Building products group James Hardie [ASX:JHX] stood out against the wider market today. It surprised all with its display of a thriving building materials industry even as other markets were falling in the health, utilities and housing sectors.
This also comes as consumer confidence was reported to have plummeted to a three-year low — declining 1.8% to 75.9, according to a survey collated by ANZ-Roy Morgan — a week ahead of today’s RBA declaration of further rate rises expected to beat inflation.
And yet James Hardie was seemingly untouchable. The group posted a 4% increase in net sales and a 12% profit of US$512 million. The favourable trading period saw JHX shares rising over 8% by the early afternoon.
Worth $36.72 a share at the time of writing, JHX may be up by nearly 40% year-to-date, but it’s still down by 14.5% in its sector and by half that in the overall market over the last full year:
Source: TradingView
James Hardie posts strong year despite quarterly lows
Today James Hardie put out higher earnings and strong trade in its fourth quarter and full-year results for FY23.
The announcement resonated well with investors, with many digesting news of low consumer sentiment and further rate hikes to come.
For the full FY2023, the group said that in that time the group’s global net sales had increased by 4% to a record US$3.777 billion.
In comparing the Q4 FY23 highlights with Q4 FY22 however, there was a 5% dip to US$917.8 million. This includes a price and mix growth rate of 8% with all three regions having focused on value solutions for customers during these difficult times.
North America’s Fiber Cement Segment saw net sales increase by 9% to a record US$2,787.6 million in the year. EBIT increased by 4% to a record US$767.5 million — at an EBIT margin of 27.5%.
For the Asia Pacific region, net sales increased by 1% to a record A$787.0 million at an EBIT margin of 26.5%.
For Europe, net sales increased by 3% to a record €431.8 million at an EBIT margin of 5.8% in the year.
CEO Aaron Erter stated:
‘Our team executed successfully and closed out fiscal year 2023, delivering record net sales globally and in all three regions in local currency for the full year.
‘In addition, we delivered full year Adjusted Net Income and Operating Cash Flows of US$605.5 million and US$607.6 million, respectively.
‘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.’
Mr Erter acknowledged the group has fared through dynamic market conditions, which called for adaptability as significant changes to market conditions have continued to shift.
This has meant the group has had to focus on where it can accelerate competitive advantages and insists on keeping to strong execution in strategy to drive profitable share gain.
Mr Erter explained:
‘We have a superior value proposition with the right products and solutions that our customers are seeking, which allows us to continue to deliver differentiated results.
‘We are homeowner-focused, customer and contractor driven, providing the entire value chain with world-class products and services.’
For FY23, the operating cash flow of US$607.6 million was driven by profitable organic sales growth, partially offset by an increase in working capital.
Total capital expenditures were US$591.3 million. James Hardie CFO, Jason Miele, said that despite the changing market conditions, the group remains committed to investing in capacity expansion, with demand increases expected after this cycle.
From Ireland to Australia, the path to change
James Hardie may have shown trade in Ireland has afforded some room for competitive manoeuvrers in favour of profit, but it’s not the same story for Australia, whose 30 years of abundant, robust trade is struggling.
Global supply chains have changed and aren’t the same as what existed years ago…
Jim Rickards, one of the world’s top financial and geopolitical analysts, has been looking into the strange patterns in Australia’s economy, and how things as we know it could soon end.
If you want to know more click here.
Regards,
Mahlia Stewart
For The Daily Reckoning Australia
