James Hardie shares jumped strongly yesterday after the company revealed a solid rise in profit but confirmed earlier guidance of no dividend for the final half of 2019-20.
The international building products group also declined to offer guidance for the 2020-21 financial year, citing the greater uncertainty caused by the COVID-19 pandemic.
The company had trimmed its 2019-20 earnings guidance and revealed the decision to drop all dividends from now until further notice, in a trading update issued on May 5.
Yesterday it reaffirmed that decision, saying “The COVID-19 pandemic and actions taken in response thereto are continuing to have a significant adverse effect on many sectors of the economy, including new home building and remodeling activity.”
“Accordingly, we have currently reduced our production capacity to match supply and demand. While this reduction in production is expected to be temporary, the duration of the COVID-19 pandemic, the actions to contain the pandemic and treat its impacts, and the effects on our operations are highly uncertain and cannot be predicted at this time.”
Directors also confirmed the sharp cut in CAPEX to a maximum of $US95 million in the coming year from the more normal $US240 million.
Investors pushed the shares up by nearly 13% at one stage yesterday before they eased back to close up 11.2% at $A23.82.
The statement earlier this month also revealed plans to close plants in Australia, the US, and Europe and in New Zealand which will now be supplied from Australia.
Close 400 jobs were to be cut in the closures or suspensions of production.
The company reported a 6.0% rise in full-year profit to $US241.5 million ($A370.9 million).
Net operating profit for the year to March 31, which strips out asbestos liabilities (Payments on which will now switch to being made quarterly), rose 17% to $US352.8 million.
The May 5 guidance had put earnings in the range of $US350 million and $US355 million and yesterday’s announcement revealed it was smack bang in the middle.
But its operations did not seem all that much affected in the March quarter, with improved performance across the North American operations resulting in 11% volume growth in the exterior business and 5% in the interior business.
Europe Building Products segment produced a 7.0% growth in revenue while Asia Pacific saw a 2% rise.
“Our performance in March was exceptionally strong despite the highly volatile market environment in which we operated. We supplied our customers seamlessly around the world, growing revenue by double digits in each region we operate in,” chief executive Jack Truong said in Tuesday’s statement.
Net sales for the full year were up 4.0% to $US2.61 billion.
James Hardie declined to issue a full-year guidance, given the highly volatile and uncertain circumstances surrounding the COVID-19 pandemic and its effect on demand in various countries.
That’s because the COVID-19 pandemic and associated lockdowns only started halfway through the month and deepened in April and early may, cutting building and construction activity across many economies in the US, Australia, the Pacific, and Europe.
Hardie said in Tuesday’s announcement that “Our strong fourth quarter, including the exceptional March performance, led to significant improvement in our liquidity position, increasing from US$464 million at 31 December 2019 to US$510 million at 31 March 2020 and US$578 million at 30 April 2020, while reducing our leverage ratio to 1.9x at 31 March 2020 from 2.1x at 31 December 2019.”
