Exchange: ASX | Sector: Basic Materials | Industry: Construction Materials
Q1 2025
Published: Jun 30, 2024
Earnings Highlights
Revenue of $990.97M up 3.8% year-over-year
EPS of $0.36 increased by 0% from previous year
Gross margin of 40.0%
Net income of 155.30M
"We are driving profitable share gain and executing consistently on our strategy." - Aaron Erter
James Hardie Industries plc (JHX.AX) QQ1 2025 Earnings Review – Profitable Share Gain Against Market Softness Across NA, APAC and Europe
Executive Summary
James Hardie delivered a solid start to fiscal 2025 (QQ1) with resilient profitability in a softening market environment. Total net sales of $990.97 million rose 3.84% year-over-year, while adjusted EBITDA reached a quarterly record of $286.0 million, up 2% vs. the prior year, underscoring the company’s ability to translate pricing power and mix into cash flow amid inflationary headwinds. Net income of $155.3 million and diluted EPS of $0.36 reflected ongoing operating discipline and selective cost controls, though headwinds from labor, freight, and cement costs persisted. North America (NA) remained a key driver, reporting a 31.2% EBIT margin and mid-single-digit sales growth, supported by price realization from an annual ASP uplift. Asia Pacific (APAC) faced softer volumes (down ~9% in AUD) but benefited from price/mix, while Europe posted record top-line growth in euros driven by high-value products (fiber cement and Therm25). A strategic pivot to exit the Philippines in APAC was executed to focus resources on regions with the right to win, reinforcing a long-term value creation framework. Management reaffirmed FY25 guidance, highlighting PDG-driven outperformance and a capital allocation policy centered on organic growth, balance-sheet flexibility, and shareholder returns (stock buybacks). The company also disclosed ongoing capacity investments (ColorPlus, Prattville) and planned expansions (Orejo, Cleburne, Crystal City) to support future volume growth. Overall, James Hardie remains a growth company with substantial cash generation potential, albeit with meaningful near-term macro headwinds and execution intricacies across geographies.
Consolidated metrics and notable QoQ/YoY trends:
- Revenue: $990.97m, YoY +3.84%, QoQ -1.39%
- Gross Profit: $396.53m, YoY +6.19%, QoQ -3.45%
- EBITDA: $285.13m, YoY +2.0%, QoQ flat to slight delta (as reported, EBITDA margin 28.77%)
- EBITDA Margin: 28.77% (vs. 28.77% prior period; ~40% gross margin)
- Operating Income: $235.40m, YoY +0.64%, QoQ +180.24%
- Operating Margin: 23.75%
- Net Income: $155.30m, YoY -1.58%, QoQ +179.32%
- EPS: $0.36 (diluted $0.36), YoY 0.0%, QoQ +176.92%
- Margin by region (Select): NA EBIT margin 31.2% (within guidance midpoint); NA EBITDA margin 36.1%; APAC EBITDA margin 34.0% (EBIT margin ~30.4%); Europe EBITDA margin 15.5% with 9.6% EBIT margin
- Cash flow and capital: Operating cash flow $185.10m; CapEx $129.8m; Free cash flow $49.1m; Net debt $817m; Leverage 0.66x; Cash at end of period $383.3m; Net liquidity near $1.0b including revolver capacity
- Shareholder return: $75m of share repurchases in the quarter; total authorization increased to $300m
- Key balance sheet elements: total assets $4.93b; total liabilities $2.99b; total stockholders’ equity $1.94b; long-term debt $1.1726b; cash + short-term investments ~$0.569b
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
990.97M
3.84%
-1.39%
Gross Profit
396.53M
6.19%
-3.45%
Operating Income
235.40M
0.64%
180.24%
Net Income
155.30M
-1.58%
179.32%
EPS
0.36
0.00%
176.92%
Key Financial Ratios
currentRatio
1.94
grossProfitMargin
40%
operatingProfitMargin
23.7%
netProfitMargin
15.7%
returnOnAssets
3.15%
returnOnEquity
8.02%
debtEquityRatio
0.62
operatingCashFlowPerShare
$0.43
freeCashFlowPerShare
$0.13
priceToBookRatio
7.14
priceEarningsRatio
22.25
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key insights from management calls (themes and quotes):
- Strategy and market conditions:
- Aaron Erter: “We are driving profitable share gain and executing consistently on our strategy.” Signifies ongoing value-creation through market-share gains amid cyclicality.
- Aaron Erter: “exit the Philippines… focus on areas where we have the right to win and we’re going to be able to create long-term value,” underscoring a disciplined geographic optimization.
- Aaron Erter: “markets will contract low single-digits to mid-single-digits for the fiscal year… second quarter will be particularly challenging,” reflecting near-term macro headwinds.
- Operational execution and profitability:
- Aaron Erter: “we delivered a solid start to the year… robust profitability while investing to scale for growth and gain share across the value chain.”
- Rachel Wilson: “North America volumes grew modestly; ASP up ~4% in Q1; NA EBIT margin 31.2% and EBITDA margin 36.1%,” highlighting pricing and efficiency benefits.
- Rachel Wilson: “Asia Pacific EBITDA declined by $5m offset by higher ASP; Europe delivered record top-line growth with Therm25 and high-value products; Philippines exit contributes to APAC margin resilience over time.”
- Capital allocation and guidance:
- Rachel Wilson: “we fully covered $130m of CapEx and $75m of share repurchases; leverage at 0.66x; liquidity nearly $1b,” illustrating disciplined capital management and balance sheet strength.
- Aaron Erter: “we reaffirm FY25 guidance and expect 4 points of PDG outperformance; focus on organic growth and shareholder value creation,” signaling confidence in the long-term framework.
We are driving profitable share gain and executing consistently on our strategy.
— Aaron Erter
We made the decision to exit the Philippines because we need to focus on areas where we have the right to win and we’re going to be able to create long-term value.
— Aaron Erter
Forward Guidance
Assessment of near-term and medium-term outlook aligned with management guidance:
- FY25 base case: North American volume 2.95b–3.15b sf (flat to modestly up vs FY24, ±3%), with NA EBIT margin 29%–31%. Full-year total adjusted net income guidance: $630m–$700m. Capex guidance: $500m–$550m. Second-quarter volumes: 705m–735m sf; second-quarter NA EBIT margin: 27.5%–29.5%; second-quarter adjusted net income: $135m–$155m.
- Growth and margin trajectory: Management projects a longer-term margin expansion in North America (target ~500 bps EBITDA margin uplift) and a potential tripling of NA segment EBITDA through material conversion and share gains. Europe is focusing on high-value product growth, with Therm25 driving demand. Asia Pacific is transitioning out of the Philippines to reallocate capital toward higher-return regions.
- Risks and catalysts: Primary risks include continued softness in R&R and new single-family/multifamily construction, input-cost inflation (cement, freight, labor), and macro uncertainty around interest rates and housing affordability. Catalysts include rate cuts improving housing affordability, recovery in R&R demand, and success of contractor alliance programs driving material conversion. Key factors for investors to monitor: (1) pace of R&R demand recovery, (2) scale and profitability of the color finishing and capacity expansions (ColorPlus, Prattville), (3) progress of geographic investments (Orejo, Cleburne, Crystal City), and (4) consolidation in Europe around Therm25 and high-value products.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
JHX.AX Focus
40.01%
23.70%
8.02%
22.25%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
James Hardie remains a credible growth company with strong cash generation, a disciplined balance sheet, and a clear path to profitable share gain in North America. The QQ1 2025 results underscore resilience in margins and cash flow despite soft market conditions, aided by price action, mix benefits, and strategic geographic optimization (exit from the Philippines, focus on right-to-win regions). The longer-term outlook hinges on continued PDG-driven outperformance, successful commercialization of high-value products (Therm25, ColorPlus), and scalable capacity additions. Investors should monitor the pace of end-market recovery (R&R and new construction), raw-material cost trajectories, and the effectiveness of capital allocation (organic growth investments vs. buybacks) as catalysts or headwinds to the anticipated 4% PDG and EBITDA-margin expansion in North America. The stock’s current valuation metrics (P/E around 22x, P/B ~7.1x, enterprise-value multiple ~51x) appear to reflect a premium for growth and quality, justified by robust leverage management and multi-regional opportunities, but sensitive to macro shifts in housing demand and cost inflation.
Key Investment Factors
Growth Potential
Strategic flywheel supports long-run growth: homeowner focus, contractor-driven distribution, and cross-region value-chain integration. Management targets double-digit top-line growth in North America with 500 bps of adjusted EBITDA margin expansion and potential tripling of NA segment EBITDA over the long term. The North American addressable market remains favorable for material conversion (R&R and new construction), supported by large homebuilder partnerships (e.g., Meritage exclusive agreement) and a growing contractor alliance program.
Profitability Risk
Near-term macro and operational headwinds include weak R&R and new construction volumes, input-cost inflation (cement, labor, freight), and FX considerations across Europe. The exit from the Philippines reduces APAC revenue diversity and could shift risk and margin dynamics in the near term. Execution risk remains in ramping ColorPlus, Prattville capacity, and greenfield/brownfield expansions (Orejo, Cleburne, Crystal City). Dependence on large builders for volume and the pace of market recovery are additional sensitivities.
Financial Position
Strong liquidity framework with nearly $1.0b in total liquidity (cash plus revolver capacity); net debt of $817m and leverage of 0.66x, the 15th straight quarter at/below 1x. Positive free cash flow generation ($49.1m in the quarter) supports capex, buybacks, and potential inorganic opportunities. The balance sheet exhibits robust current and non-current asset bases (cash, inventories, property, and goodwill) and a solid equity base (total stockholders’ equity ~$1.94b). The company continues to deploy capital to shareholders via a $300m authorization and maintains disciplined capital allocation prioritizing organic growth, balance-sheet flexibility, and selective acquisitions.
SWOT Analysis
Strengths
Strong FCF generation and robust margin profile across regions (NA EBITDA margin 36.1%; NA EBIT margin 31.2%), supported by price realization and mix
Diversified geographic exposure (NA, APAC, Europe) with leadership in high-value fiber cement and Therm25 flooring
Strategic investor-day flywheel emphasizing demand creation, unrivaled support, and material conversion
Prudent capital allocation: disciplined buybacks, leverage at 0.66x, substantial liquidity
Weaknesses
Near-term end-market softness in R&R and single-family new construction in NA and APAC
Higher input costs (cement, labor, freight) pressuring margins in the near term
Philippines exit reduces APAC exposure and introduces transition risk
Capital-intensive expansion and ramp-up risks (ColorPlus, Prattville, brownfield and greenfield projects)
Opportunities
Material conversion and share gains through contractor alliance programs and national builder partnerships
Growth in high-value European products (Therm25, fiber cement plank) and continued penetration in fiber gypsum
Potential uplift from macro policy shifts (rate cuts) improving housing demand and remodeling activity
Long-term North America addressable market expansion from 11m to 25m homes over the next decade
Threats
Macro volatility and cyclicality in housing: R&R and new construction demand could deteriorate further
Inflationary pressures and input-cost volatility could erode margins if price realization fails to fully offset costs
Competition intensity in exterior cladding and alternative substrates; pricing discipline required
Execution risk around capacity expansions and integration of new product lines