Investors Buy Better Outlook At James Hardie

By Glenn Dyer | More Articles by Glenn Dyer

Shares in James Hardie jumped more than 7% yesterday after the company revealed the tiniest of upgrades to its full-year earnings and despite a 10% drop in December quarter earnings.

The building products group company blamed soft demand for the lack of sales growth in the three months to December 31 while higher costs squeezed margins and pushed operating profit down to $US65.9 million ($90.79 million).

The US housing sector, Hardie’s biggest market, has been stalled by rising mortgage rates in recent months and weak demand.

That saw Hardie slash its full-year outlook in November when single-family home completions hit an 18-month low.

But yesterday in its quarterly report, Hardie revealed that it had gotten a bit more confident about the outlook – it lifted the bottom end of its range for annual operating profit slightly, raising it to $US295 million from $US280 million. It trimmed the upper limit to $US315 million from $US320 million, raising the midpoint by $US5 million.

Hardie shares ended the day up 5.6% at $15.98.

James Hardie said in a statement that it had won some major customers and gained market share in Australia, where are running at five-year lows because of a 40% slide in approvals for home units and a 9% drop in approvals for private houses.

Hardie’s US market saw cement earnings, which make up 88% of total earnings, fell 15% in the quarter to $US86.1 million compared to the same quarter a year earlier as labour, freight and raw materials costs climbed and weak demand from the construction sector kept sales flat.

“Demand was soft across most geographies and customer segments,” James Hardie chief executive Jack Truong said of the US business. “Our exteriors business continues to improve and grow slightly above our addressable market, but below our expectations,” he added.

“We expect to see modest growth in the US housing market to continue through the remainder of fiscal year 2019. The single-family new construction market and repair and remodel market growth rates in fiscal year 2019 are expected to grow, albeit at a growth rate lower than that in fiscal year 2018.

“The Company expects new construction starts between approximately 1.2 million and 1.3 million,” he added
Overall net sales climbed to $US596.2 million for the quarter from $US495.1 million a year earlier.

For the 9 months to December 31 sales were up 23% to just over $US1.5 billion and aftertax profits were up a slower 8% to $US226.7 million

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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