On first glance, the headline figure from JHX looks awful. Net profit after adjustments are down 92% on the previous year, as asbestos, asset impairments, ASIC expenses, New Zealand product liability expenses and tax adjustments bite into the bottom-line, with a final figure of $45.5 million versus $602 million last year.
However, ring-fencing them out, the pre-impairment figures are actually at the top-end of guidance at $140.8 million versus Bloomberg’s consensus of $139 million, which can only be described as solid. It is down 2% on last year, however the exciting part for JHX is that net sales from the US and Europe fibrocement division were up 10% as the US arm drives growth.
The company sees solid growth in the US. It is pleasing to see that macro housing data from the start of the year is actually filtering through to bottom-line figures. The company expects current US conditions to continue and ‘remain sustainable as the recovery takes off’. Language like that will send shivers down the backs of the liquidity-addicted US markets that hang on the FOMC’s every word, but from a stock-specific view this is a double pic- up. With AUD/USD now below parity and trending lower, JHX will take a double benefit from increased US housing and a low Aussie dollar.
It isn’t all good news from the sales side. Total net sales were up 7% on last year, but 1.5% down on consensus due to a 2% fall in the Asia-Pacific division, because of slowing conditions from the Australian arm. We don’t see this improving anytime soon. The local economy is slowing and housing remains strained, which may be why JHX has chosen now to announce a share buy-back plan.
JHX plans to take 5% of the register off the market at current prices, as the board looks for continued capital management. It is a prudent time to act; shareholders should like the move and the fact JHX have announced a 24 cent special dividend to go with the 13 cents declared. The yield will also see a wry smile from investors.
The final take from the cut of the numbers should see investors sticking with JHX over competitors BLD and ABC. Its US exposure should see it maintaining market share and holding current momentum.