James Hardie has reported a sharp decline in orders from its core North American market, while construction activity in Australia is expected to remain flat until early 2026. The building materials company is also facing investor pressure following its acquisition of Azek in the United States.
James Hardie is facing weaker demand in its core North American market
Why Did Net Profit Drop in the June Quarter?
The company recorded a 60 per cent fall in net profit for the June quarter. Profit dropped to $62.6 million compared with $155.3 million a year earlier. Revenue also fell 9 per cent to $900 million.
According to analysts, weakness in the quarter was linked to soft demand and tighter inventory management by customers. Barrenjoey analyst Brook Campbell-Crawford said the revised earnings guidance was 24 per cent below previous forecasts.
How Did the Azek Acquisition Affect the Share Price?
In June, James Hardie acquired the Azek outdoor decking and pergolas business for $14 billion. The deal shifted its primary listing to New York, although Chess Depositary Interests still trade on the ASX.
Following the announcement, James Hardie’s CDIs plunged 27 per cent to $11.89, wiping about $7 billion from its market value. The acquisition was funded through a mix of cash, scrip, and $4 billion in additional debt.
What Is Driving the US Market Slowdown?
New home builders in Florida, Georgia and Texas reduced orders sharply
Chief executive Aaron Erter said the decline in orders was due to customers reducing stock levels amid weaker conditions. He described it as a short-term issue and rejected claims the company was losing share to rivals.
The slowdown was most visible in Florida, Georgia, and Texas, where new home builders cut orders at a faster pace. Erter added that this pattern is expected to continue for at least six months.
How Are Analysts Responding to the New Guidance?
James Hardie adjusts its profit forecast of the year ending 31 March 2026. It was also following a fourth-quarter earnings guidance to considerations of between $1.05 billion and $1.15 billion, compared with the analysts’ estimate of $1.23billion.
Citi analyst Samuel Seow called the June quarter result as one which was well below expectations as soft. Market response has been conservatory with investors keenly watching on what the market can offer in future in the United States.
What Is the Situation in Australia and Asia-Pacific?
In the Australasian region, net sales for the June quarter declined by 10 per cent to $121.6 million. Flat margins and the closure of its small Philippines operation also weighed on the performance.
Erter acknowledged that the local housing construction and renovations market would remain subdued until early 2026. He said the company expects little improvement in the near term.
How Is the Azek Business Performing Post-Acquisition?
Despite the broader challenges, Erter said Azek had been performing above expectations in the seven weeks since joining the portfolio. He emphasised confidence in the strength of the acquired business.
Australian shareholders criticised the deal, arguing it was overpriced and pushed through without a shareholder vote. The ASX granted an exemption from the requirement, a decision not immediately disclosed when the transaction was announced in March.
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Final Thoughts
James Hardie is facing pressure from a weak US housing market, a sharp decline in quarterly profit, and investor concerns over its Azek acquisition. While the company expects short-term challenges to continue, management is confident the acquisition will deliver long-term value.
