James Hardie Industries(JHX -1.63%) reported first-quarter fiscal 2026 results on August 19, 2025, with global net sales of $900 million, down 9% year over year, and adjusted EBITDA of $226 million at a 25.1% margin. The company completed its acquisition of AZEK, more than doubling its addressable market, and updated guidance to adjusted EBITDA of $1.05 billion to $1.15 billion for fiscal 2026. Key themes include integration progress, significant demand headwinds in South U.S. single-family new construction, and accelerated cost and commercial synergy initiatives.

AZEK acquisition expands James Hardie Industries' market reach

The AZEK acquisition created two new North America-focused reporting segments and is expected to deliver at least $500 million in commercial synergies over five years, with benefits beginning in fiscal 2027. The AZEK legacy Deck, Rail, and Accessories (DRNA) segment posted mid-single-digit sell-through growth in June 2025, exceeding prior guidance.

"The combination of these two businesses now completed has created a leading provider of exterior home and outdoor living solutions. We have significantly expanded our offering, and in doing so, have strengthened our customer value proposition and positioned James Hardie Industries to capture multiple opportunities for material conversion, with a total addressable market more than twice the size of legacy James Hardie Industries. Our team is stronger as one, and we are better equipped than ever to serve our customers and create value for all our stakeholders."
-- Aaron Erter, Chief Executive Officer

This transformative acquisition positions James Hardie Industries for accelerated long-term growth by leveraging a broader product portfolio and deeper relationships with large U.S. homebuilders.

South U.S. demand slump impacts James Hardie Industries' volumes

North American net sales declined 12% year over year, driven by double-digit volume declines in exteriors, with the South U.S. states like Florida, Georgia, and Texas experiencing single-family starts down about 25% since February. Management incorporated a high-single-digit decline in market demand into the revised fiscal 2026 outlook, pushing anticipated new product and exclusivity benefits to fiscal 2027.

"As we progressed through the quarter, we saw our customers focus on inventory more as the outlook began to soften. The Q1 market environment was considered within our full-year guidance. North America R&R multifamily performed per our expectation. And we believe we performed in line with the market really down mid-single digits. Inventory drawdown aside. Single-family new construction starts became our demand within approximately, you know, one quarter lag. In other words, the single-family new construction starts from January through March impact our April through June, and thus, that was part of our May guidance. We knew that. Single-family new construction starts January through March. Down five. And really consistent with our underlying volume there. So with this weaker environment, we saw customers ordered less to manage inventory. And we did expect to see this in Q1. Hence, what you're seeing there."
-- Aaron Erter, Chief Executive Officer

The pronounced cyclical downturn in key Southern markets is increasing short-term earnings volatility but is expected to set the stage for future outperformance as destocking and market softness subside.

Cost discipline and synergy capture support margins

Adjusted EBITDA margin fell by 370 basis points year over year to 25.1%, but management highlighted over-delivery on global internal cost savings and rapid realization of AZEK cost synergies, with more than 50% of the run-rate target for general and administrative expenses already achieved shortly after the transaction close in fiscal 2026. Raw material inflation, especially pulp, remains a high single-digit annual headwind for fiscal 2026 but is expected to moderate as the year progresses.

"In the quarter, we over-delivered on our global internal cost savings target led by strong progress in procurement, and R&D. We continue to see runway for continuous improvement across our manufacturing, commercial, and back-office functions, contributing to both our cost synergy target and organic margin expansion goals. In both Australia and New Zealand and in Europe, we remain focused on areas in which we have the right to win, and where we can continuously improve profitability."
-- Aaron Erter, Chief Executive Officer

Faster-than-expected synergy realization and ongoing execution of the Hardie Operating System provide a meaningful buffer against margin compression and support the company's deleveraging and growth objectives.

Looking Ahead

Management guided for fiscal 2026 adjusted EBITDA of $1.05 billion to $1.15 billion and adjusted diluted EPS of $0.75 to $0.85, including $250 million to $265 million from the AZEK acquisition in adjusted EBITDA, and at least $200 million in free cash flow. The company reaffirmed its $125 million cost synergy target within three years and committed to reducing net leverage to at or below 2.0x within two years post-close. Capital expenditures are planned at approximately $400 million in fiscal 2026, including $75 million for AZEK, with long-term guidance of 6%-7% of sales invested in CapEx.