James Hardie lowers annual profit forecast on inflation hit

By Thomson Reuters Aug 15, 2022 | 8:31 PM

By Riya Sharma

(Reuters) -James Hardie cut its annual profit forecast on Tuesday, marking a dramatic shift in stance from the world’s top fibre cement maker as soaring operating costs and a cooling property market ate into margins in all three operating regions.

After raising earnings forecasts four times last year on the back of a strong North American housing market, the Australian building materials giant now finds itself squeezed by rising inflationary pressures.

“The current macro-economic environment is not only creating uncertainty for the housing markets in all three regions we do business in, but it is also putting pressure on our fiscal year 2023 financial results,” Chief Financial Officer Jason Miele said.

The Dublin-based firm flagged higher production and distribution costs, with pressure across freight, pulp, natural gas, labour, and cement businesses.

It now expects fiscal 2023 adjusted net profit between $730 million and $780 million, down from its earlier forecast of $740 million to $820 million.

The company’s Australian shares fell 3% before reversing course to trade 2.6% higher, while the broader market rose 0.4%.

New home sales in the United States, which account for 70% of James Hardie’s revenue, fell in two months of the reported quarter, as higher mortgage rates and record home prices reduced affordability in the company’s largest market.

James Hardie said it had also reduced its planned capital expansion capital expenditure for fiscal 2023 by 29%.

“While guidance has reduced… we still believe JHX has the right strategy and ability to use price to drive margin recovery through FY23,” analysts at brokerage UBS said in a note.

Net sales rose 19% from last year to $1 billion, with the North America segment contributing $740.1 million.

The company had said last week that it would appoint a new chief executive officer in the next 30 days after firing former boss Jack Truong in January over concerns about his conduct and management style. Truong has rejected the claims.

(Reporting by Riya Sharma in Bengaluru; Editing by Shailesh Kuber and Subhranshu Sahu)