This article is from the Australian Property Journal archive
WEAKNESS in North America and stronger than expected headwinds have dragged down building materials giant James Hardie’s second quarter income by 12%.
The company posted an adjusted net income of $157 million, and EBITDA of $263 million which is down 8% with adjusted EBITDA margin of 27.4%, down 120 basis points. Its net sales were $961 million, down 4%.
Despite the weaker set of figures, CEO Aaron Erter praised the company’s resilience, stating, “We again delivered on our commitments in the second quarter, and our first-half results demonstrate that we are managing decisively as we continue to scale and invest to grow our business profitably.”
James Hardie’s North American fibre cement recorded a 5% decrease in net sales primarily driven by lower volumes of (7%) due to market weakness. Volumes of exterior and interior products each declined high single-digits. EBIT margin decreased (270bps) to 29.0%. Excluding depreciation and amortisation expenses, which rose 14% to $38 million, EBITDA declined (10%) to $240 million with EBITDA margin of 34.5%, a decrease of (170bps).
In the Asia-Pacific, net sales declined by primarily due to its decision to cease operations in the Philippines. However, it was partially offset by higher volumes in Australian and New Zealand markets. Adjusted EBIT margin jumped by an impressive 310 basis points to 33.3%. Excluding depreciation and amortization expense, which increased +12% to $5 million. Adjusted EBITDA grew 11% to $54 million with adjusted EBITDA margin of 36.5%, an increase of +350bps attributable to the above drivers of Adjusted EBIT margin, excluding the increase in depreciation.
The European market presented a mix of challenges, with net sales down slightly by 1% in. EBIT margins declined by 320 bps to 7.5%, impacted by challenging conditions in Germany. However, the UK market showed positive signals, with residential construction improving and James Hardie positioned to capitalize on potential growth. Price increases in high-value products are a key strategy in Europe, with an eye toward further market share gains.
Excluding depreciation and amortisation expense, which rose +17% to $8 million, EBITDA declined (12%) to $17 million with EBITDA margin of 14.5%, a (220bps) decrease.
Despite the weaker results, the company has reaffirmed its FY25 guidance.
CFO Rachel Wilson said despite greater market headwinds anticipated in its original outlook, the company remain well-positioned to deliver volumes within the original guidance range.
“Our Hardie Operating System initiatives, together with efforts to rationalize and prioritize expenses enable us to achieve even better profitability than we initially anticipated. We are therefore reaffirming the low end of our volume guidance range and raising the low end of both our North America EBIT Margin and Adjusted Net Income ranges,” she added.
The company now anticipates North American volumes of at least 2.95 billion square feet, alongside an EBIT margin of 29.3%, up from an earlier forecast. Adjusted net income guidance has also been raised, now expected to exceed $635 million.
“We are encouraged by the prospect of improvements in consumer sentiment and homeowner affordability as borrowing costs normalize, however within our current fiscal year we continue to expect the North American market for exterior products to be down low to mid-single digits,” said Erter.
