ASX 200 share James Hardie surges 9% on record full-year results

The building materials company achieved record net sales globally and in all three of its housing markets.

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James Hardie Industries plc (ASX: JHX) shares are soaring today after the building materials supplier released its fourth quarter and full-year results for FY23.

The James Hardie share price hit an intraday high of $37.02 this morning, up 8.9% on yesterday's close. 

The shares are currently trading at $36.51, up 7.4%. 

Let's dig into the details. 

James Hardie shares among today's ASX 200 leaders

James Hardie shares are currently the second-best performers of the S&P/ASX 200 Index (ASX: XJO) on Tuesday.

This follows the company announcing a record US$3,777.1 million in global net sales over the 12 months ending 31 March 2023. 

This is up 4% on the prior corresponding period (pcp) and is largely due to growth in the North America fibre cement segment.

Here are the highlights of the full year: 

  • Group net sales up 4% pcp to a record US$3,777.1 million 
  • Adjusted EBIT down 4% pcp to US$779.8 million 
  • Adjusted EBIT margin down 2% to 20.6% 
  • Adjusted net income down 2% to US$605.5 million 
  • Operating cash flow of US$607.6 million 
  • Capital expenditure of US$591.3 million

Here are the highlights of the fourth quarter: 

  • Global net sales down 5% to US$917.8 million 
  • Global adjusted net income of US$146.2 million, with an adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 25.4% 
  • North America fibre cement segment: Net sales of US$651.5 million at an EBIT margin of 29% 
  • Asia Pacific fibre cement segment: Net sales increased 2% to $204.6 million and EBIT increased 12% to $59.1 million at an EBIT margin of 28.9% 
  • Europe building products segment: Net sales increased 2% to 117.8 million euros with an EBIT margin of 6.7%

On 8 November 2022, James Hardie announced it would replace dividends with a share buyback program. 

Investors weren't impressed and James Hardie shares lost 3.65% on the day. 

The buyback began in December.

The company has since bought back 3.8 million shares at a cost of US$78.4 million. 

This averages out at US$20.63 per share or $30.78 in the local currency. 

What did management say? 

James Hardie CEO Aaron Erter said:

I am pleased with how the team adjusted during the year to prepare the company to thrive through this cycle. 

This is reflected in our strong fourth quarter results, including all three regions delivering significant EBIT margin improvement sequentially in the fourth quarter.

The company expects the housing markets in the US, Australia, New Zealand, and Europe to weaken from here. 

In these conditions, James Hardie will continue aiming to grow market share and boost profit margins. 

Erter said:

We are controlling what we can control, this is about being agile and adaptive to respond to significant changes in market conditions while remaining thoughtful and focused on where we can accelerate our competitive advantages. 

We remain focused on continued strong execution of our strategy to drive profitable share gain.

What's next?

James Hardie said the outlook for the housing markets in the US, Australia, New Zealand, and Europe remains "very uncertain" largely due to the impact of rising interest rates

The company tips a hit to its addressable market in North America, which is its biggest business segment. It expects the market to shrink between 14% and 19% in FY24. 

It expects to book an adjusted net income in the range of US$145 million to US$165 million in the first quarter of FY24.

In terms of capital expenditure for full-year FY24, James Hardie reckons it will spend approximately US$550 million. That's 7% less than in FY23. 

Chief financial officer Jason Miele said: 

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.

Despite the changing market conditions, we remain committed to investing in capacity expansion, but we will continuously adjust, such that we remain flexible and agile to respond as demand increases coming out of this cycle.

Are James Hardie shares a buy? 

According to the Australian Financial Review (AFR) today, UBS analyst Lee Power reckons the "bulk of the reset is largely done" on James Hardie shares. He says investors should buy. 

Citi analyst Sam Seouw also has a buy rating on James Hardie shares. He thinks these results show the last profit downgrade was the company's last. 

James Hardie downgraded its profit guidance in February, August, and November 2022. 

James Hardie share price snapshot 

James Hardie shares are up 40% in the year to date. By comparison, the ASX 200 is up 4.4%. 

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in James Hardie Industries Plc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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