James Hardie trims full-year guidance amid US uncertainty

Shares in James Hardie slid 5pc after it lowered its earnings outlook, noting uncertainty in the US housing market.

A construction worker wears a T-shirt with a James Hardie logo.

James Hardie expects its full year earnings figures to undershoot analyst expectations and its earlier estimate, as it warned investors that the US housing market remains “uncertain” and cited manufacturing inefficiencies.

Shares in the building materials company (JHX) fell as much as 5.7 per cent in morning trade, to a two-and-a-half-month low of $19.61 after the company warned that full-year earnings would land between $US245m and $US255m, down from an earlier estimate of $US250-$US270m and shy of analysts predictions of earnings of between $US252 million and $US269m.

“Management cautions that although US housing activity has been improving, market conditions remain somewhat uncertain and some input costs remain volatile,” the guidance said.

Third quarter adjusted net profit is reported to be $US52.6m — down 6 per cent year-on-year.

“The combination of below target manufacturing performance and continuing our commitment to investing in the organisation resulted in EBIT for the quarter decreasing 11 per cent and EBIT for the nine month period being flat,” CEO Louis Gries said.

RBC said adjusted net profit was 5 per cent below their forecast of $US55.2m, due to weaker margins.

“This is clearly a disappointing result that is unlikely to be well received,” RBC’s Andrew Scott says.

“We note that the revised guidance would see negligible growth from JHX in FY17, something that is hard to reconcile with the high PE implied by the current share price.”

“We expect that the market will need to gain comfort that margin issues will not recur in FY18 and that the growth trajectory will resume from thereon.”

In the nine months to December 31, net profit attributable to shareholders arrived at $US232m, up 8 per cent on the previous corresponding period. Revenue over the nine months, meanwhile, was $US1.427 billion, a 10 per cent rise on last year.

The company announced an unfranked first half dividend of US10 cents per share ($0.1378) to be paid on February 24.

“Our group results for the nine months reflected strong top line growth and strong cash generation, yet weaker than anticipated bottom line growth when compared to the prior corresponding period,” CEO Louis Gries said.

As of 10.57am (AEDT), shares in James Hardie were down 3.5 per cent at $20.10, against a flat broader market.