The growing weakness in the US homebuilding market, driven in part by rising mortgage costs as the Fed lifts interest rates, has seen James Hardie haul back on its guidance for the full year triggering a big slump in the share price yesterday.
On Wednesday investors didn’t like the fact that James Hardie was spending more than $A700 million expanding in Europe and Germany in particular so they sold down the shares – which closed down 1.5% after being down twice that in early trading.
The third quarter result were slightly softer than Morgan Stanley expected. Primary demand growth again disappointed, although the broker questions whether there was more of an impact from the weather than management acknowledged.
The US housing market has been weakening for several months but the broker had assumed James Hardie could still grow in a soft market. Now the broker sees this as more difficult as the challenges from lower housing activity make it harder for the company to predict volume growth. Margin expectations have been cut.
The company has appointed Jack Truong as its new CEO and he will formally take up the position in early 2019. UBS suspects investor caution prevailed ahead of this announcement because any change of CEO create some hesitation over the stock.