James Hardie pushes through more price rises to head off inflation

Rising transport and energy costs weighed on the global construction materials giant as it missed expectations and trimmed forward guidance.

Global fibre cement and fibre gypsum building solutions giant James Hardie said its first quarter continued to deliver growth above market. Picture: Tim Wimborne/Reuters

James Hardie Industries has missed expectations and cut its forward guidance as it revealed a multimillion-dollar hit from inflation in its first-quarter results.

But the ASX-listed fibre cement and gypsum sheet manufacturer moved to comfort investors, noting it had frozen non-critical hiring and was banking on a new round of price rises to buoy returns and extend already strong returns through the year.

James Hardie said on Tuesday it expected income for the full year to come in at between $US730m ($1.04bn) and $US780m.

This is down from the previous $US740m-$US820m range, but still higher than James Hardie’s $US620.7m adjusted net income for the 2022 financial year.

Global adjusted earnings before interest and taxes increased 15 per cent to $US208.4m in the three months to June 30, with an adjusted margin of 20.8 per cent.

Profits have climbed 34 per cent the impact of price rises flowed through to the business, hitting $US163.1m in the period.

Rising transport, energy, and input costs all weighed on James Hardie, leading to a compression in margins despite attempts to head off inflation earlier in the year when the company pushed through a round of price rises.

James Hardie has pushed through another round of price rises through its business, which hit US shoppers on June 22 and will hit customers in the Asia-Pacific region in September.

James Hardie interim chief executive Harold Wiens said the construction giant’s strategy remained unchanged and it remained confident it could deliver “above trend” growth thanks to its price/mix growth across its three global markets in the year ahead. .

“The global team‘s success in delivering high value products is the result of enabling our customers to make more money by selling more James Hardie products and, marketing directly to the homeowners to create demand of our high value products through our customers,” he said.

Energy costs rose 62 per cent for the quarter, compared to the prior corresponding period, while freight costs increased 26 per cent.

Recycled paper – used in the production of some products – has jumped 27 per cent in price.

James Hardie also warned its European segment earnings were facing lower expectations as the market there weakened.

Despite these headwinds James Hardie noted that over the first quarter, net sales were up 19 per cent on the prior corresponding period. Sales in the North American business were up 28 per cent topped $US740.1m.

Asia Pacific sales – which includes Australia and New Zealand – moved up 9 per cent in the quarter to $200.1m.

Sales in Europe lifted 7 per cent to €110.8m ($160.47).

Mr Weins is set to exit the role of chief executive before James Hardie meets for its investor day in September, ahead of which the company flagged it would unveil a replacement after Jack Truong was removed from the business in January. Mr Truong left James Hardie under a cloud after the board aired allegations he had acted in a “intimidating, threatening” manner to other staff.

This saw James Hardie also strip the CEO of his long term entitlements, noting he had breached the long term code of conduct.

Barrenjoey analysts Brook Campbell-Crawford, Nikolai Dale, and Megan Kirby-Lewis said James Hardie’s result was 6 per cent below their expectations and a 5 per cent miss of consensus.

“The miss was driven by lower-than-expected margins across all three divisions on higher costs,” they said. Shares in James Hardie slipped on the news, falling 0.87 per cent to $36.35 by market close.