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James Hardie(JHX) - 2026 Q1 - Earnings Call Transcript
2025-08-19 23:02
James Hardie Industries (JHX) Q1 2026 Earnings Call August 19, 2025 06:00 PM ET Company ParticipantsJoe Ahlersmeyer - VP - Investor RelationsAaron Erter - CEORachel Wilson - Chief Financial OfficerPhilip Ng - Managing DirectorKeith Chau - Partner & Head - Basic Industrials ResearchRyan Merkel - Co-Group Head–IndustrialsKeith Hughes - MD - Sell Side Equity ResearchPeter Steyn - Managing DirectorConference Call ParticipantsLee Power - Equity Research AnalystTimothy Wojs - Senior Research AnalystOperatorI woul ...
James Hardie(JHX) - 2026 Q1 - Earnings Call Transcript
2025-08-19 23:00
Financial Data and Key Metrics Changes - Total net sales for Q1 2026 were $900 million, a 9% decline compared to the previous year, aligning with internal expectations [30] - Adjusted EBITDA for the quarter was $226 million, with a margin of 25.1%, reflecting a 21% decrease from the previous year's record [30] - Adjusted net income was $127 million, with adjusted diluted EPS at $0.29 per share [30] - Free cash flow increased by 88% to $104 million, driven by strong cash generation and moderating capital spending [30] Business Line Data and Key Metrics Changes - North American net sales decreased by 12%, primarily due to lower volumes, although average net sales price (ASP) increased by 3% year-over-year [31] - Legacy AZAC performed well, with mid single-digit sell-through growth in decking, railing, and accessories, contributing to strong margin performance [8] - North America adjusted EBITDA was $206 million, with a margin of 32.1%, down 400 basis points year-over-year due to lower volumes and raw material inflation [33] Market Data and Key Metrics Changes - The South region, particularly Florida and Georgia, experienced significant pressure, with single-family starts down approximately 25% since February [32] - Asia Pacific net sales declined by 10%, influenced by the cessation of operations in the Philippines, while EBITDA margin increased to 35.4% [35] - European net sales increased by 7%, driven by higher ASP, with EBITDA margin rising to 16% due to lower freight and raw material costs [37] Company Strategy and Development Direction - The integration of James Hardie and AZAC aims to create a leading provider of exterior home solutions, with a focus on material conversion opportunities [4][5] - The company is committed to outperforming market demand through strategic investments and a customer-focused approach [10][11] - Future growth is expected to be driven by new product launches and exclusivity agreements with homebuilders [14][28] Management's Comments on Operating Environment and Future Outlook - Management noted that demand in both repair and remodel and new construction in North America is challenging, with homeowners deferring large projects due to affordability issues [6] - The company anticipates a mid-single-digit decline in end market demand for the full year, adjusting expectations for softer demand in new construction [7] - Management expressed optimism about long-term growth potential, particularly through material conversion opportunities and strong partnerships with homebuilders [12][72] Other Important Information - The company is on track to achieve $125 million in cost synergies over three years, with over 50% of the target already realized [25] - Free cash flow for FY 2026 is expected to be at least $200 million, with total capital expenditures projected at approximately $400 million [41] - The company successfully completed a $1.7 billion debt financing, with a commitment to reduce net leverage to below two times within two years post-acquisition [44] Q&A Session Summary Question: Clarification on legacy North American fiber cement volume declines - Management acknowledged a 15% volume decline and discussed the impact of inventory destocking and single-family construction outlook [47][56] Question: Cost management strategies in light of demand challenges - Management highlighted ongoing cost control measures, including headcount freezes and operational efficiencies through the Hardie Operating System [57][59] Question: Inventory destocking impact and competitive standing - Management provided insights on inventory levels and emphasized the company's strong market position despite challenges in the South [63][70] Question: Single-family new construction trends - Management noted significant changes in single-family new construction estimates and the impact on guidance, emphasizing strong partnerships with homebuilders [78][80] Question: AZEK EBITDA contribution and outlook - Management discussed conservative growth assumptions for AZEK's deck rail and accessories segment, reflecting macroeconomic uncertainties [84][85] Question: Market share with major builders - Management expressed confidence in maintaining strong relationships with top homebuilders and highlighted the company's leading position in the market [88]