James Hardie Q3 FY25 Net Sales Fall 3%, Adjusted Net Income Drops 15%

• Q3 FY25 net sales declined 3% to $953 million
• Adjusted EBITDA fell 7% to $262 million with margin contraction
• North America volumes down 3%, offset by price increases
• Asia Pacific volumes dropped 28% due to Philippines exit
• FY25 guidance reaffirmed; FY26 plans target sales growth and margin expansion

Q3 FY25 Financial Performance

James Hardie Industries plc released its financial results for the third quarter ended December 31, 2024, revealing a mixed performance amid challenging market conditions. Net sales declined 3% year-over-year to $953 million, driven primarily by volume softness in North America and Asia Pacific regions. Adjusted net income decreased 15% to $154 million, while adjusted EBITDA fell 7% to $262 million, with the adjusted EBITDA margin contracting by 120 basis points to 27.5%.

The North America Fiber Cement segment saw volumes decline 3%, particularly impacted by weakness in the multi-family housing sector, although this was partially offset by a 2% increase in average net sales price following a January 2024 price hike. EBIT margin in North America contracted by 360 basis points to 29.1%, reflecting higher raw material costs, unfavorable production cost absorption, and increased startup costs at the Prattville facility.

Regional Segment Highlights

In the Asia Pacific Fiber Cement segment, net sales decreased 13% in Australian dollars, primarily due to a 28% volume drop following the strategic exit from manufacturing operations in the Philippines. Despite this, average net sales price rose 20%, and EBIT margin improved by 180 basis points to 29.3%, aided by cost efficiencies and the Philippines exit. Australia and New Zealand volumes declined modestly but outperformed the broader market.

Europe Building Products faced a slight net sales decline of 1% in euros, with EBIT margin falling 340 basis points to 3.1%, influenced by the absence of a prior year favorable customer rebate and higher gypsum and fiber cement costs. However, growth in high-value products remains a strategic focus, with investments in sales teams to support this segment’s expansion.

Guidance and Strategic Outlook

Despite the near-term headwinds, James Hardie reaffirmed its FY25 guidance, maintaining expectations for North America volumes of at least 2.95 billion standard feet and an EBIT margin of at least 29.3%. Adjusted net income guidance remains at a minimum of $635 million, with capital expenditures forecasted around $420 million.

Looking ahead to FY26, the company plans to shift its guidance framework to focus on sales and EBITDA growth rather than volume and EBIT metrics. Management anticipates sales growth and margin expansion across all regions, underpinned by continued Hardie Operating System (HOS) savings that offset raw material inflation. Capital investment will continue in key capacity expansions, including ongoing projects at Prattville, Alabama, and Orejo, Spain, alongside planning for new facilities in Texas and Missouri.

Operational and Financial Discipline

CEO Aaron Erter emphasized the company’s strong operational execution and strategic positioning, highlighting a double-digit five-year sales CAGR in North America and over 400 basis points of adjusted EBITDA margin expansion. CFO Rachel Wilson underscored the balanced approach to cost discipline and growth investment, with operating cash flow of $657 million in the first nine months of FY25 supporting capital priorities and shareholder returns.

James Hardie also announced a new $300 million share repurchase program authorized through October 2025, signaling confidence in its cash flow generation and capital allocation strategy.

Bottom Line?

James Hardie’s reaffirmed guidance and FY26 growth ambitions position it well to navigate current market softness while investing for long-term value creation.

Questions in the middle?

• How will ongoing raw material cost pressures impact margins beyond FY26?
• What is the timeline and expected impact of new capacity coming online in North America?
• How will the company’s strategic exit from the Philippines reshape its Asia Pacific footprint?