in California
– Bricks is providing materials for
construction of women’s and
children’s shelter in Georgia
Juvenile Diabetes Research Foundation
– To date, Boral USA and its employees have donated more
than $145,000 to JDRF; new company match for 2008
66
66
33
Community Relations

Boral Scholarship Awards
2008 Scholarship
Recipients:
1.Dustin Ellis, son of
William Ellis, BMTI,
Monticello
2.Charity Bowman, daughter
of Michael Bowman,
Bricks, Union City
3.Amanda Looman,
daughter of Marcia
Looman, Bricks, Augusta
Office
4.Blake King, son of James
King, Bricks, Henderson
5.Lacie Trevathan, daughter
of Stacie Trevathan,
Bricks, Gleason
6.Gabriel Guerrero, Jr., son
of Gabriel Guerrero, UST,
Corona
67
67
34