Housing demand boosts James Hardie profit, dividend outlook

Building products supplier James Hardie’s seventh straight growth quarter has delivered a special windfall for investors, amid rising profit expectations.

Strong housing demand has boosted returns for James Hardie.

Increasing global demand for home building products boosted third-quarter returns for supplier James Hardie, triggering a full-year profit upgrade, the promise of regular dividend payouts and an immediate US70c special reward for investors.

Global net sales rose 20 per cent in the quarter to $US738.6m ($958.8m), delivering a 59 per cent boost to its net operating profit after tax (NOPAT) at $US123.3m.

The global net sales number for the nine months of the 2021 financial year now sits at $US2.1bn, up 9 per cent and global adjusted earnings before interests and taxes (EBIT) has risen 25 per cent to $US455.9m.

Operating cashflow for the nine months rose 72 per cent to $US678.4m.

It was the seventh consecutive growth quarter for the Ireland-headquartered, US and Australian publicly listed business with operations in North America, Europe and the Asia-Pacific.

“Our business accelerated considerably during our fiscal third quarter, marking the seventh consecutive quarter that our global team has delivered growth above market with strong returns,” an upbeat chief executive Jack Truong told investors on Tuesday.

“We delivered strong organic growth around the world, with each operating region contributing meaningfully to global net sales up 20 per cent and an even more impressive 57 per cent increase in global adjusted EBIT.”

James Hardie CEO Jack Truong

Given expectations for continued growth in the residential housing market, full-year NOPAT guidance has been upgraded to come in within the range of $US440m-$US450m, up from the previously forecast $US380m-$US420m. The full-year adjusted NOPAT for the 2020 financial year was $US352.8m.

The North American market delivered the strongest sales gain, up 20 per cent.

Mr Truong said the business would launch a “direct to customer” campaign for homeowners in the US, targeting a significant market opportunity with more than 44 million homes more than 40 years old.

In the Asia-Pacific, covering Australia and New Zealand, EBIT increased 28 per cent and sales increased 9 per cent to $163.3m.

Mr Truong said the business had a clear strategy to drive profitable fiscal and organic growth with a focus on customer-centric marketing and product innovation.

James Hardie’s tight $77m capital expenditure during the quarter kickstarted expansions at its plants in Carole Park in Queensland and in Prattville, Alabama, in the US.

The business flagged capacity and capability expansions at its ­facilities across Australia, New Zealand and North America, including the establishment of pilot R&D plants.

Total capital expenditure is set at about $US250m per year for the 2022 to 2024 financial years.

It follows the 2020 closure of its Cooroy plant in Queensland and two others in the US and New Zealand to divest its non-profitable JH Systems business, which resulted in the loss of 375 jobs.

The business has consolidated its production volume to two Australian plants to cut costs.

“I am pleased with these record results, underpinned by excellent execution of our business transformation that we began in calendar 2019, combined with increasing demand for our premium-quality James Hardie brand products and solutions,” Mr Truong said.

“We are firmly on track with our investments in growth to broaden our portfolio with industry-leading innovations that enhance aesthetic value for homeowners.

“Our transformation initiatives will enable us to expand our market opportunity and allow us to continue to deliver strong performance.”

James Hardie expects to bring back dividends in the first half of the 2022 financial year, anticipating it will declare a first-half dividend in November this year.

Chief financial officer Jason Miele said resuming a return to dividends was “appropriate at this time”.

“Based on our strong strategic execution through the pandemic, our confidence in continued strong cash generation, and in light of the suspension of our ordinary dividend since May 2020, we believe resuming our return of capital to shareholders via dividends is appropriate at this time.

“We have a solid balance sheet and liquidity position to execute on our unchanged near-term and longer-term organic growth priorities.”

The stronger annual result will also potentially lead to higher payments to the Asbestos Injuries Compensation Fund, set up in 2006 as part of a settlement with the NSW government.

That payment is usually detailed in the fourth quarter results.

In May last year, James Hardie committed to paying $US153.3m to the fund in four instalments by March this year.

James Hardie shares rose 1 per cent to $41.17 on Tuesday.