Building materials supplier, James Hardie Industries plc (ASX: JHX) today announced an 8% drop in net profit for the nine months ended 31 December, 2014.
James Hardie, a leading supplier of building products which derives around 80% of revenues overseas, reported $US1.25 billion of net sales from operating activities.
However, a lower adjustment for asbestos, reflecting the non-cash foreign exchange translation (from USD to AUD), resulted in earnings before interest and tax, or EBIT, climbing just 1% over the prior period. Combined with a higher tax bill, earnings per share dropped to US 59 cents, from US 65 cents a year earlier.
CEO Louis Gries said: "While our operating environment in the US has improved marginally compared to the prior corresponding quarter, we are yet to see the previous anticipated accelerated growth in the US residential market."
"When we look at the US housing market, and the broader US economy as a whole, we see continued uncertainty in the short term," Mr Gries said. "However, our more positive view on the medium and longer-term outlook remains unchanged."
Should you buy James Hardie shares?
Whilst the first half may have proven to be a tough ride for investors, management anticipate net operating profit excluding asbestos to be between US$210 million and US$222 million, assuming housing conditions in the United States continue to improve and exchange rates remain largely unchanged. For comparison adjusted net operating profit for 2014 was $US197.2 million, thus a profit increase of around 9% can be expected.
Armed with a generous dividend yield and growing earnings per share, James Hardie may – in hindsight – appear cheap if it can hit its targets in the US. However, personally, I'd rather wait for a pullback in share price before hitting the buy button.
