Global Net Sales +10% to US$997.6 Million
for the Second Quarter
Adjusted Net Income +13% to US$175.8 Million
for the Second Quarter
Adjusts Fiscal Year 2023 Adjusted Net Income
Guidance Range to US$650 Million and US$710 Million
Announces New Capital Allocation Framework,
including US$200 Million share buyback
James Hardie Industries plc (ASX: JHX; NYSE: JHX), the
world’s #1 producer and marketer of high- performance fiber cement
and fiber gypsum building solutions, today announced results for
its second quarter fiscal year 2023, the three-month period ending
30 September 2022.
Second Quarter Fiscal Year 2023 Highlights, Compared to
Second Quarter Fiscal Year 2022, as applicable:
- North America Fiber Cement Segment Net Sales increased +18% to
US$750.6 million and EBIT increased +17% to US$212.8 million, with
an EBIT margin of 28.4%
- Asia Pacific Fiber Cement Segment Net Sales increased +7% to
A$211.1 million and EBIT decreased 7% to A$56.1 million, with an
EBIT margin of 26.6%
- Europe Building Products Segment Net Sales decreased 2% to
€102.0 million and EBIT decreased 69% to €4.4 million, with an EBIT
margin of 4.3%
- Global Adjusted EBIT increased +6% to US$218.5 million, with an
Adjusted EBIT margin of 21.9%
- Global Net Sales increased +10% on flat Global Volume, as all
three regions continue to deliver on the global strategy of
delivering value added solutions to our customers.
Speaking to the second quarter results, James Hardie CEO Aaron
Erter said, “I am proud to report that the James Hardie team has
continued to deliver strong execution of our global strategy that
produced record Q2 results. The team’s performance is reflected in
strong Price/Mix growth in all three regions, including North
America Price/Mix growth of +14%, Asia Pacific Price/Mix growth of
+11% and Europe Price/Mix growth of +12%. The team’s success in
driving high value product growth is underpinned by our superior
value proposition. We are homeowner focused, customer and
contractor driven, providing the entire value chain with world
class products and services.”
Mr. Erter continued, “This calendar year has seen the
macro-economic environment continue to change around us quite
significantly, with unprecedented levels of inflation, rapidly
rising interest rates, slowing housing activity, global supply
chain disruptions, and a war in Europe. At James Hardie, we are
navigating this market uncertainty with a focus on controlling what
we can control. We plan to win regardless of market conditions, and
we will continue to accelerate and expand our competitive
advantages.
Over the past 45 days, we have seen a significant change to the
outlook of housing market activity for the second half of our
fiscal year in most of the geographies where we participate.
- In North America: (1) single family new construction starts
have slowed significantly and market expectations for the remainder
of our fiscal year have declined sharply, (2) the repair and
remodel segment is seeing moderation due to a number of factors
including, but not limited to, falling home prices and declining
consumer confidence due to the uncertain economic outlook. As of 16
August 2022, our expectation of second half volume was for
mid-single digit growth, which we then reaffirmed at our Investor
Day in early September. However, based on the significant decline
in market expectations, which we have reviewed with our customer
partners, we now expect second half volume growth to be between
negative 5% and negative 8%, versus the prior year, which is a
significant reduction to our August/September projections.
- In Australia, labor shortages and unfavorable weather
conditions are constraining housing market activity despite strong
contracted backlogs. In addition, we have had customers in
Australia and New Zealand ask to lower inventory levels as we enter
this period of market uncertainty. This constrained housing market
activity resulted in our APAC volume declining by 4% in Q2. For the
second half of our fiscal year, we expect volume growth to be
between negative 4% and flat, versus the prior year.
Despite the reduction in our expectations for housing market
activity, we are confident that we will be able to deliver growth
above market and strong returns. This is reflected in the updated
guidance provided today, which at its midpoint represents 10%
growth in Adjusted Net Income versus the prior year.”
Discussing James Hardie’s ability to navigate uncertain markets,
Mr. Erter concluded, “I believe our strong balance sheet, superior
value proposition, and our 5,000+ committed team members, will
drive James Hardie to deliver organic growth above market with
strong returns.”
Second Quarter Fiscal Year 2023 Results Compared to Second
Quarter Fiscal Year 2022 Results
Global: Global Net Sales increased +10% to US$997.6 million,
while Global Adjusted EBIT increased +6% to US$218.5 million.
Global Adjusted Net Income increased +13% to US$175.8 million.
Global Adjusted EBIT margin of 21.9% was achieved through continued
operational improvements and the delivery of a high value product
mix offset by high input and freight costs and our ongoing
investment in growth initiatives.
North America Fiber Cement Segment: Net Sales increased +18% to
US$750.6 million, driven by ongoing execution of our high value
product mix strategy that delivered Price/Mix growth of +14%, with
volume growth of +4%, which included ColorPlus™ volume growth of
+31%. In addition to high value product mix, LEAN manufacturing
initiatives continued to generate improved performance across the
Company’s North American manufacturing network, helping to deliver
+17% EBIT growth to US$212.8 million. The EBIT margin contracted 30
basis points to 28.4%, as significant year over year inflationary
pressures were partially offset by delivery of our high value
product mix strategy.
Through our continued efforts to partner with customers to drive
shared growth goals, our North America business again delivered
robust ColorPlus™ volume growth of +31%. In August, we stated that
we would deliver approximately 200 basis points of EBIT Margin
accretion in Q2 versus Q1, and the team successfully delivered
against that commitment, increasing EBIT Margin by 250 basis points
by successfully executing our June 2022 price increase and
maintaining SG&A spend at Q1 levels, while our COGS per unit
remained relatively flat.
Asia Pacific Fiber Cement Segment: Net sales increased +7% to
A$211.1 million. EBIT decreased 7% to A$56.1 million, at an EBIT
margin of 26.6%. The EBIT margin of 26.6% was achieved through the
delivery of high value product mix but offset by the impact of
rising input costs, reduced volumes and our ongoing investment in
growth initiatives.
Europe Building Products Segment: Net Sales decreased 2% to
€102.0 million, as the housing market slowed throughout Europe,
partially offset by Price/Mix growth of +12%. Fiber Cement Net
Sales declined 6% and Fiber Gypsum Net Sales declined 2%. EBIT
decreased 69% to €4.4 million, with an EBIT margin of 4.3%. The
EBIT margin was reduced by 930 basis points, due to the impact of
inflation on key input costs as well as reduced volumes.
Mr. Erter remarked, “Our European business continues to face
significant headwinds from inflationary pressures and a slowing
housing market. However, the European team’s execution of our high
value product mix strategy has resulted in strong Price/Mix growth,
which underpins the ongoing transformation of the business.”
Capital Resources
Operating cash flow generation of US$264.6 million in the first
half of fiscal year 2023 was driven by strong profitable organic
sales growth, partially offset by an increase in working capital.
Working capital increased by US$46.9 million primarily due to
increased inventory levels globally and lower accounts payable
balances in North America and APAC.
James Hardie Chief Financial Officer, Jason Miele, stated,
“Today we adjusted our Capital Allocation Framework to better match
who we are: a growth company. The number one and primary focus of
our Capital Allocation Framework is to invest in organic growth;
our 5-year average Adjusted ROCE of 36% is proof that investing in
our growth should be our number one use of capital. Returning
excess capital to shareholders via a share buyback rather than a
dividend provides a growth company the optimal flexibility to
ensure investment in organic growth is prioritized while
maintaining financial strength and flexibility through cycles.
Through these cycles we will target an average leverage ratio below
2.0x. Finally, today, we announce the replacement of our unfranked
ordinary dividend with a share buyback program, which was approved
by our Board of Directors for an amount up to US$200 million from
today through 31 October 2023.”
Sustainability
At James Hardie, we are all committed to Building Sustainable
Communities and we recognize that keeping environmental and social
considerations at the core of everything we do is fundamental to
our success. On 26 July 2022, James Hardie released its FY22
Sustainability Report, highlighting the progress against our goals.
In October, Jill Kolling, Chief Sustainability Officer, was added
to the Executive Leadership Team, reporting directly to Mr. Erter.
Commenting on sustainability, Mr. Erter said: “The decisions we
make each day must be environmentally and socially responsible to
create sustainable value for homeowners, our customers and our
investors. The Company’s sustainability progress reflects the
efforts of our global team, whose passion and commitment drives the
success of our business outcomes in a sustainable way.”
For more on our commitment to Sustainability including our
goals, see our FY22 Sustainability Report at
https://www.jameshardie.com/why-hardie/sustainability
Outlook and Earnings Guidance
Based on the challenging macro-economic conditions, and housing
market uncertainty, management has adjusted the fiscal year 2023
Adjusted Net Income guidance range. The updated 2023 Adjusted Net
Income guidance range is US$650 million to US$710 million, changed
from the prior range of US$730 million and US$780 million, due to a
decline in volume expectations. The comparable prior year Adjusted
Net Income for fiscal year 2022 was US$620.7 million.
Mr. Erter stated, “We see a weakened housing market for the
remainder of our fiscal year, softening volumes in all three
regions we participate in. I am confident our experienced and
talented teams will continue to partner with our customers to bring
them value and deliver growth above market. To ensure we deliver on
our results, our teams will be laser focused on expense control
through HMOS, price realization, and efficient resource allocation.
We will continue to invest in key growth initiatives to enhance our
industry leading value proposition. This industry leading value
proposition, combined with our world class team that is homeowner
focused, customer and contractor driven, will enable us to continue
to outperform the market.”
James Hardie’s guidance is based on current estimates and
assumptions and is subject to several known and unknown
uncertainties and risks.
Key Financial Information
Q2 FY23
Q2 FY22
Change
6 Months FY23
6 Months FY22
Change
Group (US$ millions)
Net Sales
997.6
903.2
10 %
1,998.5
1,746.5
14%
Adjusted EBIT
218.5
205.7
6%
426.9
386.2
11%
Adjusted EBIT Margin (%)
21.9
22.8
-0.9 pts
21.4
22.1
-0.7 pts
Adjusted Net Income
175.8
154.9
13%
330.1
289.1
14%
Operating Cash Flow
264.6
357.5
(26%)
North America Fiber Cement (US$
millions)
Net Sales
750.6
635.3
18%
1,490.7
1,212.4
23%
EBIT
212.8
182.5
17%
404.6
351.8
15%
EBIT Margin (%)
28.4
28.7
-0.3 pts
27.1
29.0
-1.9 pts
Asia Pacific Fiber Cement (A$
millions)
Net Sales
211.1
196.6
7%
411.2
380.7
8%
EBIT
56.1
60.6
(7%)
107.4
111.0
(3%)
EBIT Margin (%)
26.6
30.8
-4.2 pts
26.1
29.2
-3.1 pts
Europe Building Products (€
millions)
Net Sales
102.0
104.6
(2%)
212.8
207.9
2%
EBIT
4.4
14.2
(69%)
15.8
27.7
(43%)
EBIT Margin (%)
4.3
13.6
-9.3 pts
7.4
13.3
-5.9 pts
Further Information
Readers are referred to the Company’s Condensed Consolidated
Financial Statements and Management’s Analysis of Results for the
second quarter ended 30 September 2022 for additional information
regarding the Company’s results, including information regarding
income taxes, the asbestos liability and contingent
liabilities.
Management Briefing for Analysts, Investors and Media
James Hardie will conduct a teleconference and audio webcast for
analysts, investors, and media on Tuesday 8 November 2022, 8:30am
Sydney, Australia time (Monday 7 November 2022, 4:30pm New York
City, USA time). Analysts, investors, and media can access the
management briefing via the following:
All participants wishing to join the webcast, please use the
following link:
https://edge.media-server.com/mmc/p/zrvd9yy5
All participants wishing to join the teleconference will need to
pre-register by navigating to:
https://s1.c-conf.com/diamondpass/10026253-fgydtf.html
Once registered, you will receive a calendar invite with dial-in
numbers and a unique PIN which will be required to join the
call.
Webcast Replay: Will be available after the Live Webcast
concludes at https://ir.jameshardie.com.au
Use of Non-GAAP Financial Information; Australian Equivalent
Terminology
This Media Release includes financial measures that are not
considered a measure of financial performance under generally
accepted accounting principles in the United States (GAAP), such as
Adjusted net income and Adjusted EBIT. These non-GAAP financial
measures should not be considered to be more meaningful than the
equivalent GAAP measure. Management has included such measures to
provide investors with an alternative method for assessing its
operating results in a manner that is focused on the performance of
its ongoing operations and excludes the impact of certain legacy
items, such as asbestos adjustments. Additionally, management uses
such non-GAAP financial measures for the same purposes. However,
these non-GAAP financial measures are not prepared in accordance
with GAAP, may not be reported by all of the Company’s competitors
and may not be directly comparable to similarly titled measures of
the Company’s competitors due to potential differences in the exact
method of calculation. The Company is unable to forecast the
comparable US GAAP financial measure for future periods due to,
amongst other factors, uncertainty regarding the impact of
actuarial estimates on asbestos-related assets and liabilities in
future periods. For additional information regarding the non-GAAP
financial measures presented in this Media Release, including a
reconciliation of each non-GAAP financial measure to the equivalent
GAAP measure, see the section titled “Non-GAAP Financial Measures”
included in the Company’s Management’s Analysis of Results for the
second quarter ended 30 September 2022.
In addition, this Media Release includes financial measures and
descriptions that are considered to not be in accordance with GAAP,
but which are consistent with financial measures reported by
Australian companies, such as EBIT and EBIT margin. Since the
Company prepares its Condensed Consolidated Financial Statements in
accordance with GAAP, the Company provides investors with
definitions and a cross- reference from the non-GAAP financial
measure used in this Media Release to the equivalent GAAP financial
measure used in the Company's Condensed Consolidated Financial
Statements. See the section titled “Non- GAAP Financial Measures”
included in the Company’s Management’s Analysis of Results for the
second quarter ended 30 September 2022.
Forward-Looking Statements
This Media Release contains forward-looking statements and
information that are necessarily subject to risks, uncertainties
and assumptions. Many factors could cause the actual results,
performance or achievements of James Hardie to be materially
different from those expressed or implied in this release,
including, among others, the risks and uncertainties set forth in
Section 3 “Risk Factors” in James Hardie’s Annual Report on Form
20-F for the fiscal year ended March 31, 2022; changes in general
economic, political, governmental and business conditions globally
and in the countries in which James Hardie does business; changes
in interest rates; changes in inflation rates; changes in exchange
rates; the level of construction generally; changes in cement
demand and prices; changes in raw material and energy prices;
changes in business strategy and various other factors. Should one
or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those described herein. James Hardie assumes no
obligation to update or correct the information contained in this
Media Release except as required by law.
This media release has been authorized by the James Hardie Board
of Directors.
James Hardie Industries plc is a limited liability company
incorporated in Ireland with its registered office at Europa House,
2nd Floor, Harcourt Centre, Harcourt Street, Dublin 2, D02 WR20,
Ireland
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221107006106/en/
Investor/Media/Analyst Enquiries:
James Brennan-Chong Director of Investor Relations and Market
Intelligence
Telephone: +61 2 9638 9205 Email:
media@jameshardie.com.au
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