James Hardie (ASX: JHX) shares are up more than 5% after the construction business increased its guidance.
What is James Hardie?
James Hardie is an industrial building materials company headquartered in Ireland that was founded in 1888. It manufactures fibre cement building products for external cladding, interior lining, flooring and eaves.
James Hardie’s profit pleaser
James Hardie CEO Dr Jack Truong explained what has been happening, “In North America, housing market activity has steadily improved during the past seven weeks despite the COVID-19 pandemic. The better than expected underlying house market during our Q1 FY21 combined with our continued focus on customer engagement to drive market share gains, resulted in volume growth in the second half of the first quarter. This improved volume result and our continued execution of lean manufacturing led to the increase of our adjusted EBIT margin guidance range.”
The numbers
For the first quarter of FY21:
North America Exteriors volume is expected to be in the range of flat to growth of 2% compared to the prior corresponding period.
The North America adjusted EBIT margin guidance has been increased and narrowed to a range of 27% to 29%.
Its liquidity guidance has improved from US$600 million to more than US$640 million.
The leverage ratio guidance has improved from less than 2x at 30 June 2020, to less than 1.8x at 30 June 2020.
Australian volumes are expected to be flat compared to last year and Europe volumes are now expected t obe down 11% rather than 14%.
Summary
This was clearly a solid update by James Hardie. It’s always good to be able to increase your guidance. Over-delivering is nearly always better than under-delivering. I’m not sure what the shorter term future of construction is in the US and Australia, COVID-19 will continue to be a cloud, so I don’t know if it’s a good buy today or not. But I did like the news that James Hardie announced, I’d be a pleased shareholder if I owned shares.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
