Product Innovation Supports James Hardie's Earnings

Industry News

& Articles

Product Innovation Supports James Hardie’s Earnings

Facebooktwitterlinkedin
  • Leading global manufacturer of ‘in-demand’ fibre cement products, given their superior quality compared to competitor products
  • Record first quarter sales up 35 percent to US$834 million and record first quarter net profit up 50 percent to US$134.2 millio
  • Earnings guidance US$550-US$590 million, driven by organic growth, supported by higher volume sales

Business Strategy

James Hardie (‘JHX’ or the ‘Company’) 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 is in contrast to 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.

First Quarter Results for FY22

The first quarter of the 2022 financial year, which covers the 3 months to June 21, was a record result in terms of sales and net income and was accompanied by higher earnings guidance. Global net sales for the quarter were up 35 percent to US$843 million on a slightly higher margin of 36.5 percent. The higher margin is attributable to a higher value product mix penetration with customers. The sales result was on the back of a 25 percent lift in volume globally. Net profit after tax for the quarter came in at US$121.4 million while adjusted net income was US$134.2 million, an increase of 50 percent. The adjustments relate to tax, restructuring and asbestos related expenses,    in the form of contributions to the Asbestos Injuries Compensation Fund.

All regions experienced higher net sales with Europe up 37 percent, Asia Pacific up 33 percent and the larger US market up 28 percent.

Operating cash flow was US$184.1 million, down from US$189 million from the previous corresponding quarter. The more informative trailing 12 months cash flow was up 56 percent to US$781 million. The strong cash flow enables JHX to invest in organic growth while maintaining a conservative net leverage ratio of between 1-2 times.

The Future

Earnings guidance for the FY22 has been raised to US$550 – US$590 million, driven by organic growth, as the Company builds on its current 20 percent market share of the US fibre cement market. The key to understanding James Hardie’s future prospects is to appreciate its product innovation capability. In this current quarter JHX has commercialised 3 new cladding products for release around the world, in the form of its patented, textured cladding. The product is aesthetically pleasing and has superior durability over other forms of cladding.

JHX invest heavily in R & D to the point where its fibre cement cladding product is now in its seventh iteration of product innovation. JHX considers that its competitor products are equivalent to its second generation of product. Consistent organic earnings growth from volume-driven higher sales, on increasing margins, supported by continuous product innovation, points to continued earnings growth in the period ahead.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

Comment on this company

Latest Stories

Telstra Corporation Capitalises on AI for Future Growth

Telstra Corporation (‘Telstra…. …

Whitehaven Coal Reports Net Loss of $543.9 Million

Whitehaven Coal Limited (‘Whitehaven’……

WiseTech Global Announces Impressive FY21 Profit Margin

Prominent WAAX player… …

More for you

Rio Tinto Achieves Record Underlying Earnings and Dividends

Rio Tinto Limited (‘RIO’ or the ‘Company’)……

Research & Development Underpins CSL’s Future Earnings

CSL (or the ‘Company’) is a world-leader…. …

Ingenia Communities Group Reports Exceptional FY21 Results

Ingenia Communities Group (the ‘Group’ or ‘Ingenia’).. …

Strong Earnings Growth Cements REA Group’s Position

REA Group (‘REA‘ or the ‘Group’) is a…. …

MacMahon Secures $210 Million Warrawoona Gold Contract

Australian gold and iron producers… …

IPH Limited Reports Underlying Profit of $76.2 Million

IPH Limited (‘IPH’ or the ‘Firm‘) is a… …

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

Disclaimer
KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

Fees
As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

Privacy
You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.

CLAIM YOUR FREE E-BOOK &
7 DAY ACCESS TO LOTUS BLUE

STOCK MARKET SUCCESS

KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.

CLAIM YOUR FREE E-BOOK WHEN YOU LOGIN TO LOTUS BLUE INVESTMENT PORTAL

Latest TV Commercial