Annual Information Meeting

CEO’s Address

Louis Gries

Results FY06

Unless otherwise stated, results are for continuing operations only, and comparisons are for fiscal year 2006 versus the prior fiscal year .

 

Highlights- FY06

Strong results

Net sales up 23% to US$1,488.5 million

Gross profit up 29% to US$550.8 million

Bottom line affected by recording of asbestos provision USA Fibre Cement sales up 30% to US$1,218.4 million USA Fibre Cement EBIT up 42% to US$342.6 million Significant capacity expansion

3

Exceeding Targets

FY06 Long Term Actual            Target

Revenue Growth 23% >15% pa            EBIT1/Sales 21% >15% pa            Return on Assets2 17% >15% pa

1 Excludes asbestos provision, SCI and other related expenses and impairment charge. 2 Net income (excluding asbestos provision, SCI and other related expenses, and write-back of tax provisions) divided by total average assets. 4

 

USA Fibre Cement – FY06

Full Year – very strong sales & EBIT growth

Net Sales up 30% to US$1,218.4 million Sales Volume up 18% to 2,182.8 mmsf Average Price up 10% to US$558 per msf EBIT up 42% to US$342.6 million EBIT Margin up 2.4 pts to 28.1%

5

USA Fibre Cement

Top-Line Growth

3000 $1,300 2800 $1,200 2600

JH Volume JH Revenue Housing Starts $1,100 2400 $1,000 2200 $900 2000 $800 1800 (US$M) Starts (000s Units) 1600 $700

/ Revenue (mmsf) 1400 $600 1200 $500 Volume 1000 $400 800 $300 600 $200 400 200 $100 0 $0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

6

 

USA Fibre Cement

Key Points

Continuing sales growth in both emerging and established markets Sales of both interior and exterior products growing strongly Continued market penetration against alternative materials Sales growth in higher-priced differentiated products ColorPlusTM strategy continuing to progress well Completed construction of new paint line at Blandon, Pennsylvania Completed construction of line 1 at new plant in Pulaski, Virginia –commercial production in April

7

Asia Pacific Fibre Cement – FY06

Full Year Results

Net Sales up 2% to US$241.8 million Sales Volume down 2% to 368.3 mmsf EBIT down 11% to US$41.7 million EBIT Margin down 2.6 pts to 17.2%

8

 

Asia Pacific Fibre Cement – FY06

Australia and New Zealand – Key Points

New housing and renovation activity continued to weaken in both Australia and New Zealand Sales volumes and market share increased Regaining momentum in commercial sector lost through last year’s bans and boycotts Net sales up slightly to US$51.1m, up 6% in A$ EBIT down 18% due to higher costs – mainly manufacturing and freight Sales up 4%, EBIT down 8% due to higher costs

9

Asia Pacific Fibre Cement – FY06

Philippines — Key Points

Domestic demand affected by weaker economic conditions and slowdown in building construction activity

Net sales down 9% full year

EBIT positive for the year

10

 

Other – FY06

USA Hardie Pipe — Key Points

Both residential and non-residential construction activity remained buoyant in Florida

Market share gains

Manufacturing performance improvements

Reduced EBIT loss

11

Other – FY06

Europe Fibre Cement

Sales building steadily

Continuing to expand distribution channels

Artisan™ Roofing

Ceased market development initiatives

Review of market testing results concluded greater shareholder value created by focusing investment elsewhere Pilot plant closed – asset impairment charge of US$13.4m in fiscal year 2006

12

 

Key Ratios – Full Year FY06

FY06 FY05 FY04

EPS (Diluted) 1 44.9c 27.7c 27.2c Dividend paid per share 10.0c 3.0c 5.0c Return on Shareholders’ Funds1 29.6% 22.4% 27.6% Return on Capital Employed1 32.1% 23.6% 23.4% EBIT/ Sales (EBIT margin) 20.9% 16.2% 17.5% Gearing Ratio (1.6)% 6.8% 17.0% Net Interest Expense Cover1 — 38.5x 17.2x Net Interest Paid Cover 89.0x 18.3x 14.8x Net Debt Payback — 0.2 years 0.6 years

1 Excluding asbestos provision, impairment charge, SCI and other related expenses and write-back of tax provisions

13

Results Q1 FY07

Unless otherwise stated, results are for continuing operations only, and comparisons are for the fiscal year 2006 versus the prior fiscal year.

 

Overview — Q1 FY07

Operating Results

USA Fibre Cement – strong sales and EBIT growth Asia Pacific Fibre Cement

Australia and New Zealand – volumes up slightly despite weaker market, but EBIT down Philippines – EBIT positive USA Hardie Pipe – first quarterly positive EBIT result Strong cashflow generation

15

Results – Q1 FY07

US$Million

Net Sales 415.5 Up 16% Gross Profit 157.7 Up 9% EBIT* 96.1 Up 11% Operating Profit* 62.7 Up 12%

* Excludes effect of foreign exchange on asbestos provision.

16

 

Results – Q1 FY07

USA Fibre Cement

US$Million

Net Sales 348.9 Up 21% EBIT 103.3 Up 10% Volume 605.7 mmsf            Up 16% EBIT Margin 29.6% Down 3.1pts

17

USA Fibre Cement

EBIT and EBIT Margin*

120 EBIT EBIT/Sales 35

30 100

25

80 % MARGIN

20 60

EBIT US$M 15 EBIT

40

10

20 5 0 0 FY01 FY02 FY03 FY04 FY05 FY06 Q1 FY07

*Excludes restructuring and other operating expenses of US$12.6 million in Q3 FY02

Note: dotted lines indicate EBIT margin long-term target range of 20% — 25% 18

 

USA Fibre Cement

New housing slow-down

Key sales determinants:

Level of new housing construction activity Level of repair and remodel activity Market development program effectiveness Price improvement

New housing construction segment currently accounts for approx. 70% of total sales (approx. 30% repair and remodel) Internal sales target of 15% — 25% from market penetration and price improvement (assumes new housing flat)

19

USA Fibre Cement

New housing slow-down (continued)

Largest sales regions:

South Central, South East and Pacific North West

Business considerations:

timing of capacity expansion, cost containment and efficiency improvements

20

 

Results – Q1 FY07

Other Businesses

ANZ volumes slightly up, EBIT margin 16.7% Philippines sales up 2%, EBIT positive USA Hardie Pipe – first EBIT positive quarter Europe – EBIT negative, as expected

21

Outlook

USA Fibre Cement

New housing construction to continue to slow

Q1 revenue and volumes very strong, but housing slow-down expected to impact Q2 volumes – this is happening

Expect to continue outperforming housing market

Repair and remodelling activity to remain stable

No change to earnings guidance at Q1 (current forecast is for NPAT excluding asbestos related costs to fall within analysts’ range at Q1 of US$207m to US$247m)

22

 

Outlook (continued)

Asia Pacific Fibre Cement

No material improvement to market conditions in Asia Pacific businesses expected in short-term

Company

SCI and other related expenses to continue until FFA finalised

Future reported earnings subject to volatility related impact of currency exchange fluctuations on asbestos liability

23

Understanding our Sustainable Competitive Advantage

 

Unique Technology and Scale

Unique plant engineering and proprietary process technology and product formulations – significant investment in R&D

Superior capital cost efficiency Low cost manufacturer

Only national producer of fibre cement in each key market Excellent plant economies of scale – plants 2-3 times larger than fibre cement competitors Unique differentiated products, widest range and strong brands

25

Focus

Industry Leadership and Profitable Growth

Aggressively grow the market Secure differentiated position Generate strong top line growth Win high shares of large segments Sustain attractive margins

26

 

Largest Fibre Cement Producer in North America

Plant Locations JH Plant Design Capacity

Flat Sheet            Capacity Plants(mmsf)

Fontana, California 180 z Tacoma, WA

Plant City, Florida 300 Cleburne, Texas 500 Blandon, PA Tacoma, Washington 200 z z Peru, IL

Peru, Illinois 560 Waxahachie, Texas 360 z Reno, NV

Pulaski, VA Blandon, Pennsylvania 200 z

Summerville, South Carolina 190 z Fontana, CA Summerville, SC Reno, Nevada 300 z

Pulaski, Virginia 600 Waxahachie, TX z Plant City, FL z            Flat Sheet Total 3,390

Cleburne, TX z

FRC Pipe Plant

Plant City, Florida 100,000 tons

USA Fibre Cement

27

Revenue Growth Streams

Exterior products

Siding Soffit Fascia Trim

Interior products

1/4 inch backerboard Hardibacker 500®

Total sales compound annual growth rate of 27% (FY02 – FY06)

USA Fibre Cement

28

 

Growth In Revenue Per Employee

$552

$495

$413 $381 $367 $354 $329 $326 $298 $251 $250

$166 $153 $115

$48

FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

Revenue # of Employees Revenue Per Employee

29

Long Term Financial Targets

Target 1 Actual Actual Actual FY06 FY05 FY04

Revenue Growth > 15% p.a. 23% 23% 25% EBIT Margin > 15% p.a 19%* 16% 18% Return On Capital > 15% p.a 29%* 24% 23% Employed

1 Long term target excludes asbestos-related expenses

* Excludes asbestos charge of US$716 million associated with recording of asbestos provision. 30

 

Annual Information Meeting

Asbestos-related compensation progress

Asbestos Update

Progress made but slower than expected

All proven claims continue to be paid by MRCF

Company recorded a net provision of US$716m (A$1 billion) at 31 March 2006 – “probable and estimable” under US GAAP (provision based on KPMG Actuaries’ estimate)

Net provision adjusted to US$742m (A$1 billion) at 30 June 2006 due to foreign exchange (US$27m charge to P&L)

23 June 2006, ATO declined to endorse SPF as tax concession charity (condition precedent to Final Funding Agreement (FFA)

29 June 2006, ATO ruled contributions from James Hardie to SPF deductible over life of fund in accordance with ‘black hole expenditure’ legislation

Tax exempt status of SPF remains critical for affordability and long term viability of proposed long-term voluntary funding arrangement

32

 

Asbestos Update (continued)

There have been ongoing discussions with ATO and NSW Government on tax treatment of SPF since adverse ATO decision in June

Currently discussing potential and limited amendments to FFA with NSW Government – objective is satisfactory outcome for all stakeholders to FFA

Requires fresh binding rulings from ATO

Both NSW Government and ATO co-operative – ATO to treat rulings as a priority

If satisfactory outcome achieved, shareholder meeting to be held around 10 weeks from agreement being reached

Company remains committed to completing as fast as possible – already well advanced on satisfying other remaining conditions precedent: Independent Expert’s Report; Explanatory Memorandum; discussions with lenders; and updated actuarial report Have begun considering options for interim funding to MRCF should it be required

33

Summary

We have a strong, well-established, high-growth and high-return business We have sustainable competitive advantage Our model for continued growth is based on:

Large market opportunity            Superior value proposition

Proprietary and/or protected technology Large upsides due to current R&D investments Significant organisational advantages Focussed strategy and organisational effort Scale

The company is in a sound financial position

Accounting results subject to volatility – foreign exchange impact on A$ asbestos provision

34

 

Annual Information Meeting

Endnotes

DEFINITIONS

Financial Measures – US GAAP equivalents

EBIT and EBIT margin – EBIT is equivalent to the US GAAP measure of operating income. EBIT margin is defined as EBIT as a percentage of net sales. James Hardie believes EBIT and EBIT margin to be relevant and useful information as these are the primary measures used by management to measure the operating profit or loss of its business. EBIT is one of several metrics used by management to measure the earnings generated by the company’s operations, excluding interest and income tax expenses. Additionally, EBIT is believed to be a primary measure and terminology used by its Australian investors. EBIT and EBIT margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America. EBIT and EBIT margin, as the company has defined them, may not be comparable to similarly titled measures reported by other companies.

Operating Profit – is equivalent to the US GAAP measure of income. Net Operating Profit – is equivalent to the US GAAP measure of net income.

SALES VOLUMES mmsf – million square feet, where a square foot is defined as a standard square foot of 5/16” thickness. msf – thousand square feet, where a square foot is defined as a standard square foot of 5/16” thickness.

FINANCIAL RATIOS

Net interest expense cover – EBIT divided by net interest expense.

Net interest paid cover – EBIT divided by cash paid during the period for interest, net of amounts capitalised. Net debt payback – Net debt/cash divided by cash flow from operations.

36

 

NON-US GAAP FINANCIAL MEASURES

EBIT and EBIT margin excluding asbestos – EBIT and EBIT margin excluding asbestos are not measures of financial performance under US GAAP and should not be considered to be more meaningful than EBIT and EBIT margin. James Hardie has included these financial measures to provide investors with an alternative method for assessing its operating results in a manner that is focussed on the performance of its ongoing operations and provides useful information regarding its financial condition and results of operations. The company uses these non-US GAAP measures for the same purposes.

US$ Million Q1 FY07 Q1 FY06 FY06 FY05

EBIT $68.9 $86.9 $(434.9) 196.2 Asbestos 27.2 — 715.6 -EBIT excluding asbestos 96.1 86.9 280.7 196.2 Net Sales $415.5 $359.4 $1,488.5 $1210.4 EBIT margin excluding asbestos 23.1% 24.2% 18.9% 16.2%

37

Disclaimer

This Management Presentation contains forward-looking statements. James Hardie may from time to time make forward-looking statements in its periodic reports filed with or furnished to the United States Securities and Exchange Commission on Forms 20-F and 6-K, in the annual reports to shareholders, in offering circulars and prospectuses, in media releases and other written materials and in oral statements made by the company’s officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of forward-looking statements include:

expectations that the conditions precedent to the Final Funding Agreement will be satisfied;

expectations about payments to a special purpose fund for the compensation of proven asbestos-related personal injury and death claims; expectations concerning the company’s Australian Tax Office amended assessment; expectations that the company’s credit facilities will be extended or renewed; projections of operating results or financial condition; statements regarding plans, objectives or goals, including those relating to competition, acquisitions, dispositions and products; statements about future performance; and statements about product or environmental liabilities.

Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should,” “aim” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve inherent risks and uncertainties. The company cautions that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the risk factors discussed under “Risk Factors” beginning on page 6 of the Form 20-F filed on 7 July 2005, and: all matters relating to or arising out of the prior manufacture of products that contained asbestos by current and former James Hardie subsidiaries; compliance with and changes in tax laws and treatments; competition and product pricing in the markets in which the company operates; the consequences of product failures or defects; exposure to environmental, asbestos or other legal proceedings; general economic and market conditions; the supply and cost of raw materials; the success of research and development efforts; reliance on a small number of product distributors; compliance with and changes in environmental and health and safety laws; risks of conducting business internationally; compliance with and changes in laws and regulations; foreign exchange risks; the successful implementation of new software systems and the successful implementation of the internal control over financial reporting requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as codified by Item 308 of Regulation S-K . The company cautions that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements. Forward-looking statements speak only as of the date they are made.

38