James Hardie soars on first quarter results, warns of housing market headwinds

James Hardie Industries’ (ASX: JHX) share price jumped 15% in early morning trade despite the company raising concerns on potential impacts related to the housing market.

In releasing its first quarter fiscal year 2024 results, the company noted in its outlook and earnings guidance that the outlook for the housing markets it participates in globally continues to remain uncertain.

It told shareholders that in its largest market, North America, its external data providers have forecast that the company’s addressable market will fall by between 5% and 18% in calendar year 2023 versus calendar year 2022.

In its guidance for the second quarter of fiscal year 2024, James Hardie forecast that its adjusted net income will come in between $260 million and $290 million.

New EBIT record

Shareholders welcomed the company’s strong results for the quarter ending 30 June 2023.

This included a record global adjusted earnings before interest and taxes (EBIT) of $358 million, with an adjusted EBIT margin of 24.5%.

The company also achieved a record global adjusted earnings before interest, taxes, depreciation and amortisation (EBITA) of $427 million with an adjusted EBITDA margin of 29.2%.

James Hardie’s global net sales hit an impressive $1.4 billion, leading to a 13% jump in adjusted net income to $267 million and a 64% jump in operating cash flow to $385 million.

James Hardie chief executive officer, Aaron Erter, said the company had started the year strong, delivering its best ever first quarter results for both adjusted net income and operating cash flow.

“I believe our last two quarterly results are proof points that we are accelerating through this cycle. We have a superior value proposition with the right products and solutions that help our customers grow profitably.”

“Our team is focused on maintaining our momentum to deliver strong financial results again in the second quarter as highlighted by our guidance range provided today. We are homeowner focused, customer and contractor driven, providing the entire value chain with world-class products and services.”

Strong liquidity position

James Hardie’s strong operating cash flow for the quarter was driven by strong results in all three regions and significant improvement in working capital.

The company’s working capital improved by $79 million primarily due to lower inventory and higher accounts payable.

Chief financial officer, Jason Miele, said the company continues to maintain a strong liquidity position.

“We improved our liquidity position by US$104.9 million (approximately A$160 million) since 31 March 2023, while also executing the next tranche of our share buyback program. We expect our continued robust operating cash flows will ensure we maintain this strong liquidity position.”

“Our capital allocation framework remains unchanged and matches who we are, a growth company. The number one and primary focus of our capital allocation framework is to invest in organic growth.”

Mr Miele said the company’s capacity expansion program is guided by its expectation for sustainable long-term profitable share gain.

“Despite the changing market conditions, we remain committed to investing in capacity expansion, but we will continuously adjust.”