James Hardie — Second Quarter FY27 Earnings Summary

Financial Performance

• Net sales from continuing operations reached $1.428 billion in Q2 FY27, a 24% year-over-year increase, landing at the high end of guidance.
• Net income from continuing operations was $149.8 million compared to a loss of $64.3 million in Q2 FY26; diluted earnings per share from continuing operations were $0.26 versus $(0.11).
• Adjusted Net Income was $248.5 million, up 67% year-over-year, with Adjusted Diluted EPS at $0.42 compared to $0.25.
• Adjusted EBITDA totaled $454.7 million, a 44% increase from $314.9 million in Q2 FY26, with an Adjusted EBITDA margin of 31.8%, up 450 basis points year-over-year.
• Operating income from continuing operations was $263.3 million versus $12.5 million in the prior year period, with an operating income margin of 18.4% compared to 1.1%.
• First-half free cash flow was $535.4 million, up from $58.4 million in the prior year period, driven by operating cash flow of $693.7 million.
• The company repaid $111 million of term loan debt in the quarter, reaching its FY27 leverage target ahead of schedule.

Guidance and Future Outlook

• Consolidated full-year FY27 Net Sales guidance is reaffirmed at $4.990 to $5.133 billion.
• Consolidated full-year FY27 Adjusted EBITDA guidance is reaffirmed at $1.446 to $1.534 billion.
• Free Cash Flow target for FY27 has been raised to more than $650 million.
• Q3 FY27 Net Sales guidance is set at $1.058 to $1.140 billion.
• Q3 FY27 Adjusted EBITDA guidance is set at $298 to $320 million.
• Management expects Adjusted EBITDA to be lower in Q3 and the second half of FY27 due to DR&A seasonality, incremental freight costs, and a weaker macro environment.
• The company remains on track to achieve net leverage below 2.0x by the end of the second quarter of FY28.

Business Segments and Product Lines

• Siding & Trim: Net sales were $880.3 million, up 15% year-over-year, exceeding the high end of guidance. Fiber cement volumes increased mid-single digits, with multi-family up high-teens. Adjusted EBITDA margin was 34.6%, up 540 basis points.
• Deck, Rail & Accessories (DR&A): Net sales were $387.0 million, up 51% year-over-year, driven by strong sell-through and the initial load-in of the new business with Boise Cascade. Operating income turned positive at $48.6 million compared to a loss of $(11.9) million in the prior year.
• Australia & New Zealand (ANZ): Net sales were $160.9 million (A$227.9 million), up 21% (12% in local currency). Growth was driven by volume growth and foreign exchange tailwinds. EBITDA margin was 35.3%, up 260 basis points.
• The company is evolving from a fiber cement business to a broader building products platform in ANZ, focusing on whole-home solutions like Hardie™ Gravis™ and outdoor living with TimberTech®.
• Closures of the Fontana, California and Summerville, South Carolina facilities are expected to generate approximately $25 million in annualized cost savings for FY27.

Market and Competitive Landscape

• Fiber cement sell-through increased low double digits, well ahead of declining end markets, driven by share gains against vinyl and other materials.
• DR&A sell-through was low double-digit, ahead of the market, supported by continued material conversion from wood.
• The U.S. housing market remains challenging, particularly in new construction, but the company's plan does not depend on a near-term recovery.
• Australia & New Zealand experienced resilient housing activity and ongoing share gains.

Risks and Challenges

• The U.S. housing market, specifically new construction, remains a challenging environment.
• General inflation and higher freight and diesel costs are offsetting some margin gains.
• Material inflation is impacting input costs.
• The company has discontinued European operations, presenting them separately in financial results.

Management Commentary and Tone

• CEO Aaron Erter stated the company delivered strong sales growth well above the market and at the high end of guidance, with margins expanding 450 basis points.
• Management emphasized focus on controllable factors: accelerating material conversion, executing growth initiatives, and driving continuous improvement through the Hardie Operating System (HOS).
• Synergy momentum is building, with cost synergies ahead of schedule and revenue synergies on track to reach fiscal 2027 targets.
• CFO Ryan Lada noted that higher Net Income Margin and Adjusted EBITDA Margin were driven by favorable volume, price, mix, and HOS savings.
• Management expressed confidence in continuing to outperform the market based on a broad set of self-help growth levers.

Other Key Points

• In August 2026, the Company announced the strategic divestiture of its European operations and the intended closure of its European fiber cement operations.
• The Company revised the definitions of certain non-GAAP financial measures, including Adjusted EBITDA, effective June 30, 2026, to exclude share-based compensation costs.
• Approximately $600 million of proceeds from the Europe divestiture (expected to close in the first half of calendar 2027) will be applied toward debt repayment.
• Capital expenditures for FY27 are expected to be in the range of 6% to 7% of net sales.
• The company does not anticipate the need for significant new capacity in the near term.
• Net leverage is defined as gross debt less cash and cash equivalents, divided by trailing twelve-month Adjusted EBITDA.