James Hardie Industries (NYSE:JHX) executives said the company delivered a “solid quarter,” exceeding prior guidance and making progress on commercial execution, manufacturing optimization, and integration work tied to its combination with AZEK. Management emphasized that while near-term market conditions for siding remain mixed, it expects a return to organic revenue growth and adjusted EBITDA margin expansion in fiscal 2027, driven by operational initiatives, product and installation innovation, and commercial synergies across the combined portfolio.
Quarterly performance and consolidated financial results
In the fiscal third quarter, total net sales rose 30% to $1.24 billion, including $275 million of acquired AZEK sales. Organic sales increased 1%. Adjusted EBITDA was $330 million, representing a 26.6% adjusted EBITDA margin.
Year-to-date free cash flow was $261 million, aided by a completed land sale in Australia, though management noted cash flow remained negatively impacted by one-time integration costs expected to “step down significantly” in fiscal 2027. Capital expenditures guidance remained approximately $400 million for full-year fiscal 2026, including $75 million for AZEK investments. The company reiterated it expects at least $200 million in free cash flow for the year, citing timing impacts such as accounts receivable at year-end.
Net debt ended the quarter at $4.3 billion. Pro forma for the AZEK acquisition and the midpoint of updated guidance, management said full-year fiscal 2026 net leverage would be approximately 3x, with a stated goal to reduce leverage below 2x within two years post-close through EBITDA growth, cash generation, and debt paydown.
Siding and trim: mixed demand, margin step-up, and manufacturing actions
Management said market conditions for siding and trim remained mixed given exposure to new construction and the Southern U.S. Organic net sales in the legacy North American fiber cement business declined 2% in the quarter on lower volumes, partly offset by higher average net sales price.
By end market, the company said single-family exteriors volumes were down high single digits, multifamily was up high single digits, and interiors were down double digits.
Siding and trim adjusted EBITDA was $269 million, and adjusted EBITDA margin was 34.1%, which management described as nearly a 500 basis point sequential improvement, “largely reflecting price mix favorability.” CFO Ryan noted the year-over-year margin comparison was affected by a 100 basis point impact from reallocating $9 million of R&D costs to the segment; excluding this, he said the margin would have increased year-over-year. He attributed comparable margin performance to positive price/mix and ongoing cost savings, partly offset by lower volumes, unfavorable absorption, and inflation in freight and raw materials.
Executives also detailed network optimization steps. On January 15, the company decided to close two older, less efficient plants and shift production to newer facilities, focusing output on fewer manufacturing lines. Management said these actions are expected to generate annual cost savings of $25 million beginning in the first quarter of fiscal 2027, driven by reduced fixed costs and improved utilization, and said the savings are incremental to AZEK-related synergies.
During Q&A, management said supply to California after the Fontana, California, closure would be supported through Tacoma for Northern California and through Cleburne and “Wax” for Southern California, adding that freight impacts were contemplated in the expected benefits.
Growth priorities: R&R focus, custom builders, and innovation
Looking ahead, executives outlined strategies aimed at increasing penetration in new home construction and repair and remodel (R&R), which they said represents an end market of over $10 billion. In R&R, management highlighted a “nearly $1 billion” opportunity in the Northeast and Midwest regions in competitive wood and wood-look siding. The company said the AZEK combination improves its ability to compete in those regions through relationships with independent lumber yards and an expanded sales force.
In new construction, management pointed to an “incremental $750 million opportunity” with custom and local homebuilders, which it described as under-penetrated.
The company also discussed product and installation innovation as levers to drive material conversion. It plans to showcase TimberHue—a product combining a natural wood look with fiber cement durability—at the International Builders Show. Management also discussed installation techniques such as “score and snap” and the “trim over method,” which it said could improve contractor efficiency by approximately 30% and help reduce installed costs.
Deck, Rail, and Accessories: market outperformance and channel expansion
In the Deck, Rail, and Accessories (DR&A) business, management said performance remained strong, with TimberTech continuing to outperform the broader market through material conversion and channel expansion. Executives cited data suggesting the decking market is about 25% converted to composite and said that at this stage of the conversion curve, every 100 basis points of material conversion equates to roughly 400 basis points of composite decking growth.
For DR&A, net sales were up 2% compared to the quarter ended December 31, 2024 (prior to the AZEK acquisition). Sell-through increased mid-single digits, while management said the broader market declined at a low single-digit rate. Adjusted EBITDA was $49 million, and adjusted EBITDA margin was 25.1%.
Management said new products such as TimberTech Advantage Rail and Impression Privacy Screen have supported growth through improved functionality, aesthetics, and ease of installation. Executives also described opportunities to expand distribution, citing the complementary geographic footprints of James Hardie’s legacy siding business and TimberTech’s selling locations—particularly an opportunity to place TimberTech products into locations already carrying fiber cement products, especially in the South.
AZEK integration and synergy progress
Management said integration efforts are proceeding with “discipline and urgency,” with a structure intended to strengthen downstream, customer-focused sales capabilities. On cost synergies, the company said it has already surpassed its fiscal 2026 cost synergy goal and expressed increased confidence in achieving its $125 million cost synergy target.
Executives also said customer feedback on the combined “One Hardie” offering has been positive and cited early commercial wins expected to translate into meaningful revenue synergies in fiscal 2027. Examples included:
- A large national one-step dealer committing to AZEK as its exclusive PVC trim brand, which management attributed to the combined offering and contractor loyalty to the portfolio.
- An expanded relationship with a scaled exterior building materials distributor positioning James Hardie as a primary hard siding and trim brand and TimberTech as its primary composite decking brand across North America, with national marketing support focused on the combined suite.
Management reiterated its expectation to deliver a $125 million annualized commercial synergy run rate exiting fiscal 2027, consistent with prior public commitments, while noting that most sales synergy benefits are expected to begin flowing through the P&L in fiscal 2027 rather than fiscal 2026.
For full-year fiscal 2026, the company raised its siding and trim net sales guidance to $2.953 billion to $2.998 billion and modestly increased siding and trim adjusted EBITDA guidance to $939 million to $962 million. It also increased its net sales and adjusted EBITDA expectations for DR&A in the post-close fiscal 2026 period, projecting net sales of $787 million to $800 million and adjusted EBITDA of $219 million to $224 million. Total company adjusted EBITDA guidance was raised to $1.232 billion to $1.263 billion.
Management said additional details on fiscal 2027 guidance will be provided during the year-end conference call in May.
About James Hardie Industries (NYSE:JHX)
James Hardie Industries plc (NYSE: JHX) is a global manufacturer of high-performance fiber cement building products. The company specializes in exterior cladding, trim and soffit, as well as interior backerboard solutions designed for residential and commercial construction. By combining cement, sand and cellulose fibers, James Hardie produces durable, low-maintenance materials that resist moisture, fire and termite damage, catering to builders, contractors and homeowners through a network of distributors and retail channels.
The company’s flagship products include Hardie® Plank® and Hardie® Panel® siding systems, Hardie® BackerBoard® for tile applications, and a range of architectural trim solutions.
