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

Good day, and welcome to the James Hardie Industries plc 2022 Annual General Meeting. Today's conference is being recorded. Please note that media are not permitted to ask questions and should direct any questions to [email protected] after the meeting. At this time, I would like to turn the conference over to Mr. Mike Hammes. Please go ahead, sir.

Thank you. Hi. My name is Mike Hammes. I'm the Chairman of the Board of James Hardie Industries. I'd like to welcome you all to the company's 2022 Annual General Meeting or AGM. As the appointed time has arrived and the necessary quorum is present, I declare this meeting open. As announced on the 23 September 2022 in the company's Notice of AGM, this year's meeting is being held at James Hardie's corporate headquarters in Dublin, where I'm attending and chairing this AGM from. I am joined in Dublin by Deputy Chairperson Anne Lloyd; Aaron Erter, the CEO; Jason Miele, the CFO; and Joe Blasko, the General Counsel and Company Secretary; and my fellow Board members: PJ Davis, Persio Lisboa, Rada Rodriguez, Suzanne Rowland, Nigel Stein, Harold Wiens. We are also joined by Iain Burnet, Robert Bruning from the company's external auditors, Ernst & Young, on the teleconference; and external legal counsel, Brian O'Gorman from Arthur Cox who is here in person. Finally, I welcome you, our proxy holders. I would like now to explain how we are running the meeting today in order to run the meeting as efficiently as possible. My Chairman's address will not be read out today, but is publicly available on the ASX website. This meeting will give holders the opportunity to express to the Board and management your views on the resolutions, which are subject of this meeting, and through me, ask any questions, which we'll 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's relevant to the purpose of the meeting and respect the views of others. We will allow all holders to speak and ask questions at the end of this meeting. However, unless you appointed yourself as a proxy for the meeting, you'll not be able to vote on resolutions at this meeting and your vote, as submitted on your voting instruction form, cannot be changed. The Notice of the Meeting describe how proxy holders who hold undirected proxies, but we are -- that are unable to do or do not attend the meeting can instruct the company regarding their voting instructions. 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 regulate the proceedings and conduct the meeting. Consistent with the approach taken in prior years, voting on the resolutions will be conducted by the way of a poll once each of the resolutions have 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 with Slide 4. The agenda for this meeting was included in the Notice of Meeting. I will proceed on the basis of that Notice of the Meeting, including the agenda, which is taken as read at the meeting. The AGM materials include a form, which holders of James Hardie CUFS could use to send some questions. The questions received were specific in nature and have been dealt with directly. More general questions related to the business can be raised at the end of this meeting, and as mentioned earlier, 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 a resolution to me, so I can direct them to the most appropriate person. 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 2 at a time. I remind the meeting that only holders of James Hardie shares 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 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 8 resolutions in consideration at this meeting. The Board believes they are all in the best interest of the shareholders and recommends you vote 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 and reports for the year ended 31 March 2022 in accordance with the requirements of the Irish Companies Act of 2014. This resolution will also involve the review by 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 2022, including the consolidated and individual company financial statements together with the reports of the directors and the external auditors hereon. To assist on the review of the affairs of the company, I refer you to fiscal year '22 Q1 to Q4 and fiscal year '23 Q1 inclusive press releases made by the company on the 10th of August 2021, the 9th of November 2021, the 2nd of February 2022, the 17th of May 2022 and the 16th of August 2022. I also refer you to the remuneration report for the year ended 31 March 2022, which will separately be put to an advisory vote. The full year consolidated group results for the year ended 31 March 2022 reflected that our group adjusted EBIT increased 30% to USD 815.6 million, and group adjusted net income increased 36% to USD 620.7 million. In addition, group operating cash flow was USD 757.2 million in fiscal year 2022. I now put resolution 1 as set out in the Notice of Meeting to a vote of the meeting as an ordinary resolution. [Voting]

And I will now ask the Company Secretary to read the proxy votes submitted for this resolution. Joe Blasko?

Thank you. Chairman, the results of resolution 1 are as follows: for, 348,237,648; against, 26,247; open, 164,154, abstentions, 1,847,321; excluded, 0.

Thank you, Joe. We'll now move to the resolution #2. The resolution is to receive and consider the remuneration report for the year ended 31 March 2022. 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 the Meeting. I now will put resolution 2 as set out in the Notice of Meeting to a vote of the meeting as an ordinary resolution. [Voting]

Joe, as the Company Secretary, please read the proxy votes submitted for this resolution.

Thank you. Chairman, the results of resolution 2 are as follows: for, 336,923,314; against, 13,129,547; open, 161,977; abstentions, 59,332; excluded, 0.

Thanks, Joe. We'll now move to resolutions 3(a), (b), (c) and (d). These resolutions ask the shareholders to consider the elections of directors. Each is a separate resolution. The full text of resolutions 3(a), (b), (c) and (d) is set out in the Notice of the Meeting. Peter John Davis, Aaron Erter were appointed by the Board in August and September 2022, respectively, and each of them are required to stand for election at this meeting. The initial terms of the current Class I directors, Anne Lloyd and Rada Rodriguez, shall expire at the conclusion of the 2022 AGM. Both Anne Lloyd and Rada Rodriguez are retiring by rotation at the 2022 AGM and offer themselves for reelection. The rotation, as previously announced, I will retire at the conclusion of this AGM and will not stand for reelection. The Board on recommendation of the Nominating and Governance Committee believes it is in the interest of shareholders that Peter John Davis, Aaron Erter, Anne Lloyd and Rada Rodriguez be elected as directors of the company. The Notice of the Meeting also includes information about the candidates. I will now put each of the resolutions 3(a), (b), (c) and (d) as set out in the Notice of the Meeting to separate votes of the meeting as ordinary resolutions. And I'll ask the Company Secretary, Joe Blasko, to read the proxy votes submitted for these resolutions. [Voting]

Thank you, Mr. Chairman. With regards to resolution 3(a), the election of director Peter John Davis, the proxy results are as follows: for, 348,845,724; against, 1,143,353; open, 165,831; abstentions, 120,462; excluded, 0. With regards to resolution 3(b), the election of director Aaron Erter: for, 349,474,464; against, 496,359; open, 168,104; abstentions, 136,443; excluded, 0. With regards to resolution 3(c), the reelection of director Anne Lloyd, the proxy results are as follows: for, 343,146,100; against, 6,848,676; open, 174,113; abstentions, 107,863; excluded, 618. With regards to resolution 3(d), the reelection of director Rada Rodriguez, the proxy results are as follows: for, 345,271,922; against, 4,722,016; open, 174,385; abstentions, 107,047; excluded, 0.

Thank you. For resolution #4, this resolution asks shareholders to authorize the Board to fix the remuneration of the company's external auditors for the financial year ending 31 March 2023. This resolution is required because 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 Meeting. I will now put resolution 4 as set out in the Notice of the Meeting to a vote of the meeting as an ordinary resolution, and I ask the Company Secretary to read the proxy votes submitted for this resolution. Joe? [Voting]

Thank you, Chairman. Results of resolution 4 are as follows: for, 349,262,919; against, 741,658; open, 166,500; abstentions, 104,293; excluded, 0.

Thanks, Joe. We move now to resolution 5, the resolution that asks shareholders to approve the grant of return on capital employed or ROCE restricted stock units or RSU to the CEO, Aaron Erter. The Notice of the Meeting and our remuneration report contain a detailed explanation of the reasons to use ROCE RSUs, key legal terms and performance hurdles, as well as the changes proposed for fiscal year 2023. For fiscal year 2023, the LTI components are materially consistent with fiscal year 2022. The full text of resolution 5 is set out in the Notice of the Meeting, and I'll now put resolution 5 as set out in the Notice of the Meeting to a vote at the meeting as an ordinary resolution and ask the Company Secretary, Joe Blasko, to read the proxy votes submitted for this resolution. [Voting]

Thank you, Chairman. The results for resolution 5 are as follows: for, 325,213,530; against, 24,805,849; open, 155,840; abstentions, 100,151; excluded, 0.

Thanks, Joe. Resolution 6, we move now to a resolution that asks shareholders to approve the grant of relative total shareholder return or TSR RSUs to the CEO, Aaron Erter. The Notice of the Meeting and our remuneration report contain a detailed explanation of the relative TSR RSUs, their key terms and performance hurdles. The key aspects of the relative TSR RSUs are unchanged for fiscal year 2023. The full text is set out in the Notice of Meeting. And I now put resolution 6 as set out in the Notice of this Meeting to a vote at the meeting as an ordinary resolution and ask the Company Secretary to read the proxy votes submitted for this resolution. [Voting]

Thank you, Chairman. The results of resolution 6 is as follows: for, 325,192,387; against, 24,824,378; open, 158,743; abstentions, 99,862; exclusions, 0.

Thanks, Joe. Moving now to resolution 7, resolution that asks shareholders to approve the grant of stock options under the restated 2001 equity incentive plan to the CEO, Aaron Erter, under and for the purposes of ASX Listing Rule 10.14. The Notice of the Meeting contains a detailed explanation, the reason for the options and the key aspects of the stock options. The full text of resolution 7 is set out in the Notice of the Meeting. I'll now put resolution 7 as set out in the Notice of this Meeting to a vote in the meeting as an ordinary resolution and ask the Company Secretary to read the proxy votes submitted for this. [Voting]

Thank you, Chairman. The results of resolution 7 are as follows: for, 333,797,651; against, 16,246,885; open, 154,093; abstentions, 76,741; exclusions, 0.

Thanks, Joe. Moving to the last resolution, resolution #8, resolution that asks shareholders to approve the issue of shares for cash to nonexecutive directors under James Hardie 2020 Nonexecutive Director Plan at the November 2020 AGM. Shareholders approved the NED Equity Plan and the issue of shares for cash to participants to facilitate equity ownership for non-executive directors. However, it's been determined as appropriate for a fixed portion of nonexecutive director fees to be paid in shares rather than each nonexecutive director making an election until such time as each nonexecutive director has accumulated 1.5x and 2x for the chairperson of their nonexecutive director fees -- fee based in shares. A copy of the NED Equity Plan is available on our website; at the back of the room in Dublin, which is the company's official registered Irish office and at the registered Australian office. The full text of resolution 8 is set out in the Notice of the Meeting. And I now put resolution 8 as set out in the Notice of the Meeting to a vote at the meeting as an ordinary resolution and ask the Company Secretary to read the proxy votes submitted for this resolution. Joe? [Voting]

Thank you, Chairman. The results of resolution 8 are as follows: for, 339,678,297; against, 10,307,489; open, 157,875; abstentions, 115,257; exclusions, 14,598.

Thanks, Joe. Now moving to the questions and other business. Any questions on my earlier summary of the company affairs? Are there any questions or comments in relation to any of the resolutions put to this meeting?

[Operator Instructions] Mr. Chairman, there are no questions.

Will the Company Secretary, inform me if there are any other items of business or proposals that have been properly made by shareholders or proxy holders of the company.

Mr. Chairman, no, there are none.

Thank you. I note that in accordance with the Irish law, Ernst & Young are deemed to be reappointed as the company's external auditors until the conclusion of next year's AGM. I now declare the polls open. The voting cards will now be collected. After the poll is closed, the votes will be verified under the scrutiny of the registrars, Computershare. The registrars will report the total of the votes cast for and against the resolutions and for abstentions. Subject to the final tabulation of votes confirming the poll results, I declare that all the resolutions have been carried. The final voting results will be announced to the Australian Securities Exchange and the U.S. Security Exchange Commission once they are available. That concludes our meeting for today. Thank you very much. On behalf of all directors, I'd like to thank you for attending our Annual General Meeting and wish those of you attending from Australia a good day. Thank you, ladies and gentlemen. I declare this meeting closed.