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James Hardie Industries Announces Record Fourth Quarter And Fiscal Year 2021 Results

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James Hardie Industries plc (ASX: JHX; NYSE: JHX), the world’s #1 producer and marketer of high-performance fiber cement and fiber gypsum building solutions, announced record results for its fourth quarter and fiscal year ending 31 March 2021.

Fourth Quarter Fiscal Year 2021 Highlights, Compared to Fourth Quarter Fiscal Year 2020, as Applicable:

  • North America Fiber Cement Segment Net Sales increased +17% to US$555.3 Million and Adjusted EBIT increased +27% to US$152.9 Million in US Dollars, with Adjusted EBIT margin expansion of 220 basis points to 27.5%
  • Europe Building Products Segment Net Sales increased +12% to €104.6 Million and EBIT increased to €15.7 Million in Euros, with record EBIT margin of 15.0%
  • Asia Pacific Fiber Cement Segment Net Sales increased +11% to A$162.6 Million and Adjusted EBIT increased +46% to A$43.7 Million in Australian Dollars, with EBIT margin expansion of 630 basis points to 26.8%
  • Group Adjusted EBIT margin of 21.4%, an expansion of 340 bps

James Hardie CEO, Dr. Jack Truong, said, “I am proud of our globally integrated team’s ability to close out the fiscal year with a fourth quarter of exceptionally strong results. We have now delivered eight consecutive quarters of consistent profitable growth, including record financial results each of the past three quarters. Our performance in fiscal year 2021 marked a significant step change across multiple facets of our Global Company that allowed us to deliver this consistent profitable growth on an expanding global scale. Over the past twelve months, we were able to accelerate our strategy: (i) to unlock capacity and increase efficiency in our global manufacturing network through LEAN initiatives, and (ii) to better integrate our supply chain with our customers, which collectively drove consistent market share gains in all three regions.”

“Partnering more closely with our customers has resulted in eight straight quarters of above market growth with strong returns. LEAN initiatives are improving the quality and efficiency of our world-class manufacturing capabilities, which contributed a meaningful portion of the 340 basis point Adjusted EBIT margin expansion in fiscal year 2021. Our integrated approach connecting our supply chain with market demand through our customers and to our LEAN network of plants led to increased sales with more efficient working capital which resulted in a 74% increase in our operating cash flow to US$786.9 million. We have met and surpassed all of the goals that we set for our Company in February 2019,” added Dr. Truong.

Dr. Truong continued, “Our expanded focus for fiscal year 2022 and beyond is to execute on the three strategic initiatives that we introduced in February 2021. This includes commercializing global product innovation, further penetrating into existing and new market opportunities, and extending the James Hardie brand from a premium professional brand into a market-leading consumer brand. We are on or ahead of plan for each of these initiatives. This month, we are launching our first phase of innovation. This market-driven innovation represents a cornerstone of our organic growth potential in the coming years. In April, we began to roll out a global marketing campaign to create demand directly with homeowners to position James Hardie as the trusted brand of premium quality products that provide endless design possibilities. We continue to execute LEAN through our growing, global network of plants to continue to reduce variation, increase efficiency and improve quality to serve our customers better every day. We could not be more excited for our future and the opportunity to further convert our strategic vision into tangible benefits for homeowners, our customers, our employees, and shareholders.”

Fourth Quarter Fiscal Year 2021 Results Compared to Fourth Quarter Fiscal Year 2020 Results

Global Net Sales of US$807.0 million increased 20% while Global Adjusted EBIT increased 43% to US$173.1 million. Global Adjusted Net Income, formerly referred to as NOPAT, increased 44% to US$124.9 million, compared to US$86.6 million. Global Adjusted EBIT margin expanded 340 basis points to 21.4%, with continued operational improvement across all three regions: North America, Europe and Asia Pacific.

North America Fiber Cement Segment: Net sales increased 17% on continued strength in exterior volume growth of 12%, combined with improved price mix. LEAN manufacturing initiatives continued to generate improved performance across our North American manufacturing network, which helped to drive 27% Adjusted EBIT growth at a 27.5% margin. Dr. Truong remarked “The 17% Net Sales growth and 27% Adjusted EBIT growth in Q4 FY21 is truly an exceptional result, as it represents significant profitable growth on top of significant profitable growth. For reference, in Q4FY20, net sales increased 12% and Adjusted EBIT increased 26% vs Q4FY19.”

Europe Building Products Segment: Adjusted EBIT increased to €15.7 million in Euros, compared to €0.4 million, resulting in a significant expansion in Adjusted EBIT margin to 15.0%. The dramatic improvement was attributable to a net sales increase of 12% in Euros, a focus on gaining end user demand of our high value and high margin products, a decrease in production and distribution costs driven by LEAN manufacturing savings, and the improved supply chain integration with customers.

Asia Pacific Fiber Cement Segment: Adjusted EBIT grew 46% in Australian Dollars, generating an Adjusted EBIT margin of 26.8%, driven by a net sales increase of 11% combined with reduced production and distribution costs. The decision to consolidate Australia and New Zealand regional production volume into our two more efficient Australian plants has proven to be a key driver of margin expansion.

Capital Resources

We generated record operating cash flow of US$786.9 million in fiscal year 2021, up 74% compared to US$451.2 million in the prior fiscal year. The increase was a direct result of continuous improvement in our LEAN manufacturing performance, the integration of our supply chain with our customers, and strong profitable organic sales growth. Working capital improved by US$105.3 million during fiscal year 2021. We achieved global LEAN savings of US$107.4 million over the 24-month period since inception of LEAN, including US$78.1 million LEAN savings in North America.

In January 2021, we used our strong cash position to voluntarily redeem our 4.75% senior unsecured notes due 2025 with a payment of US$409.5 million in principal and call premium, resulting in anticipated interest savings of approximately US$20 million per annum. Primarily due to the redemption, our gross debt balance decreased to US$868.3 million as of 31 March 2021, compared to US$1,370.7 million at 31 March 2020. We entered fiscal 2022 with a solid liquidity position of US$703.8 million, including cash on hand of US$208.5 million and a leverage ratio of 0.85x, as of 31 March 2021.

Capital Management

In April 2021, we paid a special dividend of US$0.70 cents per share to shareholders of record as of 19 February 2021. We intend to resume our ordinary dividend policy in fiscal year 2022, beginning with a first half fiscal year 2022 dividend to be declared in November 2021.

James Hardie CFO, Jason Miele, stated, “The fiscal year 2021 step-change in cash flow generation was an impressive testament to our ongoing efforts to transform James Hardie into a high-performing, world-class organization. Our ability to resume issuance of dividends earlier than expected, and our recent pay down of debt, affirm our confidence in continued strong cash generation moving forward. We believe our ability to drive profitable growth will expand as we commercialize global innovations into new markets and further penetrate the repair and remodel market. Our strong balance sheet and cash flows put us in an advantageous position to internally fund investments that extend our brand with consumers, expand our global capacity, and commercialize market-driven product innovations. We look forward to executing on all our capital allocation objectives to fuel the next chapter of our organic growth strategy in fiscal year 2022 and beyond.”

Outlook and Earnings Guidance

The Company is experiencing strong growth momentum in its businesses across all three regions. Residential and market growth in the USA is expected to continue. The Company is introducing its outlook for fiscal year 2022, ending 31 March 2022. Management expects fiscal year 2022 Adjusted Net Income to be between US$520 million and US$570 million. The comparable prior year Adjusted Net Income for fiscal year 2021 was US$458.0 million.

In addition to fiscal year 2022 Adjusted Net Income guidance, management has provided long-term targets (FY2022-FY2024) for annual Adjusted EBIT margin in each operating segment as follows:

  • North America 25% - 30%
  • Asia Pacific 25% - 30%
  • Europe 11% - 16%

James Hardie’s guidance is based on current estimates and assumptions and is subject to several known and unknown uncertainties and risks, including those related to the COVID-19 pandemic. James Hardie continues to assess the impacts and the uncertainties of the COVID-19 pandemic on the geographic locations in which it operates, and the continuing impact of the pandemic on the Company’s business and future financial performance remains uncertain.

Key Financial Information

 

Q4 FY21

 

Q4 FY20

 

Change

 

Full Year FY21

 

Full Year FY20

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Group (US$ millions)

Net Sales

$

807.0

 

 

$

673.2

 

 

20%

 

$

2,908.7

 

 

$

2,606.8

 

 

12%

Adjusted EBIT

173.1

 

 

121.0

 

 

43%

 

629.0

 

 

486.8

 

 

29%

Adjusted EBIT Margin

21.4%

 

18.0%

 

3.4 pts

 

21.6%

 

18.7%

 

2.9 pts

Adjusted Net Income

124.9

 

 

86.6

 

 

44%

 

458.0

 

 

352.8

 

 

30%

Operating Cash Flow

 

 

 

 

 

 

786.9

 

 

451.2

 

 

74%

 

 

 

 

 

 

 

 

 

 

 

 

North America Fiber Cement (US$ millions)

Net Sales

$

555.3

 

 

$

474.5

 

 

17%

 

$

2,040.2

 

 

$

1,816.4

 

 

12%

Adjusted EBIT

152.9

 

 

120.0

 

 

27%

 

588.0

 

 

470.5

 

 

25%

Adjusted EBIT Margin

27.5%

 

25.3%

 

2.2 pts

 

28.8%

 

25.9%

 

2.9 pts

 

 

 

 

 

 

 

 

 

 

 

 

Asia Pacific Fiber Cement (A$ millions)

Net Sales

A$

162.6

 

 

A$

146.1

 

 

11%

 

A$

635.2

 

 

A$

614.1

 

 

3%

Adjusted EBIT

43.7

 

 

29.9

 

 

46%

 

177.3

 

 

139.1

 

 

27%

Adjusted EBIT Margin

26.9%

 

20.5%

 

6.4 pts

 

28.0%

 

22.7%

 

5.3 pts

 

 

 

 

 

 

 

 

 

 

 

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