James Hardie Industries plc (JHX) Earnings Call Transcript & Summary

Good day and welcome to the James Hardie Industries plc 2020 Annual General Meeting. Today's conference is being recorded. Please note that media are not permitted to ask questions. You should direct any questions to Jason Miele at investor.relations@jameshardie.com.au after the meeting. For holders and proxy holders, all questions relating to the business of the meeting will be taken all together following the last resolution. [Operator Instructions] At this time, I'd like to turn the conference over to Mr. Mike Hammes. Please go ahead, sir.

Hi. My name is Mike Hammes, and I am Chairman of the Board of James Hardie Industries plc. I'd like to welcome you all to the company's 2020 annual general meeting. As the appointed time has arrived and the necessary quorum is present, I declare this meeting open. As announced on the 1st of October 2020 in the company's notice of the AGM, the Annual General Meeting, this year's meeting is being held at James Hardie's corporate headquarters in Dublin, in line with previous years. However, physical attendance is limited to those persons legally required to attend the meeting to meet the quorum requirements to hold the meeting. Due to being unable to travel to Ireland to attend and chair the AGM in person as a result of the COVID-19-related restrictions, I am attending and chairing the AGM from Chicago via the teleconference facility available to all shareholders. I am joined on the teleconference call by Dr. Jack Truong, the CEO; Jason Miele, the CFO; and Joe Blasko, the General Counsel and Corporate Secretary in Chicago as well as my federal -- my fellow Board members Brian Anderson, Russell Chenu, Andrea Joosen, David Harrison, Persio Lisboa, Anne Lloyd, Dr. Nozari, Rada Rodriguez, Nigel Stein and Harold Wiens. We are also joined in the teleconference by Iain Burnet and Tim Rahall, representatives of the company's external auditors, Ernst & Young. Finally, I'd like to welcome you, our proxy holders. Given the exceptional circumstances this year, I would now like to explain how we are running the meeting today. In order to run the meeting as efficient as possible in line with public health guidelines, my Chairman's address will not be read, held today but is publicly available on the ASX website. This meeting will give holders the opportunities to express to the Board and to the management your views on the resolutions, which are subject -- which are the subject of this meeting, and through me, ask any questions, which we will take at the end of the meeting instead of after each resolution. We welcome an open discussion and expression of views as long as it is relevant to the business of the meeting and respects the views of others. We will allow all holders to speak and ask questions at the end of this meeting. However, unless you have appointed yourself as a proxy for the meeting, you will not be able to vote on the resolutions at this meeting and your vote, as submitted on your voting instruction form, cannot be changed. The notice of the meeting describes how proxy holders who hold undirected proxies but are unable to or do not attend the meeting can instruct the company regarding their voting directions. We allow proxy holders to do so until the earlier of the commencement of voting on the resolutions set out in the notice of the meeting or 30 minutes after the commencement of the meeting. As Chairman, I note that I have the sole authority to preserve order and to regulate the procedure for the conduct of the meeting. Consistent with the approach taken in prior years, voting on the resolutions will be conducted by way of a poll once each of the resolutions has been put to the meeting. All holders and proxy holders who are eligible to vote have been provided a voting card to complete. Voting cards will be collected at the end of the meeting. A number of documents are available for inspection at the back of the meeting room in Dublin and at our company office in Sydney. These include the minutes of the previous AGM, a copy of the registers required to be available for inspection under Irish law and the documents referred to in the notice of the meeting. Now let's turn to the business of the meeting. The agenda for this meeting was included in the notice of the meeting. I will proceed on the basis that the notice of the meeting, including the agenda, is taken as read to the meeting. The mailing with the notice of the meeting also included a form which holders of James Hardie's CUFS could use to send through questions. The questions received were specific in nature and many have been dealt with already and directly. More general questions related to the business can be raised at the end of this meeting, and as mentioned above, we'll take questions on all resolutions from holders and proxy holders participating via teleconference, altogether at the end of the meeting. [Operator Instructions] Please address your questions related to the resolutions to me so I can direct them to the most appropriate person who can answer. If a holder or proxy holder has asked 2 questions on a resolution, I'll give priority to questions from other holders or proxy holders on that resolution before inviting the original holder to ask any further questions, again, limited to two at a time. I remind the meeting that only holders of James Hardie's share and holders of James Hardie CUFS or their nominated proxies are entitled to speak at this meeting. If other stakeholders on the teleconference have questions, I would ask that you direct your inquiries to the Investor Relations team following the meeting. Contact information for the Investor Relations team is available on our website. There are 9 resolutions for consideration at this meeting. The Board believes that they are all in the best interest of shareholders and recommends you both in favor of each resolution. The full text of each resolution is set out in the notice of the meeting. Voting on each resolution will be conducted by way of a poll once each resolution has been put to the meeting. The aggregate results of the votes on each resolution will be announced to the ASX following the final tabulation of the results. Resolution 1 is to receive and consider the financial statements report for the year ended 31st March 2020, in accordance with the requirements of the Irish Companies Act of 2014. This resolution will also involve a review of James Hardie shareholders of the affairs of the company. I now present to the meeting for its consideration and lay before the company's shareholders the company's Irish statutory financial statements for the financial year ended 31 March of 2020, including the consolidated and individual company financial statements, together with the reports of the directors and external auditors thereon. To assist a review of the affairs of the company, I refer you to the fiscal year '20 Q1 to Q4 and fiscal year '21 Q1 inclusive press releases made by the company on 9th of August 2019, the 7th of November 2019, the 11th of February 2020 and 19th of May 2020 and the 11th of August 2020. I also refer you to the remuneration report for the year ended 31 March of 2020, which will be put separately to an advisory vote. The full year consolidated group results for the year ended 31 March 2020 reflected strong growth globally, as adjusted EBIT increased 20% and our group adjusted NOPAT increased 17% to USD 352.8 million. In addition, group operating cash flow increased by USD 147.2 million to USD 451.2 million in fiscal year 2020. I now put Resolution 1 as set out in the notice of the meeting to the vote of the meeting as an ordinary resolution. I'll now ask the company secretary, Mr. Joe Blasko, to read the proxy votes submitted for this resolution. Joe?

Thank you, Mike. Proxy results for Resolution 1: For, 343,364,485; against, 334,282; open, 429,265; abstain, 6,405,566; excluded, 0.

We'll now move on to Resolution 2. This resolution is to receive and consider the remuneration report for the year ended 31 March 2020. We voluntarily produce a remuneration report to give shareholders an opportunity to better understand the company's remuneration framework. The full text of Resolution 2 is set out in the notice of meeting. I now put Resolution 2 as set out in the notice of meeting to a vote of the meeting as an ordinary resolution. I will now ask the company secretary to read the proxy votes submitted for this resolution. Joe?

Proxy results for Resolution 2: for, 341,172,179; against, 8,803,081; open, 426,939; abstain, 131,309; excluded, 0.

Thank you, Joe. We'll now move on to Resolutions 3a, b and c. These resolutions ask shareholders to consider the election of directors. Each is a separate resolution. The full text of resolutions 3a, b and c is set out in the notice of meeting. Dr. Moe Nozari was appointed by the Board in November 2019. Mr. Nigel Stein and Harold Wiens were appointed in May this year, and each of them are required to stand for election at this meeting. The initial terms of the current Class 2 directors, Brian Anderson and Russell Chenu, shall expire at the conclusion of the 2020 AGM. Brian Anderson and Russell Chenu are not seeking reelection, and therefore, they will retire from office when their term expires at the conclusion of this meeting. The Board on the recommendation of the Nominating and Governance Committee believes it is in the interest of shareholders that Dr. Nozari Mr. Nigel Stein and Mr. Harold Wiens be elected as directors of the company. The notice of the meeting also includes information about these candidates. I now put each of the resolutions 3a, b and c as set out in the notice of the meeting as separate votes of the meeting as ordinary resolutions. I will now also ask the company secretary to read the proxy votes submitted for Resolutions 3a, b and c. Joe?

Thank you, Mr. Chairman. With regards to Resolution 3a, the election of Director Dr. Moe Nozari, the proxy results are: for, 338,439,637; against, 11,432,692; open, 431,546; abstain, 229,633; excluded, 0. With regards to Resolution 3b, the election of Director Nigel Stein, proxy results: for, 348,899,348; against, 999,776; open, 431,391; abstain, 202,993; excluded, 0. And finally, with regards to Resolution 3c, the election of Director Harold Wiens, proxy results are: for, 349,745,000; against, 157,244; open, 431,441; abstain, 199,823; excluded, 0.

Thank you, Joe. We'll now move on to Resolution 4. This resolution ask shareholders to authorize the Board to fix the remuneration of the company's external auditors for the financial year ending 31 March of 2021. This resolution is required because the Irish law requires shareholders to fix or authorize the Board to fix the remuneration of the auditors for the current year at the AGM. The full text of Resolution 4 is set out in the notice of the meeting. I now put Resolution 4 as set out in the notice of the meeting to a vote of the meeting as an ordinary resolution. I'll also now ask the company secretary to read the proxy votes submitted to this resolution. Joe?

Thank you, Mr. Chairman. With regards to Resolution 4, the proxy results are: for, 348,956,879; against, 969,020; open, 452,134; abstain, 150,325; excluded, 0.

Thank you, Joe. We'll now move on to Resolution 5. This resolution asks shareholders to approve the grant of fiscal year 2021 return on capital employed, or ROCE, restricted stock units or RSUs to the CEO, Dr. Jack Truong. The notice of the meeting and our revenue remuneration report contain a detailed explanation of the reasons we use ROCE RSUs [ their ] key terms and performance hurdles as well as the changes proposed for fiscal year 2021. For fiscal year 2021, the long-term incentive components, LTI, are materially consistent with fiscal year 2020. The full text of resolution 5 is set out in the notice of the meeting. I now put Resolution 5 as set out in the notice of the meeting to a vote of the meeting as an ordinary resolution. And I'll ask the company secretary to read the proxy votes submitted for this resolution. Joe?

Thank you, Mr. Chairman. With regards to Resolution 5, the proxy results are: for, 334,790,194; against, 15,100,138; open, 426,389; abstain, 216,787; excluded, 0.

We'll now move on to Resolution 6. This resolution asks shareholders to approve the grant of fiscal year 2021 relative total shareholder return or TSR RSUs to the CEO, Dr. Jack Truong. The notice of the meeting and our remuneration report contain a detailed explanation of relative TSR RSUs, their key terms and performance hurdles. This year, we are not proposing any changes to the key terms or performance hurdles for the relative TSR RSUs. The full text of Resolution 6 is set out in the notice of the meeting. I now put Resolution 6 as set out in the notice of the meeting to a vote of the meeting as an ordinary resolution. And I'll ask the company secretary to read the proxy votes submitted to this resolution. Joe?