Shares in James Hardie Industries Plc (ASX: JHX) have jumped more than 10% in early trade after the company's third-quarter profit exceeded expectations.
The building products maker said in a statement to the ASX that its net sales rose 30% to US$1.2 billion, while operating income was US$176 million.
The net sales figure was, however, inflated by the contribution of AZEK, which James Hardie bought mid-last year.
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Better-than-expected earnings
RBC Capital Markets said in a note to their clients that the company handily beat expectations on adjusted EBITDA, which came in at US$330 million, posting results 6.6% ahead of consensus.
They added that the company's guidance for earnings for the fourth quarter was unchanged, "although updates on synergy capture were solid'', referring to the savings James Hardie expects to capture following the AZEK takeover.
James Hardie Chief Executive Officer, Aaron Erter, said it was a solid result.
In the third-quarter, we achieved or exceeded each of our financial commitments despite a mixed macro backdrop. We are taking actions to address the current market environment, including optimizing our manufacturing footprint and better aligning our cost structure with the slower, but stabilizing, pace of demand. These actions will improve near-term profitability and better position the Company to profitably grow when conditions improve.
Adjusted net sales in the siding and trim division were down 2%, stripping out the contribution from AZEK; however, Mr Erter said the EBITDA margin improved significantly, driven by pricing and cost reduction measures.
Mr Erter added:
Our confidence in the combination of James Hardie and AZEK continues to be strong as customers respond to our differentiated products, leading brands, focus on innovation and investment across the value chain. We continue to make progress on the integration and have surpassed our FY26 cost synergy goal. Our progress to date reaffirms our confidence in hitting our US$125 million cost synergy target. On the commercial front, our early wins with dealers, contractors and homebuilders will drive meaningful revenue synergies in FY27 and beyond, demonstrating our potential to accelerate material conversion across exteriors and outdoor living.
Outlook upgraded
In terms of the outlook, the company's Chief Financial Officer Ryan Lada said in the siding and trim market, "conditions remain challenged, consistent with our prior expectations''.
Mr Lada said they expected the broader exteriors market to remain "mixed" in the near term, while in the deck, rail & accessories division, growth in the mid-single digits had carried through from the third quarter into the early fourth quarter.
The company upgraded its full-year adjusted EBITDA guidance from US$1.2 to US$1.25 billion to US$1.23 to US$1.26 billion, and also upgraded the net sales outlook for both the siding and trim, and deck, rail & accessories divisions.
James Hardie shares traded as high as $37.60 in early trade before settling back to be 12.2% higher at $37.34.
