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Vital to an economy’s overall growth, material sector plays an important role in infrastructure development and optimisation of resources. Companies operating in the sector are involved in raw material discovery, production and processing.
The benchmark index S&P/ASX 200 traded downward by 0.86 percent to 6,650.8, while S&P/ASX 200 Materials (Sector), the benchmark for material-specific companies, closed the day’s trade at 12,985.3, down 0.6%, on 27 February 2020.
In this article, we are discussing three ASX-listed materials stocks, covering their recent updates like new appointments, financial performance and outlook for the year ahead.
James Hardie Industries plc (ASX: JHX)
James Hardie Industries plc (ASX: JHX) is a manufacturer of fibre cement siding and backerboard. The company’s products have a wide range of applications, such as fencing, trim, decking, external siding, internal walls, ceilings, floors, soffits, and facades.
JHX Appoints CFO with Strong Financial & Business Leadership Track Record
The company appointed Mr Jason Miele as Senior VP & CFO, reporting to CEO, Dr Jack Truong. Mr Miele has been associated with JHX for more than 13 years, including his tenure as VP - Investor and Media Relations since February 2017.
Commenting on Mr. Miele’s appointment, Dr Truong highlighted that his financial skills, leadership attributes and international exposure would complement the company’s strong performance-oriented culture and would be the perfect fit to lead its finance organisation as the company is continuing to execute on its global strategic plan.
JHX Delivers Phenomenal Growth in First Three & Nine Months
JHX announced results for the third quarter and nine months of FY2020 for the period ended 31 December 2019. The group’s adjusted net operating profit (NOPAT) grew by 17 percent on pcp during the three months and nine months.
Sales volume increased by 6 percent and 4 percent in three months and nine months of FY2020, respectively.
Factors that resulted in the steady performance of the company included outstanding performance by the North American business segment, wherein its sales volume and adjusted EBIT increased by 11 percent and 30 percent, respectively. Commercial transformation is gaining momentum in North America, while Europe has been witnessing continuous growth in Fiber Cement.
Guidance for FY2020
Full-year adjusted NOPAT is expected in the range of USD 350 million to USD 370 million. Moreover, the company expects a positive outlook for FY 2020, as mentioned below -
- Considering the North America Fiber Cement segment, James Hardie expects commencement of new construction to be around 1.3 million in FY2020 and EBIT margin to lie in the range of 25 percent to 27 percent.
- In Australia, JHX anticipates continuous growth in volume from its business arm.
- Europe’s Building Products segment is likely to achieve y-o-y net sales growth. However, EBIT margin is expected to be flat as compared to FY2019.
Stock Performance
On 27 February 2020, the stock of JHX settled at $28.875, moving downwards by 0.841 percent as compared to previous closing price. The stock has delivered a positive return of 4.26 percent and 29.77 percent on a year to date basis and in the last six months, respectively.
Amcor Plc (ASX: AMC)
Amcor Plc (ASX: AMC) is engaged in the responsible packaging development and production for products such as beverage, food, pharmaceutical, personal and home care, and medical. Solutions offered include flexible packaging, rigid packaging, specialty cartons and closures.
Earnings Growth and Strong Cash Flow in First Half
During mid-February 2020, AMC reported first half year results for the period ended 31 December 2019. After paying a dividend of USD0.12 per share in 1Q FY2020, the company announced a second quarter dividend of US$0.115 per ordinary share to be paid on 24 March 2020.
In HY2020, the company registered faster synergy delivery and strong earnings growth with EBIT of US$699 million, an increase of 4.4 percent on pcp. The company has an annual free cash flow of more than USD 1 billion.
Increased EPS Growth Outlook for FY2020
The company has increased its outlook for adjusted EPS growth in the range of 7 percent to 10 percent. In constant currency terms, the adjusted EPS varies from 62 to 64 cents. Pre-tax synergy benefits related to the Bemis acquisition are projected to be US$80 million.
FY2020 guidance for cash related items is as follows -
- Free cash flow before dividends (before cash integration costs) is projected to be more than $1 billion, while after dividends but before cash integration costs, it is expected at $300 - $400 million
- Cash integration costs are expected to be around $100 million
Way Forward
The company is fully committed and making investments to support its pledge for 2025, which was updated to the market in January 2018. AMC is focusing on increasing the use of post-consumer recycled content, collaborating for boosting recycling rates globally and developing all its packaging that can be reusable or recyclable by 2025.
AMC has a targeted investment of $50 million towards R&D infra, manufacturing equipment and partnerships.
Stock Performance
On 27 February 2020, the stock of AMC closed the day’s trade at $14.695, moving downward by 0.17 percent as compared to previous closing price. The stock has delivered a positive return of 4.55 percent in the last six months.
Boral Limited (ASX: BLD)
ASX-listed materials company, Boral Limited (ASX: BLD) delivers materials for construction and building products. Its products are mainly categorised into four segments, namely Packaged Products (Builders cement), Decking (Hardwood Timber), Ceramic Roof Tiles (Artline) and Quarry products (Rail Ballast).
BLD has an online portal to order concrete via Boral Connects and Boral Direct® for roof tiles requirement.
Interesting Read: After banks, are industrials and materials stocks under fire? A look at Boral
First Half Performance in Line with Guidance
On 20 February 2020, Boral released its half yearly results for FY2020 for the period ended 31 December 2019.
Key highlights.
- Total revenue stood at $2,989 million, down from $2,990 million on pcp.
- EBIT slipped by 14 percent, from $287 million to $246 million.
- Free cash flow was lower with minimal portfolio activity, standing at $35 million from $441 million on pcp.
- Total capital expenditure increased by 3 percent from $183 million to $189 million.
- Nearly 68 percent invested in Boral Australia and the remaining 31 percent in Boral North America.
- Net debt increased from $2.19 billion (at 30 June 2019) to $2.32 billion (at 31 December 2019).
Guidance FY2020
- FY2020 EBITDA to be down when compared with FY2019
- NPAT to come in the range of $320 to $340 million
- D&A (depreciation & amortisation) to be in the range of $400 million to $410 million
Stock Performance
On 27 February 2020, the stock of BLD settled at $4.695, moving upward by 0.107 percent as compared to previous closing price. The stock has delivered a positive return of 19.04 percent in the last six months.
