James Hardie reaffirms fiscal 2027 outlook, raises free cash flow target

James Hardie (JHX) raised its free cash flow target for fiscal 2027 to more than $650 million while reaffirming its net sales and Adjusted EBITDA outlook.

Net sales from continuing operations rose 24% to $1.43 billion in the fiscal second quarter ended Sept. 30. Adjusted EBITDA rose 44%.

Here's how the company did:

• Net sales: $1.428 billion vs. $1.155 billion a year earlier
• Adjusted diluted EPS: 42 cents vs. 25 cents a year earlier
• Adjusted EBITDA: $454.7 million vs. $314.9 million a year earlier
• Net income from continuing operations: $149.8 million vs. a loss of $64.3 million a year earlier

Adjusted EBITDA margin was 31.8%, up 450 basis points. Adjusted EBITDA now excludes share-based compensation; prior periods were recast to match.

Fiscal 2027 outlook

Full-year net sales outlook of $4.99 billion to $5.13 billion and Adjusted EBITDA outlook of $1.45 billion to $1.53 billion were reaffirmed.

For the third quarter, it expects net sales of $1.06 billion to $1.14 billion and Adjusted EBITDA of $298 million to $320 million.

Adjusted EBITDA is expected to be lower in the third quarter and second half, driven by seasonality in deck, rail and accessories, higher freight costs and a weaker macro environment.

CEO Aaron Erter said the plan "does not depend on a near-term recovery."

Segment results

Siding & Trim net sales rose 15% to $880.3 million, led by fiber cement volume growth and favorable price and mix.

Deck, Rail & Accessories net sales rose 51% to $387.0 million, reflecting sell-through growth, the end of planned channel inventory normalization in the first quarter and the initial load-in of new business with Boise Cascade.

Australia & New Zealand net sales rose 21% to $160.9 million, or 12% in Australian dollars.

Cash flow and debt

First-half free cash flow was $535.4 million, compared with $58.4 million a year earlier.

The company repaid $111 million of term loan debt in the quarter and reached its fiscal 2027 leverage target ahead of schedule.

In August the company announced the divestiture of its European operations and intended closure of its European fiber cement operations. It expects about $600 million of sale proceeds, closing in the first half of calendar 2027, for debt repayment, and targets net leverage below 2.0x by the end of the second quarter of fiscal 2028.

The Fontana, California and Summerville, South Carolina facility closures are expected to generate about $25 million in annualized cost savings in fiscal 2027.