Exchange: NYSE | Sector: Basic Materials | Industry: Construction Materials
Q2 2025
Published: Sep 30, 2024
Earnings Highlights
Revenue of $960.80M down 3.8% year-over-year
EPS of $0.19 decreased by 44.1% from previous year
Gross margin of 38.8%
Net income of 83.40M
""We are managing decisively as we continue to scale the organization and invest to profitably grow our business."" - Aaron Erter
James Hardie Industries plc (JHX) QQ2 2025 Results — North America Outperformance Amid Raw Material Headwinds; Margin Resilience Drives cash Flow and Guidanced Growth Prospects
Executive Summary
- James Hardie reported Q2 2025 results with revenue of $960.8 million, adjusted EBITDA of $263.0 million and an adjusted net income of $157.0 million, yielding an adjusted net income margin of approximately 16.4% and an overall net income margin of 8.7%. North America (NA) volumes were 717 million standard feet with an EBIT margin of 29.0% in Q2, contributing to a North American EBITDA of $240 million and an NA EBITDA margin of 34.5%. Consolidated EBITDA margin stood at about 21.3% for the quarter, supported by favorable ASP around 2% and ongoing pricing actions, offset by raw material headwinds (notably pulp and cement) and continued capacity-related startup costs.
- For the first half of fiscal year 2025, the company reported more than $0.5 billion in adjusted EBITDA, down only low single digits versus a record prior-year period, underscoring the robustness of James Hardie’s value proposition and the operating discipline of the Hardie Operating System (HOS). Management highlighted strong cash generation, with year-to-date operating cash flow of $364 million and free cash flow of $83.8 million, funding capital priorities from operating cash and returning capital to shareholders.
- The company maintained a constructive, albeit cautious, outlook. NA volumes are guided to at least 2.95 billion standard feet for the full year, with Q3 volumes expected to grow sequentially from Q2. Capex guidance was cut to $420–$440 million for FY25 (from $500–$550 million previously) to align spend with a softer near-term demand environment, while new buyback authorization of $300 million signals a continued focus on capital discipline. Management signaled a plan to accelerate outperformance in FY26 and beyond, leveraging material conversion opportunities, a broadened product mix (including Therm25 flooring), and ongoing margin expansion targets.
Key Performance Indicators
Revenue
960.80M
QoQ: -3.04% | YoY:-3.80%
Gross Profit
372.90M
38.81% margin
QoQ: -5.96% | YoY:-7.61%
Operating Income
152.30M
QoQ: -35.30% | YoY:-31.83%
Net Income
83.40M
QoQ: -46.30% | YoY:-45.02%
EPS
0.19
QoQ: -47.22% | YoY:-44.12%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $960.8m, YoY -3.8%, QoQ -3.0%
Gross profit: $372.9m, gross margin 38.8%
EBITDA: $204.2m, EBITDA margin 21.3%
EBIT: $152.3m, EBIT margin 15.9%
Net income: $83.4m, net margin 8.7%
Financial Highlights
- Revenue: $960.8m, YoY -3.8%, QoQ -3.0%
- Gross profit: $372.9m, gross margin 38.8%
- EBITDA: $204.2m, EBITDA margin 21.3%
- EBIT: $152.3m, EBIT margin 15.9%
- Net income: $83.4m, net margin 8.7%
- EPS: $0.19 (diluted)
- NA volumes: 717 million standard feet in Q2; ASP up 2% (price realization)
- NA EBITDA: $240m; NA EBITDA margin 34.5%
- YTD cash flow: operating cash flow $179.2m (quarterly), YTD OCF $364m; capex $95.4m; free cash flow $83.8m
- Balance sheet: total assets $4.973b; cash & equivalents $368.1m; short-term investments $194.1m; total debt $1.2215b; net debt $853.4m; total equity $1.9768b
- Guidance: NA full-year volumes at least 2.95b SF; NA EBIT margin guidance raised to 29.3%; Adjusted net income guidance up to $635m; FY25 capex guidance $420–$440m; board-approved new $300m buyback program.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
960.80M
-3.80%
-3.04%
Gross Profit
372.90M
-7.61%
-5.96%
Operating Income
152.30M
-31.83%
-35.30%
Net Income
83.40M
-45.02%
-46.30%
EPS
0.19
-44.12%
-47.22%
Key Financial Ratios
currentRatio
2.02
grossProfitMargin
38.8%
operatingProfitMargin
15.9%
netProfitMargin
8.68%
returnOnAssets
1.68%
returnOnEquity
4.22%
debtEquityRatio
0.62
operatingCashFlowPerShare
$0.42
freeCashFlowPerShare
$0.2
priceToBookRatio
8.75
priceEarningsRatio
51.85
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and guidance execution: Management emphasized disciplined capital allocation and progress toward outperforming end markets, with quotes stressing the company’s commitment to scale and profitability through the Hardie Operating System (HOS).
- Margin resilience and cost discipline: Calls out margin strength in NA and ongoing headwinds from raw materials; HOS savings and centralized procurement cited as key drivers of EBITDA resilience.
- Capital allocation and buybacks: The company completed a $300 million repurchase program (Q2) and announced a new $300 million program, signaling a continued emphasis on returning capital while funding growth initiatives.
- Strategic moves and market view: Philippines wind-down underway, Asia-Pacific mix benefited earnings, Europe remains challenged but long-term growth through high-value products remains intact; management pointed to material conversion opportunities as a primary driver of long-term growth.
- FY26 readiness: Management reaffirmed long-term growth aspirations and highlighted plans to invest for growth in FY26, aiming to grow NA revenues and EBITDA margins and to sustain peer-leading EBITDA growth.
"We are managing decisively as we continue to scale the organization and invest to profitably grow our business."
— Aaron Erter
"North America volumes for the full fiscal year will be at least 2.95 billion standard feet"
— Rachel Wilson
Forward Guidance
- Revenue trajectory and volumes: Management reaffirmed guidance for the North American exterior products market to be down low-to-mid single digits for FY25, with NA volumes at least 2.95 billion standard feet and Q3 volumes expected to increase sequentially from Q2.
- Margin and profitability: They expect HOS initiatives and expense rationalization to yield better profitability than initially anticipated for the volume outlook, with North American EBIT margin guidance raised to 29.3% for FY25.
- Cost pressures and raw materials: Pulp and cement headwinds are expected to intensify in the back half of FY25, and the company will continue to manage through these with price realization and cost discipline.
- Capex and capital allocation: FY25 capex trimmed to $420–$440 million to preserve cash during a softer demand environment, with levers in place to accelerate investment if demand recovers.
- Long-term outlook: Management continues to target double-digit growth in North America revenues, 500bp EBITDA margin expansion in NA over the long term, and triple NA EBITDA, signaling a multi-year, cash-generative growth trajectory. Key monitoring factors for investors include: (1) pace of demand recovery in repair/remodel and new construction, (2) raw material cost trajectory (pulp, cement, freight), (3) progress on capacity additions and the timing of their benefits, and (4) the evolution of the company’s TLC (tariff/regulatory) and macro housing backdrop.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
JHX Focus
38.81%
15.90%
4.22%
51.85%
LOMA
21.70%
17.30%
6.55%
4.29%
SUM
23.60%
16.10%
2.45%
15.15%
USLM
45.40%
39.10%
5.91%
19.24%
EXP
32.70%
29.80%
10.00%
16.75%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
James Hardie remains a cash-generative, growth-oriented player within the Basic Materials/Construction Materials space. The QQ2 2025 results demonstrate a resilient margin framework and meaningful NA volume leadership, supported by a disciplined capital framework and a clear path to FY26 outperformance. The near-term risks center on raw material cost volatility and continued macro housing softness; however, the management team’s emphasis on material conversion, pricing discipline, and selective capex deployment is designed to mitigate these headwinds. The long-term investment thesis rests on: (1) a large, addressable NA material conversion opportunity that could yield sustained margin expansion (targeting 500bp EBITDA margin uplift in NA over the long term), (2) an expanding portfolio of high-value products and growth initiatives (e.g., Therm25, contractor alliance program), and (3) a capital allocation framework that prioritizes high-IRR investments while returning capital to shareholders via buybacks. Investors should monitor: NA volume progression (2.95b SF annualized), raw material cost trajectory (pulp, cement, freight), execution timing of capacity expansions (Prattville, Cleburne, etc.), and the rate of market recovery in R&R and new construction across regions. On balance, given the robust free cash flow generation, deleveraging capacity, and the potential for meaningful margin upside, the stock presents a compelling, albeit cyclical, exposure to a multi-year re-acceleration in construction markets, with the caveat of near-term margin headwinds from commodity inputs.
Key Investment Factors
Growth Potential
- Material conversion opportunity in NA; 500bp NA EBITDA margin expansion target; long-term goal to double NA revenues and triple NA EBITDA; success with Therm25 and other high-value products; contractor alliance program driving share gains in R&R.
Profitability Risk
- Raw material cost volatility (pulp, cement, freight) continuing to pressure margins; cyclicality in construction markets; Philippines wind-down reducing APAC exposure; potential rebating/intense price competition affecting realized ASP; geopolitical/regulatory risks impacting labor and supply chains.
Financial Position
- Strong cash flow generation with YTD OCF of $364m and FCF of $83.8m; robust liquidity, cash of $368.1m and net debt $853.4m; capex discipline reducing FY25 spend to $420–$440m; debt metrics moderate (debt to capitalization ~38.2%; debt ratio ~24.6%); stock repurchase program in place and a new $300m authorization confirming capital allocation discipline.
SWOT Analysis
Strengths
Strong NA position with 717 million standard feet in Q2 and 29.0% EBIT margin in NA; NA EBITDA margin of 34.5% supports robust cash generation
Diversified geography (NA, Asia Pacific, Europe) with improving margins in APAC and selective high-value product growth (e.g., Therm25)
Solid cash flow generation (YTD OCF $364m; FCF $83.8m) and disciplined capital allocation (capex control; share repurchases)
Successful zero-harm culture and implementation of the Hardie Operating System (HOS) to drive efficiency
Weaknesses
Significant raw material headwinds (pulp, cement, freight) that weigh on margins; Q2 EBITDA margin below peers at 21.3%
Philippines wind-down reduces APAC footprint and adds execution risk in transition
Europe remains challenged with ongoing demand headwinds (Germany) and rebate true-up dynamics affecting EBITDA comparability
Opportunities
Growth from material conversion opportunities across regions; further market share gains via contractor alliances and exclusive arrangements in NA; expansion of high-value product lines (Therm25)
R&R and new construction market recovery in NA and UK as affordability improves; potential upside from PDG-like growth initiatives in 2026+
Procurement centralization yielding ongoing cost savings and margin resilience
Threats
Commodity price volatility (pulp, cement, energy) and potential further cost inflation
Macro housing cycle risk (rates, housing starts) impacting renovation and new construction demand
Customer price dynamics and rebating environment affecting realized ASP
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