James Hardie Industries Plc Plunged After Releasing Second Quarter Results  

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James Hardie Industries

James Hardie Industries Plc (ASX:JHX) posted its second quarter results of fiscal year 2019 and the half year period ended on September 30, 2018 on November 8, 2018 i.e. today. JHX officially completed the acquisition of the German Company, Fermacell on April 3, 2018. Fermacell has been the market leader in fibre gypsum boards used in the construction industry based out in Germany. This acquisition has helped JHX in boosting up its profit figures. 

Adjusted net operating profit for the group posted an increase of 7% up to US$80.9 million for the quarter and 17% rise up to US$160.8 million for the half year as compared to the prior corresponding period. Adjusted EBIT for the group recorded an increment of 1% up to US$106.9 million and 10% rise up to US$214.0 million for the half year as compared to the prior corresponding period. Net Sales for the group showed 23% rise to US$644.6 million for the quarter and 25% rise to US$1,295.6 million for the half year as compared to the prior corresponding period.

JHX delivered good top line growth of 9% for the quarter and 10% for the half year from its North America Fiber Cement segment, and volume growth of 5% was posted both for the quarter and the half year. EBIT margins remained within the targeted range but faced pressure on account of cost increment of the raw materials and freight charges.

JHX Australian fibre cement sheeting business is the main business under its broader Asia-Pacific fibre cement operations, and this also includes business in New Zealand and the Philippines Australian business delivered 10% increase in EBIT for the quarter and 13% for the half year. Segmental results were in US dollars and were highly impacted by the changes in the foreign exchange rates. Management expects significant growth in the total sales from its business in Australia, even though approvals for detached houses in the September quarter were down 5% to 30,397. JHX is gaining market share in its core fibre cement sheeting operations in Australia. JHX posted 12% rise in the sales in the last six months for the period ended on September 30, 2018.

Segmental revenue under New Europe building product division posted strong net sales for the period with an adjusted EBIT margin of 9.7% for the quarter and 10.9% for the half year, excluding the costs associated with the acquisition.

The management expects the modest growth to continue in the US housing market in fiscal year 2019. JHX projects EBIT margin to be in the top half of their stated target range of 20% to 25% for fiscal year 2019. For its North America Fiber cement segment, the projections are done taking into consideration the exchange rates at current levels, continuation of current inflationary trends for the input costs and the strong delivery of the operating performance from its plants. Australian business net sales are expected to deliver above average growth of the domestic repair and remodel and single family detached housing markets in the eastern states of Australia.

Despite of healthy financial results, JHX shares experienced a major fall in early session of November 8, 2018. From the previous closing levels of $19.80 as on November 7, 2018, to the current trading levels of $16.90, the scrip has fallen more than 14.6% on intraday basis. The share prices have fallen by more than 13% in the past three months.


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