James Hardie Industries plc (ASX:JHX) released a quarterly trading update which showed a 3% increase in revenue to US$428m. The corresponding period is the three months ending on 30 June 2015.
In a statement released to the ASX this morning, James Hardie announced adjusted net operating profit of US$63.5m, an increase of 27% compared to the prior corresponding period. Group EBIT increased by 26% to US$89.7m.
Shares of James Hardie (JHX) fell around 3% in the opening minutes of trade to $17.42. By 10:30am (AEST) the stock had already recovered some of the losses, being down only 1.5%. Year to date JHX has gained 32% buoyed by organic growth which has resulted in an accelerating uptrend.
James Hardie, which reports in USD, managed to deliver solid growth in all of its businesses despite the strong US currency. Chief Executive Officer Louis Gries says that the achieved net operating profit of US$63.5m “is the higher first quarter result since fiscal year 2007, largely driven by the operating results of our USA and Europe Fiber Cement segment.” Mr Gries states that the strong results are a combination of lower production costs and deflationary trends in markets. He also states that the unfavourable currency movements had a negative impact on the group’s consolidated results.
One of the highlights of the quarter was the US$22.5m share buyback which comprised of 1.7m shares of James Hardie’s common stock.
The company also provided an outlook for FY16 stating that “full-year adjusted net operating profit to be between $US240 million and $US270 million assuming, among other things, housing conditions in the United States continue to improve.” Currency exchange movement may influence James Hardie’s outlook and could potentially put pressure on the stock price as we expect interest rates to increase in the US which should further strengthen the USD over the next 12 months.
James Hardie’s results are robust even though offset by unfavourable currency movements. The 12 month outlook looks generally strong, however investors should be prepared to expect slower capital growth as headwinds increase.
Author: Simon Herrmann
Aug 14, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.