Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• James Hardie Industries PLC (NYSE:JHX) delivered over half a billion dollars of adjusted EBITDA in the first half of the year, demonstrating strong financial performance.
• The company achieved a 29% EBIT margin in North America, aligning with their guidance and showcasing robust profitability.
• James Hardie Industries PLC (NYSE:JHX) is investing in capacity and growth, including expansions in Alabama and Spain, positioning for future demand recovery.
• The company is outperforming its end markets in North America and Asia Pacific, with strategic investments in contractor base and homeowner demand.
• James Hardie Industries PLC (NYSE:JHX) completed a $300 million share repurchase program, reflecting confidence in its financial position and commitment to shareholder returns.

Negative Points

• Total net sales were 4% below last year's record second quarter, indicating challenges in maintaining sales momentum.
• North American volumes declined due to ongoing demand challenges, impacting overall profitability.
• The company faces raw material headwinds, particularly with pulp and cement costs, which are expected to continue affecting margins.
• James Hardie Industries PLC (NYSE:JHX) is winding down operations in the Philippines, which negatively impacted Asia Pacific segment results.
• European markets remain challenging, with Germany showing a more gradual improvement, affecting overall regional performance.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with DHX.

Q: Can you provide clarity on your expectations for price increases, considering competitive dynamics and potential rebating activity in 2025? A: (Aaron Erter, CEO) We are still working with our customers on price increases, so it's premature to provide details. However, we typically target one price increase annually, usually at a mid-single-digit percentage, and that's our current focus.

Q: How are you managing costs, particularly with raw materials like pulp, electricity, and freight, and what are your expectations for SG&A expenses? A: (Rachel Wilson, CFO) Our raw material assumptions remain largely unchanged, with pulp still a headwind year-over-year. We have a 2-4 month lag in recognizing pulp prices. Regarding SG&A, we are managing expenses carefully, clutching in certain areas without compromising long-term investments.

Q: Can you elaborate on the HOS savings and their impact on your EBITDA performance? A: (Rachel Wilson, CFO) Our HOS discipline has contributed to margin progression, particularly in manufacturing efficiencies and spending management. We've seen record performance in throughput, especially during challenging times, demonstrating our ability to control the controllables.

Q: What are your views on the potential impact of the recent hurricanes on volume rebound in the coming quarters? A: (Aaron Erter, CEO) While we've been impacted by extreme weather, the effect on volume has not been significant. Our focus remains on material conversion opportunities rather than any lagging volume recovery.

Q: Why did you reference EBITDA growth rather than EBIT in your FY26 aspirations? A: (Rachel Wilson, CFO) EBITDA is a better metric for measuring business performance as it focuses on controllable factors and aligns closely with cash flow. It also provides a more comparable measure with our peers in the building products industry.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.