What James Hardie Industries (JHX) Said on Its Q2 Earnings Call

Key Points

• Fiscal Q2 results strengthened: Net sales rose 24% to $1.43 billion, adjusted EBITDA increased 44% to $455 million, and adjusted EPS climbed 68% to $0.42. Management noted some growth reflected distribution changes and inventory normalization.
• Housing outlook weakened, but guidance was maintained: James Hardie now expects its blended market to decline by a mid-single-digit percentage, with new construction especially soft. It kept its full-year sales and adjusted EBITDA forecasts and expects to outperform the market.
• Cash flow and debt reduction improved: The company raised its free cash flow target to more than $650 million, repaid $111 million of term loan debt in the quarter, and ended with net leverage of 2.3 times.

James Hardie Industries NYSE: JHX reported higher sales and earnings for its fiscal second quarter and raised its free cash flow target, even as management lowered its outlook for the housing market.

Net sales from continuing operations rose 24% from a year earlier to $1.43 billion. Adjusted EBITDA increased 44% to $455 million, while adjusted diluted earnings per share from continuing operations rose 68% to $0.42.

CEO Aaron Erter said the results included timing benefits from distribution changes and channel inventory normalization, but that underlying sales growth and sell-through remained well ahead of the market. The company maintained its full-year sales and adjusted EBITDA guidance.

Housing Outlook Weakens

James Hardie now expects its blended market, weighted 60% toward repair and remodeling and 40% toward new construction, to decline by a mid-single-digit percentage for the fiscal year. In May, it had expected a low-single-digit decline.

Management’s prepared remarks projected a low-single-digit decline in repair and remodeling and a high-single-digit decline in new construction, with the market weakening further in the second half. Erter said new construction was particularly soft in Texas and the West, while higher-end remodeling was holding up better in the Midwest and Northeast.

“We’re not assuming a near-term housing recovery, and we don’t need one to execute our plan,” Erter said.

The CEO said James Hardie expects to outperform the market in the second half and for the full year. Management has targeted annual growth of 4 to 7 percentage points above the market.

Segment Sales and Distribution Changes

Siding and trim sales rose 15% to $880 million, exceeding the company’s guidance range. CFO Ryan Lada said roughly half of the fiber cement revenue growth came from volume, with the rest attributable to price and product mix. Sales of higher-priced ColorPlus fiber cement siding rose 22%.

Deck, Rail & Accessories sales increased 51% to $387 million. Lada said about 21 percentage points of that growth came from distribution changes involving Boise and other distributors, while another 16 points came from channel inventory normalization after the first quarter. That left approximately 14 percentage points of underlying growth.

Sell-through in both siding and trim and Deck, Rail & Accessories was up by a low-double-digit percentage, according to Lada. He said channel inventories ended the quarter at healthy levels aligned with demand.

Jon Skelly, president and general manager of North America Building Products, said the company accelerated inventory shipments to Boise so it could begin building customer relationships and taking orders, while former distribution partners sold through their remaining inventory. Lada said modest additional shipments to new distributors are expected in the second half, but should be offset by the end of orders from departing partners.

In Australia and New Zealand, sales rose 21% in U.S. dollars to $161 million and increased 12% in local currency.

Guidance and Cost Pressures

For fiscal 2027, James Hardie maintained its forecast for continuing-operations sales of $4.99 billion to $5.133 billion, representing growth of 6% to 9%. It also reaffirmed its adjusted EBITDA outlook of $1.45 billion to $1.534 billion.

For the third quarter, the company expects sales of $1.058 billion to $1.14 billion and adjusted EBITDA of $298 million to $320 million. Lada said the midpoint of the full-year outlook implies a slight year-over-year decline in second-half consolidated sales, though management still expects to outpace the market.

The second-half forecast reflects weaker new construction, the absence of certain first-half distribution benefits and seasonal inventory reductions by decking customers. Management also expects lower second-half EBITDA in both North American segments because of reduced volumes, freight costs and planned distribution-related expenses.

Lada said fiscal 2027 cost pressure is expected to be at the high end of the company’s prior $80 million to $100 million range, driven mainly by freight, raw materials and energy. He said approximately 90% of freight lanes are contracted and the company is seeking to increase that coverage by the start of fiscal 2028.

Cash Flow and Debt Reduction

James Hardie raised its full-year free cash flow target to more than $650 million from at least $600 million, citing first-half financial performance and favorable working capital trends. First-half free cash flow was $535 million.

The company repaid $111 million of term loan debt during the quarter, bringing repayments since the AZEK acquisition closed to more than $1 billion. Net leverage ended the quarter at 2.3 times, below its fiscal year-end target of 2.4 times. Management reiterated its target of leverage below 2 times by fiscal second-quarter 2028.

James Hardie said its planned European divestiture remains on track to close in the first half of calendar 2027. Europe is now classified as discontinued operations, and prior-period results have been recast on that basis.

About James Hardie Industries (NYSE:JHX)

James Hardie Industries plc is a global building materials manufacturer specializing in fiber cement products. Its portfolio includes exterior siding, trim, soffits, backer board and related solutions used in residential and commercial construction, remodeling and repair projects.

The company markets products under brands including James Hardie, HardiePlank, HardiePanel and HardieBacker. Fiber cement is designed to provide durability and resistance to moisture, fire, pests and changing weather conditions, making it an alternative to materials such as wood, vinyl and traditional cement products.

Founded in Australia in 1888, James Hardie has expanded into an international building products business serving customers across North America, Australia and New Zealand, Europe and other selected markets.

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