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The James Hardie Industries plc (ASX:JHX) share price tanks on profit warning

The James Hardie Industries plc (ASX: JHX) share price is getting whipped this morning even as the building materials company posted strong double-digit interim earnings and sales growth.

James Hardie’s share price crashed 8% to a more than one-year low of $18.21 as the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index jumped 0.5% thanks to a positive lead from Wall Street.

But shareholders in James Hardie won’t be feeling much like celebrating after management said its full-year result may not meet brokers’ expectations.

Analysts are forecasting FY19 net profit of between US$313 million and US$335 million but James Hardie believes its bottom line will only range between US$280 million and US$320 million.

If group net profit were to fall to the lower end of management’s guidance, this year’s profit will fall below F18’s figure of US$291.3 million!

What’s more, management’s latest guidance is dependent on US housing conditions improving, stable input cost inflation and the US dollar to Australian dollar staying at around current levels.

That’s a lot of hoops to jump through although US housing starts should improve given that the market had been impacted by bad weather recently.

Input costs though are much harder to predict, and higher costs had impacted on the group’s first-half result for the six months to end September.

However, that didn’t stop the group from posting a solid 29% increase in net profit to US$160.1 million as revenue jumped 25% to US$1.3 billion.

The solid first half result makes the full-year profit downgrade even harder to swallow as it implies that the second half of the financial year is going to be ugly.

Those looking for a silver lining will be cheered by the performance of James Hardie’s US fibre cement business, which posted top-line growth of 10% from increasing volumes and higher selling prices.

The Australian business is also performing strongly even in the face of a slowing housing market although the weakening Australian dollar is hurting when earnings are converted into US dollars.

The bad news from James Hardie isn’t hurting its peers though. The Boral Limited (ASX: BLD) share price is up 0.5% at $5.63 while the CSR Limited (ASX: CSR) share price is 2.5% ahead at $3.35 at the time of writing.

James Hardie is the second-worst performer on the S&P/ASX 200 index in early trade after APA Group (ASX: APA) as the APA share price has collapsed 10% to $8.55.

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Motley Fool contributor Brendon Lau owns shares of Boral Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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