James Hardie Rises Despite 60% Profit Drop
Investors look past weak Q1 results, focusing on the strategic upside and synergies from the company's recent acquisition of AZEK.
Shares of James Hardie Industries (JHX) gained over 2% on Tuesday, even as the building materials company reported a steep 60% decline in first-quarter net income and a 9% drop in sales, a clear sign that investors are betting on the company's long-term strategy over short-term headwinds.
The Dublin-based manufacturer announced net sales of $900 million for the quarter, down from the prior year, while net income fell to $62.6 million. The slump was driven primarily by a 12% sales decline in its core North America Fiber Cement segment amid softening demand and inventory adjustments across distribution channels.
Despite the weak quarterly performance, the market's positive reaction was fueled by the company's recently completed acquisition of AZEK, a leader in polymer composite decking and exteriors. Finalized on July 1, 2025, the deal is central to James Hardie's strategic pivot to becoming a dominant force in 'material conversion'—replacing traditional materials like wood with more durable, low-maintenance alternatives.
The integration is expected to unlock significant value, with management projecting $350 million in annual adjusted EBITDA synergies. The acquisition expands James Hardie's addressable market in North America by 40% to an estimated $23 billion and positions its combined product portfolio to cover 80% of the exterior building products market.
Underscoring its confidence, management maintained its full-year 2026 guidance, forecasting total adjusted EBITDA between $1.05 billion and $1.15 billion. However, the company faces the challenge of integrating the new business while managing a heavier debt load, which now stands at $5.1 billion. Leadership has stated a goal of deleveraging to below 2.0x EBITDA by fiscal 2027, supported by a projected $1 billion in annual free cash flow.