James Hardie (ASX:JHX), the world's largest fiber cement maker, reported a modest 2% increase in second-quarter earnings, reaching an all-time high, as it focused on conserving cash flows for the upcoming year through higher prices and cost reductions.
The company announced its intention to buy back shares worth $US250 million, expected to be completed within a year, replacing dividends for the period. This move signals management's concern about potential pressure on cash flows in a slowing economy.
Simultaneously, the company repaid a $US140 million revolving credit facility at the end of the quarter and secured a $US300 million five-year loan, increasing its total liquidity by 60% to $US1 billion by the end of the previous month.
For the three months ending on September 30, Hardie reported adjusted net income of $US178.9 million, compared to $US175.8 million the previous year.
Hardie provided a third-quarter earnings guidance range of $US165 million to $US185 million. CEO Aaron Erter emphasized the company's focus on safety, customer partnerships, decisive management, and controlling controllable factors, leading to strong financial results.
Erter stated, "I believe our last three quarterly results are proof points that we are accelerating through this cycle and taking share, maintaining momentum to deliver strong financial results again in the third quarter."
While North American activity, Hardie's key market, experienced a slowdown with a 2% decline in net sales to $US734.4 million, North American EBIT increased by 9% to a record US$232.7 million due to higher average net sales prices and reduced costs.
In Australia, net sales reached a record $A225.1 million, with EBIT increasing by 21% to $A67.9 million, driven by higher average net sales prices.
In Europe, net sales rose by 5%, primarily attributed to a 20% increase in ASP and a 3.3 million euro favorable adjustment related to customer rebate estimates, while volumes fell by 15%.
The new $US250 million share buyback followed the completion of a previous $200 million buyback and appears linked to Hardie's efforts to reduce debt and secure a new term loan, increasing total liquidity to $US1 billion by the end of October.
CFO Rachel Wilson expressed caution, stating, "Our capacity expansion program is guided by our expectation for sustainable long-term profitable share gain." Despite this caution, Hardie remains committed to investing $US550 million in capital investment for 2023-24.
