James Hardie profits jump as customers ‘sit on the sidelines’
James Hardie lifted prices by 12 per cent in Australasia in the June quarter, pushing profit margins in the region to an all-time high even though its sales volumes slipped.
Shares at the building products group jumped by as much as 16 per cent on Tuesday to $47.37, with investors buoyed by the company’s ability to bolster margins through price rises and cost reductions even as the housing construction market contracts.
James Hardie chief executive Aaron Erter says a high interest rate environment was making people more reluctant to commit to big projects.
The company, which makes plasterboard and wall cladding products, also announced it would scrap plans to build a $400 million factory at Truganina on Melbourne’s outskirts as it reassesses capital spending priorities in uncertain economic times.
But James Hardie chief executive Aaron Erter said there was less activity in the renovation market, a key driver of the company’s earnings, as higher interest rates and economic uncertainty made households more reluctant to commit to large projects.
“People are sitting on the sidelines and waiting for a little bit,” he told an investor briefing on Tuesday.
Earnings before interest and tax margins in the Asia-Pacific region – largely Australia and New Zealand, with a small contribution from the Philippines – jumped by 750 basis points to 33.1 per cent. EBIT rose 35 per cent to $69.5 million in the June quarter.
A raft of smaller builders have collapsed in Australia as their profit margins disappeared on rising building materials prices and labour costs, which were squeezed by fixed price contracts entered into when the economy was much stronger.
James Hardie said average net sales prices in the Asia-Pacific region were up 12
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