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James Hardie cuts dividend despite 57pc full-year profit jump

Lex Hall with AAP  |  21 May 2019Text size  Decrease  Increase  |  
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Construction materials company James Hardie has cut its final dividend despite lifting full-year profit 57 per cent to $US228.8 million ($331 million).

Revenue for the 12 months to 31 March rose 22 per cent to $US2.51 billion despite the softening housing market in Australia, with the company's acquisition of Fermacell in Europe and higher net sales in its North America Fiber Cement segment lifting income.

The company reported on Tuesday its net operating profit increased for the quarter and full year, driven by fewer-than-expected asbestos-related adjustments and higher gross profit, partially offset by higher income tax expense and general expenses.

James Hardie chief executive Jack Truong said the Australian and Philippines businesses led the way in gaining volume growth above that in their underlying market.

"This strong growth was achieved despite a continued, softening Australian housing market throughout the year," Dr Truong said.

James Hardie said it would pay a final unfranked dividend of 26 US cents, down from 30 US cents a year ago.

The company's ASX-listed shares were worth $17.83 before trade on Tuesday, down 21 per cent from $22.45 a year ago.

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Morningstar this month removed James Hardie from its “Global Best Ideas” list of equities because the company has risen more than 20 per cent since it was added to the list in December last year.

The stock is currently trading at a 16 per cent discount to the Morningstar’s fair value estimate of $21.20.

However, there is growth ahead, Morningstar equity analyst Grant Slade says, citing a US residential construction cycle that has yet to peak

“We expect US housing starts to peak in 2024 at 1.58 million, some 27 per cent above 2018 levels,” Slade says.

“The cyclical upswing in US housing and a further 3 per cent of market share gains are likely to accelerate sales growth in the coming five years, with a compound annual growth rate of 11.7 per cent compared with the 9.2 per cent sales CAGR over the preceding five years.

“With operating margins expected to remain robust, at an average 18.6 per cent over the coming five years, we believe returns on invested capital will average a healthy 20 per cent over the same period.”

James Hardie lifts profit, cuts dividend 

  • Net profit up 57pct to $US228.8m ($331m)
  • Revenue up 22pct to $US2.51bn ($3.63bn)
  • Final dividend 26 US cents, unfranked, down from 30 US cents


. Lex Hall is content editor with Morningstar Australia

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