James Hardie Delivers Strong Fourth Quarter With A 36% Rise In Profits

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James Hardie Delivers Strong Fourth Quarter With A 36% Rise In Profits

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  • Global sales up by 24 percent to US$3,614 million and Adjusted Net Income up 36 percent to S$620.7 million
  • Earnings per share US$39, compared to US$1.03 for the prior financial year
  • North America Fibre Cement market segment accounted for 70 percent of global sales and 77 percent of global EBIT
  • Full year 2023 earnings guidance range reaffirmed at US$740 to US$820 million
  • US$1.6 B to US$1.8 B global capacity expansion program to 2026 underpins long-term favourable earnings outlook.

Business Strategy

James Hardie Industries plc (‘JHX’ or the ‘Group’) is the largest global manufacturer of fibre cement external cladding and internal lining products in North America and Asia-Pacific. Listed on the Australian and New York Stock Exchanges, the Company is headquartered in Ireland. The Company’s fibre cement products are water resistant, low maintenance and fire resistant. Importantly, in a carbon emission focused environment, these products are also lightweight. The products are predominantly used in residential construction, manufactured housing, repair and re-modelling and a variety of commercial and industrial applications.

North America is the Company’s largest and most strategically important market. JHX today has a 20 percent share of the fibre cement exterior cladding market in the US and this market share is growing steadily. The strategic importance of the North American market is that apart from being the largest in the world, housing stock in the US is ageing, in that 40 million homes are more than 40 years old. This supports consistent growth in the repair & remodel market as it takes market share from brick and timber products.

Another key driver of demand for the Company’s building products is the light-weight nature of fibre cement. This implies that it is likely to benefit from the ongoing introduction of carbon-reducing policies imposed on the building environment. This contrasts with clay bricks, for example, which are susceptible to the negative impact of carbon-reducing policies that may restrict future demand, as the trend to lower carbon emissions gathers momentum.

North America Fibre Cement market drives strong Full Year result  

Global net sales of US$3,614 million were up 24 percent, boosting JHX’s Adjusted Net Income to US$620.7 million for the year to 31 March. This profit outcome is up 36 percent on the prior financial year. The North America Fibre cement business segment was the standout performer for the Group, generating US$2,040 million or 70 percent of global sales, and 77 percent of operating EBIT, with an EBIT margin of 29 percent. The other regions across Asia Pacific and Europe also grew strongly with Net Sales up 23 percent and 10 percent respectively.  Asia Pacific generated an EBIT margin of 28 percent for the year and Europe an EBIT margin of 12.9 percent. The overall adjusted Group EBIT margin was 22.6 percent, up from 21.6 percent in the 2021 financial year.

Adjusted earnings per share came in at US$1.39, compared to US$1.03 for the prior financial year.

An unfranked final dividend of US30 cents per security was declared.

Cash flow from operations was US$757 million, down US$30 million or 4 percent from 2021. The slight decrease is attributable to the US$64.8 million CARES Act tax refund received in the prior financial year. Cash flow from operations includes asbestos claims paid of US$118.8 million. JHX’s cash position decreased by US$83 million from U$208.5 million at March 2021 to US$125 million at March 2022. Debt increased slightly from U$868 million to US$886 million at March 2022.  The Group’s balance sheet remains robust and sufficient funds exist to meet the Group’s planned working capital requirements for the coming 12 months.

The 2022 full year result was less affected by COVID and government enforced lockdowns in the Philippines and New Zealand, compared to the 2021 financial year.

A focus on a high value product mix penetration strategy in Australia and New Zealand boosted the Price/Mix ratio by 10 percent. This was achieved by selling more higher margin James Hardie products and by marketing directly to homeowners to create increased demand for the Group’s high value product range. A key factor in this marketing strategy is a focus on the homeowner repair and remodel market, especially in North America.

Full Year 2023 Guidance

The Group’s Adjusted Net Income guidance range for the 2023 financial year was reaffirmed at US$740 to US$820 million. This compares to the comparable prior year Adjusted Net Income of US$620.7 million.

Looking beyond the 2023 financial year, consistent organic growth globally, and a continuing strong North American Fibre cement market, augur well for JHX’s long-term earnings prospects. JHX’s ongoing investment in R & D, supported by its transformational global capacity expansion program in all 3 regions, underpins the Group’s favourable earnings outlook. Through to the end of the 2026 financial year, the Group anticipates undertaking capital expenditure of between US$1.6 billion and US$1.8 billion, across all 3 geographic regions.

Volume-driven higher sales, on increasing margins, supported by continuous product innovation and capacity expansion, points to continued earnings growth in the period ahead.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

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