Exchange: ASX | Sector: Basic Materials | Industry: Construction Materials
Q4 2024
Published: May 20, 2024
Earnings Highlights
Revenue of $1.00B up 9.5% year-over-year
EPS of $0.13 decreased by 31.6% from previous year
Gross margin of 40.9%
Net income of 55.60M
""We are homeowner-focused, customer- and contractor-driven…driving profitable share gain."" - Aaron Erter, CEO
James Hardie Industries plc (JHX.AX) QQ4 2024 Results Analysis: North America Outperformance Supports Growth Amid Moderate Global Headwinds
Executive Summary
James Hardie delivered a solid QQ4 2024 with notable top-line momentum led by North America, supported by ongoing demand creation and strategic share gains. Quarterly net sales of $1.0049 billion rose 9% year over year, while adjusted net income increased 19% to $174.2 million and EBITDA margin expanded to 27.9% (up 250 bps). North America demonstrated robust profitability, with EBIT margin of 31.7% and cash-generative operations contributing to a FY24 record operating cash flow of $914.2 million (+50% YoY). The company also showcased resilient operating momentum across APAC and Europe, though APAC and EU face near-term end-market headwinds and mix shifts toward higher-value products.
Management articulated a clear growth framework anchored in three strategic pillars: profitably grow and take share where the company has the right to win; deliver high-value differentiated solutions; and connect, influence, and strengthen the customer value chain. The FY25 guidance emphasizes continued profitable share gains (PDG of at least 4%), disciplined investment in demand creation and HOS (Hardie Operating System), and capacity expansion to support material conversion. Key risks include raw material cost pressure, macro housing cycles (notably R&R weakness in the near term), and the variability of the European and Australian markets. The company also signaled ongoing capital discipline with CapEx guidance of $500-550 million for FY25 and a buyback program, reinforcing a balanced approach to growth and shareholder value.
Q4 vs Q3: SG&A $164.2M (16.3% of revenues), up 5% QoQ; SG&A reflects continued marketing tentpole investments for long-term growth.
FY24 cash flow: operating cash flow $914.2M, up 50% YoY; capex $449.3M; free cash flow $43.6M; net debt $836M; liquids remain strong with liquidity at $958.2M and net leverage 0.67x at Q4.
Segment highlights (Q4 2024): NA net sales $735.2M, up 13% YoY; NA EBIT $233.0M, margin 31.7% (improved 270 bps); APAC net sales AUD 215.2M, EBIT margin 27.2%; EU net sales EUR 118M with EBIT EUR 12.1M and margin 10.3%.
FY25 guidance (company targets): Q1 FY25 NA volumes 745-775 million sf; NA EBIT margin 30-32%; Global adjusted net income Q1 $155-175M. Full-year FY25: NA volumes 2,950-3,150 million sf; NA EBIT margin 29-31%; Global adjusted net income $630-700M; PDG guidance ≥4%; CapEx guidance $500-550M.
Financial Highlights
- Revenue (Q4 2024): $1.0049B, up 9% YoY. Gross profit: $410.7M, gross margin 40.87%. EBITDA: $153.3M, EBITDA margin 15.25%. Operating income: $84.0M, operating margin 8.36%. Net income: $55.6M, net margin 5.53%. EPS: $0.13; Diluted EPS: $0.13; Weighted avg shares: 438.4M (non-GAAP basis).
- Q4 vs Q3: SG&A $164.2M (16.3% of revenues), up 5% QoQ; SG&A reflects continued marketing tentpole investments for long-term growth.
- FY24 cash flow: operating cash flow $914.2M, up 50% YoY; capex $449.3M; free cash flow $43.6M; net debt $836M; liquids remain strong with liquidity at $958.2M and net leverage 0.67x at Q4.
- Segment highlights (Q4 2024): NA net sales $735.2M, up 13% YoY; NA EBIT $233.0M, margin 31.7% (improved 270 bps); APAC net sales AUD 215.2M, EBIT margin 27.2%; EU net sales EUR 118M with EBIT EUR 12.1M and margin 10.3%.
- FY25 guidance (company targets): Q1 FY25 NA volumes 745-775 million sf; NA EBIT margin 30-32%; Global adjusted net income Q1 $155-175M. Full-year FY25: NA volumes 2,950-3,150 million sf; NA EBIT margin 29-31%; Global adjusted net income $630-700M; PDG guidance ≥4%; CapEx guidance $500-550M.
- Capital allocation: Buybacks continued (Q4: 1.9M shares for $75M; FY24: 8.7M shares for $271.4M).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.00B
9.49%
1.88%
Gross Profit
410.70M
24.45%
1.66%
Operating Income
84.00M
-56.66%
-64.49%
Net Income
55.60M
-31.70%
-61.68%
EPS
0.13
-31.58%
-60.61%
Key Financial Ratios
currentRatio
1.79
grossProfitMargin
40.9%
operatingProfitMargin
8.36%
netProfitMargin
5.53%
returnOnAssets
1.13%
returnOnEquity
2.99%
debtEquityRatio
0.65
operatingCashFlowPerShare
$0.38
freeCashFlowPerShare
$0.1
priceToBookRatio
9.2
priceEarningsRatio
76.86
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and execution focus: Aaron Erter emphasized a homeowner-focused, customer- and contractor-driven approach, highlighting 3 strategic initiatives: profitable share growth, high-value differentiated solutions, and full coordination across the customer value chain. He highlighted North America volume growth and a 31.9% EBIT margin for FY24 as evidence of outperformance. Key quote: “we are homeowner-focused, customer- and contractor-driven…driving profitable share gain.”
- Q4 performance and outlook: Rachel Wilson noted Q4 group net sales up 9% and adjusted net income up 19% YoY, with SG&A up 24% YoY reflecting ongoing marketing investments. She signaled a wide FY25 tax rate guidance (23.5%-24.5%) and an adjusted tax rate range for planning. Quote: “we are forecasting net sales growth in all divisions with positive price in all regions. Margins remain strong.”
- PDG and market dynamics: The management team reiterated a 4% PDG target for FY25, acknowledging the implied PDG range of -3% to +3% and emphasizing that much of the PDG is loaded into the back half of the year. They framed the outlook as a range rather than a point estimate to accommodate macro and raw material variability. Quote: “We feel very confident in giving full year guidance here…we have a 4% North America PDG outlook with continued investment.”
- Competitive landscape and pricing: The executives stated they are not competing on a commodity basis and highlighted taking share with top builders (80% share with the top 24 of 25 builders, expanding to the top 200). They expect a positive average selling price net of mix, with a roughly 4% price level, implying through-cycle resilience. Quote: “We’re going to have a positive average sale price…it doesn’t matter where it comes from.”
- Demand creation and mix: There was emphasis on demand creation, ColorPlus, and Trim as part of the growth narrative, with exterior volumes growing in the high-single to low-double digits and R&R demand improving in the back half of the year, supported by a steady winter and ongoing investments in marketing.
- HOS progress and capacity: The project milestones on HOS (HMOS, procurement, and capacity expansions) were highlighted, including Prattville sheet machines 3 and 4 adding 600 million sf of capacity and the ColorPlus facility in Westfield contributing to R&R, with Europe capacity expansions in Orejo, Spain. Quote: “HOS savings…USD 31M in global HMOS savings against the 3-year target of $100M.”
"We are homeowner-focused, customer- and contractor-driven…driving profitable share gain."
— Aaron Erter, CEO
"We feel very confident in giving full year guidance here…we have a 4% North America PDG outlook with continued investment."
— Aaron Erter, CEO
Forward Guidance
Strategic guidance is anchored in a durable growth profile despite near-term headwinds. Key elements: 1) PDG target of at least 4% for FY25, with a broad but manageable range for quarterly performance (-3% to +3% volume), underpinned by positive price growth and ongoing demand creation. 2) North America is the primary driver of earnings growth, with FY25 NA volumes expected to be 2.95–3.15 billion sf and EBIT margin 29–31%, reflecting continued market share gains and pricing power from product mix (e.g., ColorPlus) and contractor-focused programs. 3) Capex of USD 500–550 million in FY25 to support Brownfield/Greenfield capacity, including Prattville expansion (sheet machines 3 and 4) and Westfield ColorPlus facility, aligned with anticipated solid PDG. 4) Global adjusted net income guidance of USD 630–700 million for FY25, implying continued earnings resilience despite headwinds from raw materials (pulp, cement, freight, labor) and higher SG&A in support of demand creation. 5) Margin resilience supported by HOS-driven efficiency gains and favorable mix toward high-value products in Europe and APAC, even as APAC faces Australian housing market softness and Australia volumes could be down around 5% in FY25. 6) Monitoring factors for investors: (a) R&R recovery timing, (b) raw material cost trajectory and freight rates, (c) competitive dynamics among top builders and price realization, (d) effectiveness of demand creation and HOS initiatives, and (e) currency and tax-rate implications. Investors should watch: quarterly volume progression into H2 FY25, progression of ColorPlus and Trim adoption, and progression of capacity normalization post-HOS.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
JHX.AX Focus
40.87%
8.36%
2.99%
76.86%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
James Hardie remains a growth-focused, cash-generative fiber cement leader with a multi-regional footprint and a clear path to profitable share gains. The company’s FY24 cash flow strength and disciplined capital allocation enable ongoing capacity expansion and buybacks, while the PDG target of at least 4% in FY25 supports a constructive long-term growth trajectory. The NA market is the primary engine of earnings, supported by pricing power, a strong mix toward high-value products, and a broadened relationship with the top builders (80% of the top 24 builders, expanding to the top 200). The HOS program is expected to deliver ongoing savings and scalability, mitigating the gross margin headwinds from raw materials. Investors should monitor R&R demand recovery timing, raw material cost trajectory, and the effectiveness of demand creation in sustaining above-market growth. Overall, the stock presents a compelling exposure to a high-value product mix, strong cash flow generation, and a strategic expansion plan, albeit with multi-region cyclicality and cost headwinds to monitor.
Key Investment Factors
Growth Potential
Growth prospects are anchored in North America share gains, high-value product mix (ColorPlus, fiber cement), and expansion in demand creation and contractor programs. Long-term capacity additions in NA and Europe (Prattville, Westfield ColorPlus, Orejo) position James Hardie to capture favorable remodeling and new construction dynamics as R&R recovers and new housing activity stabilizes.
Profitability Risk
Key risks include: (1) sustained weakness in R&R and higher interest rates delaying R&R recovery; (2) raw material cost inflation (pulp/cement/freight/labor) and supply chain volatility pressuring margins; (3) execution risk in HOS and large-capex programs delaying unit cost savings; (4) currency/translation effects given multi-region footprint; (5) competition and pricing pressure in large-builder channels; (6) regulatory and tax-rate shifts affecting margins.
Financial Position
Strong liquidity with $958.2M in available liquidity and net leverage 0.67x at Q4; robust operating cash flow of $914.2M for FY24; capacity to fund growth through organic investments and share buybacks; dividend policy not specified for FY25 but share repurchases continued (USD 75M in Q4; USD 271.4M in FY24). Free cash flow positive at $43.6M in QQ4 2024 despite heavy SG&A investment, underscoring financial flexibility.
SWOT Analysis
Strengths
Dominant North America market position with 31.7% EBIT margin in Q4 NA; track record of above-market growth in a cyclical housing environment
Strong cash generation: FY24 operating cash flow of $914.2M and liquidity of $958.2M
Leveraged demand-creation strategy (marketing tentpoles, ColorPlus, Trim) and contractor support programs, driving material conversion
Global spread across NA, APAC, and EU with opportunities to optimize high-value product mix
Robust capital allocation including share buybacks and MI-capital planning for long-term capacity expansion
Weaknesses
Near-term exposure to R&R market softness; APAC and EU markets face declining housing activity and volume mix headwinds
SG&A investments elevated in the near term to fund demand creation and HOS, pressuring margins
Higher raw material costs (pulp, cement, freight, labor) and potential freight rate volatility
Significant reliance on NA housing cycle, making earnings sensitive to US macro dynamics
Opportunities
Upside from R&R recovery and continued share gains with top builders in US; expansion of high-value product offerings (ColorPlus) in NAS and EU; growth in Trim and external cladding demand
Capacity expansions (Prattville, Westfield, Orejo) enabling scalable profitable growth and improved cost position
HOS initiatives delivering material cost savings (HMOS, procurement, R&D) to fund growth
Further penetration in top 200 builders and expansion of sampling programs to grow market share across broader addressable market
Threats
Macro housing downturn and delayed R&R recovery; persistently rising input costs and potential energy costs
Competitive pressures and potential pricing pressure from substrate alternatives; risk of market share shifts among large builders
Regulatory, tax, and currency risks; geopolitical considerations impacting international operations