James Hardie Shares Up 13% On Solid Sales Momentum

James Hardie Industries plc (James Hardie or JHX) manufactures and sells fibre cement, fibre gypsum and cement-bonded building products for interior and exterior building construction applications, primarily in the US, Australia, Europe, New Zealand and the Philippines. Founded in 1888 by Scottish born James Hardie, who emigrated to Melbourne and began importing a fibro-cement roofing product made in France, JHX has been listed on the ASX since 1951.

Record US$179M September Quarter 2023 Earnings

James Hardie has announced a record quarterly result for the Group’s second quarter earnings covering the 3 months to September 2023 of US$179 million, up from US$175.8 million in the previous corresponding quarter. This outcome is equivalent to diluted earnings per share of US$0.41 cents, which is up 3 percent compared to the second quarter of the previous financial year.

Global net sales were US$999 million from which a record global adjusted EBIT of US$240 million was achieved, representing a margin of 24 percent. The North America market saw a 2 percent decline in sales to US$734.4 million on a 5 percent drop in volume, partially offset by a 2 percent increase in average net sales price. The Asia Pacific Fibre cement market segment achieved a 7 percent lift in sales to a record A$225 million, despite a 9 percent decline in volumes, which was more than offset by a 15 percent average sale price increase. Australia was the strongest performing market in the Asia Pacific region with an EBIT margin of 30.2 percent, which is considerably higher than the global EBIT margin of 24 percent.

Operating cash flow for the first half-year came in at a record amount of US$459 million, up 74 percent on the previous corresponding half-year and enables the Group to continue to invest in organic growth and deploy excess capital to shareholders. Following completion of the most recent US$200 million share buyback program, James Hardie has announced a fresh $250 million share buyback through to 31 October 2024. The recent US$200 million share buyback resulted in 8.2 million shares being acquired at an average share price of US$24.26.

The Group’s 0.79x leverage ratio at 30 September 2023 is conservative, leaving it well placed to fund the current $550 million capital expenditure program, of which YTD FY24 capital expenditure is $232 million.

Outlook

The Group has pointed to the uncertain nature of the US housing market, in which two-thirds of profit is generated. However, James Hardie is an organic global growth company with a growing presence in the higher margin earning Asia-Pacific region where prices were up by 15 percent in the September quarter, compared to a year ago.

The strong September quarter result underscores the Group’s sales and earnings momentum going into the third quarter, in which earnings guidance of US$165 to US $185 million has been provided to the market.

James Hardie’s wall cladding and plasterboard products are gaining market share in key markets that it contests, and are products customers and builders want. This market share growth, combined with building capacity expansion, augmented by buying back shares, should see the share price continue to perform in the period ahead.