James Hardie Industries (NYSE:JHX) released fourth-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Access the full call at https://events.q4inc.com/attendee/602490831
Summary
James Hardie Industries PLC reported Q4 fiscal 2026 net sales of $1.4 billion and an adjusted EBITDA of $381 million, with an EBITDA margin of 27.1%. For the full fiscal year, net sales were $4.8 billion with an adjusted EBITDA of $1.3 billion and a 26.2% margin.
Strategic initiatives focused on the integration of Azek, achieving $125 million in run-rate commercial revenue synergies by fiscal 2027, and leveraging the Hardi operating system to drive productivity and cost savings.
The company aims for a return to growth in the fiber cement business in fiscal 2027, driven by market expansion efforts in underpenetrated regions and leveraging a combined sales force to enhance market presence.
Management highlighted successful commercial synergy momentum, including expanded relationships with partners like Lansing Building Products and CB USA to strengthen their product offering and market position.
Guidance for fiscal 2027 includes net sales between $5.25 billion and $5.41 billion, with an adjusted EBITDA range of $1.45 billion to $1.5 billion, and free cash flow exceeding $500 million.
Management expressed optimism in outperforming the market despite economic uncertainties, focusing on execution, cost management, and capturing growth opportunities through strategic initiatives.
Full Transcript
OPERATOR
Welcome to the James Hardy Fiscal fourth quarter 2026 earnings conference call. After prepared remarks by management, there will be an opportunity to ask questions. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one again. I would now like to hand the call over to Chris Russell, Senior Vice President of Global Strategy and Corporate Development. Please go ahead.
Chris Russell (Senior Vice President of Global Strategy and Corporate Development)
Thank you Operator and thank you to everyone for joining today’s call. I am joined today by Aaron Erter, Chief Executive Officer of James Hardy, Ryan Latta, Chief Financial Officer of James Hardy and John Skelly, President and General Manager of James Hardy North America Building Products. Before we begin the call, please note that during prepared remarks and Q and A we may refer to non-GAAP financial measures and make forward looking statements. You can refer to several related cautionary and other notes on slide 2 of our earnings presentation for more information. Forward looking statements made during today’s conference call and in the earnings materials speak only as of the date of this presentation. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from from those in the forward looking statements. Accordingly, investors are cautioned not to place undue reliance on forward looking statements. In addition, non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of non-GAAP measures discussed today can be found in our earnings presentation which is posted on our website. Also, unless otherwise indicated, our materials and comments refer to figures in US Dollars and any comparisons made are to the corresponding period in the prior fiscal year. Organic net sales comparisons exclude the impact of the Azek acquisition as well as the impact of exiting our Philippines business in Q2 fiscal year 25. With that opening, I’m pleased to hand the call to Aaron.
Aaron Erter (Chief Executive Officer)
Thanks Chris. I’d like to take a moment to thank Chris for his contributions during this transition period in investor Relations and to welcome Bill Seymour, our new Vice President of Investor Relations. Bill brings extensive IR experience to the role and a strong track record in the field. In my remarks today, I will briefly review the highlights for Q4 and fiscal 2026, discuss our strategy and end with our outlook. We delivered a solid fiscal fourth quarter and full year despite a challenging construction market. The result of staying focused on what we can control, execution, cost and serving our customers. For the fourth quarter we delivered net sales of $1.4 billion, an adjusted EBITDA of $381 million at ahead of expectations with adjusted EBITDA margin of 27.1% demand held up across our core categories despite weather related softness early in the quarter in the United States and our teams executed well protecting price, managing costs and supporting demand as conditions improved. For the full fiscal year we delivered net sales of $4.8 billion, an adjusted EBITDA of $1.3 billion with adjusted EBITDA margin of 26.2% reflecting the resilience of our portfolio and the actions we took across the business. Free cash flow for the year was $314 million reflecting tightly managed operations in the year and despite significant one time integration and acquisition related costs. While organic net sales declined in our fiber cement business during the year, we are confident in the underlying demand drivers and expect this business to grow in fiscal 2027. This confidence is reinforced by our great products, leading brands and best in class sales force which together position us to outperform the market and capture long term growth opportunities. As I look back on fiscal 2026, we delivered against a number of objectives. A key differentiator for us is the Hardie operating system. Through Hardiee Operating System (HOS), we’ve taken out and offset significant inflationary costs by improving procurement, driving productivity in our plants and applying operational discipline. Even with lower volumes, we were able to maintain best in class margins and keep the business performing at a high level. As we continue to bring the companies together, we are applying the Hardie operating system to the Azek manufacturing network. We are encouraged by the early progress in the Azek plants and believe that Hardiee Operating System (HOS) will drive productivity and savings over the long term. We utilized a Hardiee Operating System (HOS) framework to make the difficult decision to close two of our legacy fiber cement plants in January 2026. As we move forward, we will continue to leverage Hardiee Operating System (HOS) as a critical tool to drive productivity, manage costs and support both margin expansion and and reinvestment and growth. Another milestone in the integration we recently completed was combining our sales forces. We believe we have the largest most downstream focused sales team in our space, one salesforce, one company and a portfolio of leading pro brands, James Hardiee, TimberTech, Azek and more. We are seeing commercial synergy momentum build as a result of the combination with early wins validating the strength of our integrated go to market approach. These wins are both numerous and broad based. You can see two examples in our earnings presentation. One example is our expanded relationship with Lansing building products. Lansing has been a long time and valued partner of James Hardiee and through this expansion we are consolidating multiple PVC Trim brands to AZK across their footprint. This simplifies the offering for the channel increases attachment of Azek Trim on our fiber cement siding jobs and strengthens our ability to deliver a more complete exterior solution. Another example is our recently announced expansion with CB USA. This exclusive agreement adds timber tech to an existing relationship between James Hardiee and CB USA, expanding our share of wallet while positioning us as a single source provider of exterior products for custom builders. These are just two examples. The breadth of opportunities and early traction reinforces our confidence in hitting $125 million and run rate commercial revenue synergies exiting fiscal 2027 on cost synergies we’re ahead of schedule without sacrificing service or execution. Integration continues and our conviction in this combination grows. Next, I’d like to discuss our go to market strategy in our largest market, North America. Starting with the size of the prize. Our $23 billion exterior total addressable market remains heavily under penetrated by more resilient materials. Wood and vinyl still dominate siding, decking, railing and outdoor structures despite real limits on durability and maintenance. A $17 billion plus conversion opportunity the James Hardiee ASA combination positions us to capture it, build a leading exterior platform with the best brands and win in both R R and new construction. To capture it, we’re executing against five pillars that drive our growth and margin expansion. First, Material conversion. We’re replacing wood and vinyl with materials that are more resilient, need less maintenance and resist fire. We’re seeing this play out in real time. Contractors who trust our brands are switching competitive decking to timber tech and longtime Hardiee siding contractors are adding composite decking to their service offerings. There are approximately 60 million decks in the United States and the vast majority are wood representing a long Runway as the installed base weathers in the elements. These two way wins are exactly what we expected from the combination. With our brands, products and contractor relationships, we are positioned to continue to deliver above market growth. Second Channel expansion in scaling what each business does best across the combined footprint. In the south, approximately 2,500 locations stock Hardiee but not TimberTech. Yet a clear Runway for our outdoor portfolio into accounts where we have established relationships in the north. The inverse approximately 700 strong timber tech and AZK locations where Hardiee isn’t yet stocked. Disciplined approach Real growth opportunities the third pillar is innovation. The product and R D teams from both companies are now combined focused on solutions that accelerate exterior conversion. Innovation has been a key element of Azax 500 to 700 basis points above market growth per year. We’re applying that same playbook to fiber cement to expand our market and drive new product growth over time. Fourth Brand Preference James Hardiee Azek and timbertac are among the most recognized brands in our categories and we’re extending that lead through targeted marketing, contractor education and innovation, most of it in house. The impact is clear in our Deck, Rail and Accessories business. Brand search volume has increased at a 40% CAGR over the past three years while customer sample orders, a leading indicator of future demand, have grown at nearly 15% annually over the same period. This marketing strength also carries through to our loyal TimberTech pros where our data suggests that the consumer demand we are generating has established TimberTech as the leader in brand awareness among contractors. This positions us for sustained share gains over time. As we move forward, we have combined the marketing teams and are applying the AZK in house marketing approach to the fiber cement side of the business. As we scale this competency, we expect to drive increased awareness consideration and brand preference. Fifth, simplifying the consumer journey, we’re making it easier for homeowners to choose and purchase our products. A key part of this has been a full replatforming of our website designed to improve how homeowners research, compare and ultimately select products for their homes. Just as important, it better connects homeowners to our contractor network, helping turn interest into action. Underpinning it all is the hardy operating system, continuous improvement in safety, quality, service and cost. Together this is a clear path to sustainable growth, margin resilience and long term value. Now let me talk a little bit about our fiber cement growth plan. Beyond these five pillars, our fiber cement growth plan is central to the strategy. We have clear plans to reaccelerate siding and trim and as noted, we expect fiber cement to return to organic volume growth in fiscal 2027. Step one a deliberate focus on the Northeast and Midwest where we’re under penetrated and where R and R wood and wood look siding alone is an approximately $1 billion conversion opportunity. AZAC gives us immediate relevance, established channels, strong relationships and complementary products in these markets. We are actively pursuing the opportunity across multiple fronts including expanded dealer engagement, targeted training programs and scaled contractor conversion initiatives. Central to this effort is the continued rollout of expanded statement and Statement Essentials which ensure James Hardiee has the right offering for each contractor in our value chain. We launched this program with a Midwest pilot in April 2025 and the results to date provide clear evidence that the strategy is working. We are seeing consistent acceleration in ship to revenue across each quarter with growth culminating in double digit percentage gains. This reflects improved execution in the market and early success in converting demand into realized revenue and we are scaling this approach to other regions throughout our footprint we’re hitting these markets on multiple fronts. Hardiee Pro Lab, a series of mobile training units, supports contractor adoption with hands on training on ease, speed and economics of fiber cement install. Based on Midwest Pilot success, we’ve expanded the program across approximately 50 dealer locations in the broader Midwest and Northeast with strong early traction. Our approach focuses on three opportunities 11 converting vinyl siding, 2 winning against all wood siding types and 3 expanding our presence in premium products. First, vinyl we’re accelerating penetration in the Northeast, Midwest, Carolinas and Canada backed by new products, expanded color plus rollout and more contractor engagement and training. Second, Virginia winning against wood we are rolling out easier and faster to install products targeted downstream sales and marketing and expanded channel access including the Legacy AZK dealer network. Fire resilience is becoming an increasingly critical factor in this dynamic as building codes evolve, insurance requirements tighten and homeowners place greater emphasis on durability and risk mitigation. Fiber cements non combustible properties are emerging as a more meaningful differentiator versus wood and other combustible materials. While this is most pronounced in higher risk regions, we are also seeing broader awareness and adoption across markets, reinforcing the structural advantage of our portfolio and supporting continued material conversion. Third, premium products, timber hue and enhancements to artisan and other premium lines target custom builders and high end remodelers, leveraging our independent channel strength where design and durability drive the decision. Together these priorities position us to accelerate conversion, take share and drive durable volume growth and fiber cement siding. Let me talk to you a little bit about our external environment and outlook. Ryan will cover our outlook in more detail, but let me quickly frame how we see the external environment and touch on our approach to fiscal 2027. The market has shifted substantially in the last few months. At the start of the year, we plan for broadly flat market Demand in fiscal 2027. Since then, key variables have changed. 30 year mortgage rates below 6% late February move meaningfully higher after the Middle east escalation. Builder confidence and consumer sentiment have softened across our dealers and contractors. Nearly half cite economic uncertainty as their biggest challenge, while the broader market remains somewhat challenging. I want to be clear we are optimistic about our path forward. We are seeing solid momentum in the business and are intensely focused on execution. We expect to deliver market outperformance, a return to growth in fiber cement adjusted EBITDA expansion, and we expect to significantly grow our free cash flow which will drive meaningful deleveraging. Now over to Ryan who will take us through the financials.
Ryan Latta (Chief Financial Officer)
Thanks Aaron. I will walk through our results and then get into our planning assumptions. fourth quarter total net sales grew 45% to 1.4 billion, including 445 million of acquired AZEC revenue. Organic net sales declined 1% in the quarter. For the full year, Total net sales grew 25% to 4.8 billion with organic net sales down 2%. The organic decline in fiber cement reflects the market environment Aaron described. fourth quarter adjusted EBITDA was 381 million, margin was 27.1% for the full year, adjusted EBITDA was 1.27 billion, margin was 26.2%. A few items to highlight Adjusted corporate and unallocated R&D was 45.5 million in fourth quarter for modeling purposes, keep in mind that approximately 40% of our full year 2026 cost energy benefits are in that line. Our adjusted effective tax rate was 23.4% for the quarter and 20.2% for the full year, slightly above our prior 20% guide. Adjusted net interest was 65 million. Weighted average diluted shares were approximately 585 million. We expect both to remain consistent. In fiscal 2027, fourth quarter adjusted net income was 173 million and adjusted diluted EPS was $0.30. Free cash flow for fiscal 26 was 314 million, including the benefit of a completed Australia land sale in Q3 integration costs continue to weigh on cash, but those stepped down meaningfully in fiscal 2027. Combined with higher EBITDA from synergy realization and disciplined CAPEX, free cash flow will improve significantly and deleveraging remains a clear priority. In siting in trim, we delivered against our objectives to despite unfavorable weather. In fourth quarter net sales were 767 million, up 7% with adjusted EBITDA of 253 million at a 33% margin. Cold storms and above average precipitation, most pronounced in February and early March. Limited job site activity and delayed project starts in both new construction and R and R. We estimate the weather impact to our fiber cement sales was approximately 20 million in the quarter. Activity rebounded later in the quarter as conditions improved. Our manufacturing footprint optimization and expense management is already delivering with initial P&L benefits in fourth quarter, an example of actively managing the business for stronger profitability for the full year. Siding and TRIM delivered net sales of 2.96 billion, up 3% and adjusted EBITDA of 951 million at a 32.1% margin. In deck rail and accessories, fourth quarter net sales were 345 million, up 5%. Adjusted EBITDA was 97.5 million margin was 28.2%. Sell through grew low single digits. January was solid. February and early March were disrupted by weather, then activity recovered through the end of the month. We grew Deck, Rail and Accessories again this quarter, lapping strong fourth quarter growth in the prior year delivering against the down market over the past few years. We’ve meaningfully expanded our shelf position with continued gains this year across both pro and retail channels. During fourth quarter we shipped to support those new shelf wins and and saw pockets of sell through delayed by weather. Working with our channel partners, we are taking a slightly more conservative inventory position in Q1 to set up a strong back half of the year. Q1 sales and margins will be softer as a result. Underlying demand is intact. We expect positive sell through in both Q1 and for the full year. Full year on 3/4 of contribution. Net sales were 795.2 million. Adjusted EBITDA was 224.8 million, margin was 28.3%. We outperformed a market that declined low to mid single digits by more than 700 basis points in Australia and New Zealand. …
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