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James Hardie Industries plc (JHX) Q1 2022 Earnings Call Transcript

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JHX earnings call for the period ending June 30, 2021.

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James Hardie Industries plc (JHX -3.40%)
Q1 2022 Earnings Call
Aug 9, 2021, 7:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by and welcome to the James Hardie Industries, JHX, Q1 FY '22 Results Briefing [Operator Instructions]

I would now like to hand the conference over to Dr. Jack Truong, Chief Executive Officer. Please go ahead.

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Jack Truong -- Chief Executive Officer and Executive Director

Good morning and good evening to everyone. Thank you for joining us on our first quarter fiscal year 2022 earnings call. I will begin today's call by providing a brief update on our global strategy that was announced in our Annual Investor Day this past May. This is now the ninth consecutive quarter about company delivering on strong financial results, with growth above market and strong returns, based on the consistent execution of our global strategy. Our CFO, Jason Miele, will then cover our financial results for the quarter and also an update on our full year guidance. After that, we'll open up for questions.

So let's now turn to page 5 for an update on our strategy; in our Investor Day at the end of May, we described our three critical strategic initiatives that will enable consistent profitable growth globally for our company, from fiscal year 2022 to fiscal year 2024. The three strategic initiatives are; number one, expanding the James Hardie brand from a premium professional brand into a market-leading consumer brand, that focuses on marketing directly to the homeowners to create true demand of our products.

Number two, penetrating and driving growth in existing and new markets such as repair and remodel; and number three, commercializing global innovations that allow us to expand into other Exterior looks and to take advantage of the adjacent opportunities in each of our regions. In addition, we will continue to execute and deal on a significant foundation we have built over the past three years. This foundation includes continuing on our path of becoming a world-class manufacturer via LEAN, continuing to partner closely with our customers via push-pull strategy, and continuing to integrate our supply chain with our customers to serve the markets.

Let's now turn to page 6 to discuss additional details on how we're driving profitable organic growth through marketing directly to homeowners. During our Investor Day, we shared details about our 360 degree integrated marketing campaign, that reaches homeowners directly to create demand.

As I shared with you then, the four phases of Christine's path of targeted homeowners to purchase are Awareness, Consideration, Purchase and Amplification. The TV campaign is passable with James Hardie, with the foundation of the awareness phase. It illustrates through the power of emotional storytelling, the meaningful ways that a family find comfort, connection, joy, and safety from their home, made with James Hardie brand Exterior products. These are the James Hardie brand Exterior products that continue to make their homes beautiful over time, and yet with superior durability that protect the family from the elements. To date, the TV commercial has been very successful in raising awareness of James Hardie with our targeted homeowners, the Christine's. We have received very positive feedback from homeowners, builders, contractors, and customers.

We continue to air this TV campaign in strategic growth markets across North America throughout the year. Consumers are relating to the emotional storytelling and are becoming more and more aware of the James Hardie brand, and our exciting line of Exterior products that meet their needs. After the homeowners are aware of James Hardie, it's important that we reach them with the right content at the right time, as they consider their options to beautify the Exterior of their home, which leads me now to page 7 to discuss in more details of the consideration phase.

In this second phase of the 360 degree integrated marketing campaign, we leveraged on social media and key influencers to reach the homeowners that they consider the options. What you see on the left-hand side of this slide, are just samples of the social media content, that elevates the key emotional messaging from our TV commercial. We then engage with Christine's, our targeted homeowners, with these contents via relevant conversations in social media platforms that Christine's frequently visits. To further augment and reinforce our story, we are partnering with key influencers and lifestyle experts, such as Kia Malone, to further expand our reach and to help educate the homeowners about the endless design possibilities, with trusted protection that James Hardie brand Exterior products can deliver.

In this segment by Kia Malone, which ran during a news hour in the Northeast of the U.S. and then amplified across all about key social media platforms, Kia described how the home Exterior can passively impact this value. How upgrading with James Hardie brand fiber cement products, provide the number one return on investments of all major Exterior remodeling projects. And how James Hardie brand fiber cement Exterior's offers styles and colors to help achieve long lasting beauty, and how engineered for climate technology provides durability and peace of mind protection.

You can watch this segment on many social media outlets, including our Instagram, LinkedIn, and Facebook, as indicated on the right hand side of this slide. We're tracking the impact of our marketing campaign, including web sessions, lead generated, and of course, sales of high value products. We're very encouraged with the early results. In fact, to-date, our campaign had already delivered over 300 million impressions and reached Christine's in the target markets, an average of seven to nine times with the James Hardie story. What is also very encouraging is that traffic to our website by female consumers had increased seven times over the same period last year.

Let's now turn to page 8; the second of our three core strategic initiatives, is to penetrate and drive profitable growth in repair and remodel segments. A key component of this strategy that we discussed in Investor Day back in May, is about driving the high value product mix. On this page, you see the impact, this particular strategy is having on our North American business.

Starting on the left-hand side, what you see here is a plot about current product portfolio in North America across two key criteria, price and value. In North America, we define our high value products as our Hardie brand Exterior products, Hardie brand Exterior products with ColorPlus technology and all of our Hardie brand innovations, including the recently launched Hardie panels. The focus of our strategy in driving a high value product mix, is to create awareness and having higher demand for our differentiated line of products with homeowners in the remodeling segments, where our value propositions are strong. In turn, it generates increased sales and margin for our customers and for us.

Key strategic action we will execute into drive high value product mix are; one, shift in demand from Cemplank products to Hardie brand experience where appropriate. Tow, driving penetration of ColorPlus technology products in R&R segments. And three, expand into adjacent markets, with our market-led innovations. On the right hand side, what you see here is a significant impact this strategy has had on our recent financial results in North America. Our teams are partnering with our customers to drive a higher value product mix and you can see the results in Q1. The blue line on this chart, representing percent volume growth for each quarter from fiscal year 2020 to Q1 of fiscal year 2022. The green bars represents percent price mix growth across the same time period.

If you focus on Q1 fiscal year 2022, you will observe the real impact that our strategy of driving high value product mix had on our financial results. Not only did we see strong volume growth of 21%, but equally important, we also saw a significant step change price mix growth of 7%. What this indicates, is that by partnering closely with our customers, we have been successful in shifting through high value product mix and driving profitable growth.

While not shown here, we have had similar success in Europe and Australia, New Zealand in delivering similar strong results. Expansion of high value product mix for growing our overall volume, along with lean manufacturing execution, were the key drivers in offsetting input cost inflation and marketing investment in the first quarter. It enabled us to deliver a strong leverage to our bottom line in all three regions, North America, Europe and Asia Pacific.

Turning now to page 9 for an update on innovation. In May of 2021, we announced the launch of three new global innovations; Hardie Textured Panels in North America, Hardie Fine Texture Cladding in Australia, and Hardie VL Plank in Europe. We had very good traction with market acceptance and penetration of all three products since the launch. We continue to partner with our customers to drive awareness and adoption. Feedback from homeowners and our customers in North America have been overwhelmingly positive. Hardie Textured Panels deliver the contemporary design solutions that fit any homestyle that homeowners want and need. In addition, they offer protection properties such as durability, water resistance and fade resistance. What you see here are four examples of Hardie Textured Panels on two different homes in Oregon, one in California, and one in Utah. What I'd like to point out here about these pictures, is how Hardie Textured Panels are prominent in a variety of home designs, from contemporary look to coastal, to mixed design.

Turning now to page 10; similar to North America, feedback from homeowners and customers in Australia are also very positive. What you see on this page are four examples of Hardie Fine Texture Cladding in the Australian market, which as you can see, helped to augment the modern design look that's prominent throughout the continent. As with Hardie Textured Panels in North America, Hardie Fine Texture Cladding offer endless design possibilities for homeowners, while delivering on protection that homeowners need, durability, water resistance and non-combustibility.

Moving to page 11; in Europe, we are also very pleased with the progress of Hardie VL Plank product. Installers have been consistent in their positive feedback about the time savings that Hardie VL Plank offers compared to competitive solutions. Hardie VL Plank saves approximately 20% on total installation time. On this page, you see examples of Hardie VL Plank in the U.K. and French markets. What I would point out, is how Hardie VL Plank helps to protect and provide a mixed design modern look, which is becoming more popular with homeowners across the Western European continent.

We're excited about these new innovations and how they will allow us to continue to penetrate and grow in large adjacent set markets, in each of our three operating regions. While we're excited about the early success of these three new innovations, our global innovation program is much bigger than just these three products. Our innovation team is focused on our innovation pipeline, to ensure we will have additional new innovations to provide endless design possibilities, with superior durability and protection for the homeowners around the world.

Turning to page 12 for a summary of our global results for the first quarter. This is now the ninth consecutive quarter that we delivered consistent financial results, growth above market and strong returns. Specifically in the first quarter, we delivered global net sales of over $843 million, which is 35% growth versus the prior corresponding period, and we delivered a global adjusted net income of more than $130 million, which is an increase of 50% over the prior corresponding period. Most important is that we delivered strong financial results in all three regions for four consecutive quarters.

As all three regions delivered exceptional double-digit growth in both net sales and EBIT in North America, driven by strong momentum in high value product mix penetration and share gain, we achieved net sales of more than $577 million at 28% growth. EBIT of more than $169 million and 29% growth, for a continued strong EBIT margin of 29.3% for the quarter.

In Europe, we delivered four straight quarters of strong organic growth. Net sales of more than EUR103 million, 37% increase over the prior corresponding period. EBIT of more than EUR13 million for a very good EBIT margin of 13.1%. In Asia-Pacific, with strong performance in all three countries, we delivered net sales of AUD184 million at 33% growth and EBIT to AUD50 million at 50% growth, and a strong EBIT margin of 27.4%.

Our strategy of driving penetration of high value product mix in all three regions along with lean manufacturing execution, were the key drivers in delivering positive leverage to the bottom line in all three regions. This was achieved against the backdrop of high input cost inflation, and higher investments in marketing and innovation during the quarter.

I would like now to turn over to our CFO, Jason to provide additional detail on our financial results.

Jason Miele -- Chief Financial Officer

Thank you, Jack. Good morning, and good evening, everyone. I'll start on slide 14 with our global results. This is our fourth straight quarter with record global results, including quarterly records for net sales, adjusted EBIT and adjusted net income. This also marks the fourth consecutive quarter we've been able to deliver strong results in all three regions simultaneously. In the first quarter, each region again delivered double-digit net sales growth and double-digit EBIT growth, while also expanding their adjusted EBIT margin.

In my view, our ability to expand global adjusted EBIT and EBITDA margins and our abilities to drive leverage on our outstanding top line results is the real standout of our first quarter results. We invested significantly in our strategic initiatives during the quarter with SG&A up 36% globally, and like most companies, we have significant inflationary cost pressures. Yet, we were able to still drive margin expansion and drive leverage to the bottom line, with adjusted net income improving 50% on a plus 35% net sales performance.

As I just mentioned, global net sales increased 35% to $843.3 million. This excellent top line result was driven by strong volume growth in all three regions, totaling 25% global volume growth and net sales growth included 10% price mix improvement, as our teams in all three regions successfully gained momentum in driving a higher value product mix.

Through continuous improvement of lean manufacturing globally and integration of our supply chain with our customers, we were able to translate that strong top line results into an even stronger bottom line outcome. Global adjusted EBIT improved 45% and global adjusted net income increased 50%. Global adjusted net income in the first quarter of $134.2 million represents another all-time record high for a quarter. And as I mentioned earlier, we were able to expand our global adjusted EBITDA margin by 110 basis points to 26% in the first quarter.

We continue to generate strong cash flow, with operating cash flow of $184.1 million in the first quarter. It is worth noting that these first quarter results are not reflective of simply comping and easy prior quarter due to COVID. Our first quarter results last year included our global net sales down only 5%, adjusted EBIT flat and adjusted net income was only down 1% in the prior period.

I will now review each region in more detail, starting with North America on page 15. In North America, the team delivered another outstanding quarter. In the first quarter, net sales increased by 28% to $577.1 million. This represents the highest net sales in one quarter ever achieved by the North American business. It is worth noting that this first quarter result was against a comp of flat last year. This significant growth was driven by our continued focus to partner and integrate with our customers. In addition to strong volume growth, the team began gaining momentum in high value product mix penetration with our customers. Price mix improved by 7%, and our expectation is that we will deliver price mix improvement of 7% to 9% for the full year.

These outstanding top line results were coupled with even better adjusted EBIT growth, which increased by 29% in the quarter to $169.3 million at an EBIT margin of 29.3%. The exceptional adjusted EBIT and margin results were driven by strong organic volume growth, particularly of high value products and continued LEAN manufacturing savings. These margin accretive items were partially offset by our significant investment in growth initiatives and inflationary cost headwinds. The North America team continues to deliver consistent double-digit net sales growth at a step changed EBIT margin level.

Turning now to page 16, to discuss the European result. In Europe, the team delivered a fourth straight quarter of strong results and a third straight quarter of double digit net sales growth. In the first quarter, net sales increased 37% to EUR103.3 million. The team remains focused on high value product mix penetration with our customers.

Fiber Cement net sales increased 91% in the quarter, which contributed to a 9% improvement in price mix. The combination of strong volumes, improved price mix, as well as lean improvements, resulted in Europe adjusted EBIT margins expanding year-over-year to 13.1%. Fiscal year 2022 represents the start of the fourth full year since the Fermacell acquisition. The European team is now fully integrated into James Hardie, and they have started fiscal year '22 with significant momentum.

Let's now move to page 17 to discuss Asia-Pacific. In the first quarter, net sales increased 33% in Australian dollars. You will note that Asia-Pacific price mix was negative for the quarter. This was due to the significant shift in Philippine sales volumes, as a percentage of the total. In the prior first quarter, the Philippines was shut down for much of the period due to COVID restrictions.

However, in our Australia and New Zealand business, we are achieving similar results to that of North America and Europe, with price mix growth of 6% as the teams have strong momentum and high-value product mix penetration with our customers. The strong top line results in the first quarter were translated into even stronger bottom line results, with adjusted EBIT growth of 50% to AUD50.4 million at an EBIT margin of 27.4%. That is 300 basis points of margin expansion versus the prior first quarter.

Moving now to page 18 to discuss operating cash flows and capital expenditures. We had strong operating cash flow of $184.1 million in the first quarter and the trailing 12-month operating cash flow was up 56% to $781.8 million. On the right hand side of the slide, you see a summary of our capital expenditures. In the first quarter, capital expenditures totaled $43.4 million. Production at our Prattville, Alabama facility continues to ramp up, and is on track to be the best start-up in our history globally. Sheet machine one started saleable production in March. Sheet machine two begin saleable production in July. We believe this additional capacity will help us to continue to drive profitable growth and gain market share throughout fiscal year 2022.

Looking forward, we expect total capital expenditures to average between $250 million to $350 million per year over the three-year period of fiscal year '22 through fiscal year '24. This is an increase to our prior capital expenditure guidance and reflects greater investment in future capacity, both brownfield and greenfield, in all three regions, as we continue to drive profitable growth. Adding the right capacity at the right time, positions us to continue to drive market share gains and flow products to our customers and the end users.

Moving to page 19, we'll discuss capital management and allocation. Our strong capital structure and cash flows have enabled us to execute on all of our capital allocation objectives. We continue to preserve a strong liquidity position and financial flexibility, and we are positioned to continue to invest in organic growth, including capacity expansion, market-driven innovation and marketing directly to the homeowner. We remain focused on investing in growth and returning capital to our shareholders, while continuing to strengthen our balance sheet.

Finally, let's turn to page 20 to discuss guidance; our significant momentum and high value product mix penetration in all three regions combined with continued market share gains and LEAN execution, gives us confidence in raising the adjusted net income guidance range, while also committing to further investment in our growth initiatives. We have raised our adjusted net income guidance to a range of $550 million and $590 million. The comparable figure for the prior year was $458 million. The revised guidance range represents a 20% to 29% year-on-year improvement in adjusted net income.

Specific to our North America segment, we're providing two points of guidance. First, for North America net sales for the full year fiscal year 2022, we expect growth greater than 20%, and we expect price mix growth of between 7% and 9%. We've also revised our guidance regarding cost of goods sold, inflation and investment in our strategic initiatives. Globally, we are anticipating between $120 million to $150 million in cost of goods sold, inflationary headwinds in fiscal year '22 versus fiscal year '21. We have also increased our fiscal year '22 expectation for investment in our growth initiatives. We now expect to invest between $100 million to $120 million in strategic growth initiatives.

Our first quarter results were exceptional. We delivered margin expansion in all three regions among the backdrop of global cost inflation, and while investing aggressively in our strategic growth initiatives.

We have now concluded our prepared remarks. I'll hand it over to the operator to commence the Q&A portion of today's meeting.

Questions and Answers:

Jason Miele -- Chief Financial Officer

[Operator Instructions] First question comes from Peter Steyn from Macquarie. Please go ahead.

Peter Steyn -- Macquarie -- Analyst

Good evening, Jack and Jason. Thanks very much for your time and congrats on the results. So two questions, just on your capex guidance, Jason, you mentioned greenfield and brownfield intentions in all three regions. Could you perhaps give us a little bit more detail there in terms of some of the nascent thinking, where the investment is likely to focus?

Jason Miele -- Chief Financial Officer

Yeah Peter, obviously we're focused on high value product penetration. And so as we think about new capacity, it'll be through that lens, as well as innovation. But as we mentioned earlier, we do expect to have greenfield capacity expansion in all three regions, so in Australia, Europe, as well as North America.

Peter Steyn -- Macquarie -- Analyst

So we are moving closer to Fiber Cement in Europe, are we? In the context of a sales performance?

Jack Truong -- Chief Executive Officer and Executive Director

That is the plan, Peter.

Peter Steyn -- Macquarie -- Analyst

Okay. Perfect. And then my second question would just be around the cost guidance, obviously increasing that -- just curious on the SG&A and R&D spaces are largely a function of increased marketing spend? And is that a consequence of better outcomes than what you've been expecting at this stage, that you're wanting to ramp up that investment? And perhaps just a little bit of detail and sort of strategic thinking around that?

Jack Truong -- Chief Executive Officer and Executive Director

Peter, that's a very good question. Yes. So as I had mentioned, the early results of our campaign have been very successful, allows us to really reach the right target groups, which is really the Christine's, the definitive female homeowners that fit our demographics as well as, they live in the homes that really need to be remodeled. And then, so it is a -- based on those data and the financial results that are coming out, that what we see is that, there's a really good path for us to continue to not only continue with the program and accelerate and then expand throughout the U.S., as well as in other part of the world that we operate in. And second is that we also have a full line of innovative products that that we plan to launch and commercialize. So it is about being able to drive growth with high margin and then be able to reinvest some of that to continue with that path.

Peter Steyn -- Macquarie -- Analyst

Yeah. Perfect. That makes sense. And in the meantime, you've got the capacity to very easily serve the market that's coming at you, as you see it and via incremental investment from a marketing point of view.

Jack Truong -- Chief Executive Officer and Executive Director

Correct.

Peter Steyn -- Macquarie -- Analyst

Perfect. Thanks. I'll leave it there. Appreciate it.

Jack Truong -- Chief Executive Officer and Executive Director

Thanks Peter.

Operator

Thank you. Your next question comes from Andrew Scott from Morgan Stanley. Please go ahead.

Andrew Scott -- Morgan Stanley -- Analyst

Jack and Jason, well done and great results. Just couple of questions. Jack, given the market strength, just interested in your thoughts on announcing a second price increase for this year?

Jack Truong -- Chief Executive Officer and Executive Director

Well Andrew, our plan has always been that we do value pricing, and then so we will be taking our annual price increase about the same time every year. The only difference is that, this past year, we moved our price increase up to realign with the beginning of the calendar year. So it is our -- that is our path.

Andrew Scott -- Morgan Stanley -- Analyst

Okay, understood. Just thought the market might have been strong enough to just sustain a second increase.

Jack Truong -- Chief Executive Officer and Executive Director

Well, it is -- our strategy is really about delivering more value to our consumers and customers, and it's really about making sure that we can market the high value products that deliver strong value proposition to the homeowners. And that is our strategy, and that's what you saw in our Q1 results, that we were able to get that price mix to go higher, much higher than the normal price increase -- invoice, price increase for the sake of invoice price increase.

Andrew Scott -- Morgan Stanley -- Analyst

Absolutely. That was a great outcome there. Just second question, we can't talk about industrials at the moment without focusing on supply chain. So just interested, can you talk about any specific inputs for you that are not just seeing price appreciation, but actually difficulty in obtaining the supply? And in terms of your supply to customers, how is that tracking, maybe if you can talk about service metrics, whether it's delivery in full or other metrics, please?

Jack Truong -- Chief Executive Officer and Executive Director

Yeah. I think, if you look at our -- I think slide 8 or 9, that that really shows the volume growth that we have in North America, the past seven or eight quarters. So we were able to deliver volume to the marketplace in North America in double digit, and we will continue to do so. And as you know, that we have Prattville, I think Jason mentioned that the start-up of Prattville line 1 is going well and we just started line 2. And together with the LEAN approach and in our supply chain integration with our customers, that would allow us to essentially make the right products that the market needs, and then be able to flow the product from our production line to the marketplace. So these are the key initiatives that we have in driving within our company, to ensure that we serve the markets, on what the products can deliver the value.

Andrew Scott -- Morgan Stanley -- Analyst

Okay. Thank you. That's [Indecipherable].

Jack Truong -- Chief Executive Officer and Executive Director

Thank you.

Jason Miele -- Chief Financial Officer

Thanks Andrew.

Operator

Thank you. Your next question comes from Lee Power from UBS. Please go ahead.

Lee Power -- UBS -- Analyst

Hi Jack. Hi Jason. I was expecting to see COGS guided to maybe drive some of the impact upgrade. Can you just talk a little bit about what you are seeing there? Now that COGS inflation guides to the top end of the rage, maybe around freight and pulp, just because it seems like a lot of them had started declining? So I'd just like to get your thoughts. Thank you.

Jack Truong -- Chief Executive Officer and Executive Director

Yes, Lee it's a good question. So I'd say it's more of a narrowing of a range than increasing. So obviously, we have three more months of actuals under our belt and better site lines into the future. Certainly pulp and freight haven't -- while they haven't gotten down significantly, they've normalized a bit. The other piece of that guidance would be our expectations around volumes have increased since the last time we spoke, and that guidance is in total dollars. So that's going in the opposite direction.

Lee Power -- UBS -- Analyst

That makes sense. Thank you. And then maybe you can just talk about Australian manufacturing? Have you seen any impact through lockdown at Roseville?

Jack Truong -- Chief Executive Officer and Executive Director

No. Fortunately, we're able to continue to run our plant in Australia, both in Roseville and Carole Park to be able to serve our customers.

Lee Power -- UBS -- Analyst

Cool. Thank you.

Operator

Thank you. Your next question comes from Lisa Huynh from Citi. Please go ahead.

Lisa Huynh -- Citigroup -- Analyst

Hi, good morning, Jack. Good morning, Jason. I'm just interested in the ASP uplift you guys saw in North America. I guess, can we kind of talk about that in a little bit more detail about contribution to the ASP uplift we saw from pulling forward the annual price increase, but also higher value products?

Jack Truong -- Chief Executive Officer and Executive Director

Yeah, so this is really the first full quarter that we really fully execute the high value product mix penetration. So the way to think about that is really -- two-third of what we've seen there is really the price, the pure price and one-third to the mix. And as we have indicated at the Investors Day as well as last quarter earnings, that the number one that we would shift the market from the siding brand of Cemplank into Hardie brand, and then second as we penetrate more into the repair and remodeling market, particularly remodel and that our colder products is where we offer the highest value proposition to the markets, and so as we invest it in marketing and reaching the homeowners, and really tell you that story about the superior products that James Hardie has, and that really drove a lot of the growth of our color products.

Lisa Huynh -- Citigroup -- Analyst

Yeah. Thanks Jack. And I guess as a follow-up, of the ASP improvement that has been driven by the higher value products, would you -- it sounds like a large proportion of that is transitioning the customer base from Cemplank to the more standard Hardie board, rather than a big uptake of the textured panels as it currently stands. It's still early days, I understand?

Jack Truong -- Chief Executive Officer and Executive Director

That's correct. So the way to think about it, Lisa is that in the first quarter results, a lot of that was due to the transition from Cemplank to Hardie brand plank, so Hardie brand products. And then second is the Hardie brand Exterior with ColorPlus technology. That's what -- the product that we penetrate into remodeling segment. And then there's a little bit of the new market led innovation in there. But it's still too early for that to gain some momentum, as part of the overall mix yet. But as time goes on, we should expect to see that the color products will continue to accelerate, and then of course with the market led innovations.

Lisa Huynh -- Citigroup -- Analyst

Thanks.

Jack Truong -- Chief Executive Officer and Executive Director

Thanks Lisa.

Operator

Thank you. Your next question comes from Sophie Spartalis from Bank of America. Please go ahead.

Sophie Spartalis -- Bank of America -- Analyst

Good morning. Just with regard to the manufacturing strategy going forward, it seems that you've pulled on a lot of the brownfield and greenfield capacity. Just from a top down level, are you still envisaging having particular plant, producing particular products and how do you expect the service market or will it be more of a, I guess integrated network servicing sort of full country? Can you just walk through the strategy there, please?

Jack Truong -- Chief Executive Officer and Executive Director

Yeah, so certainly the greenfield and brownfield capacity are a really big capacity for the region. We don't move product from one region to another region. So as we begin now to really, to accelerate our growth in any of the sides, our business today now is a lot bigger than it was three, four years ago, and that the growth rate that we would expect to plan for, is that we -- that we are really getting into this stage where, it is about having more of what we call the focus factory or a certain plant really dedicated to do certain type of products, so that we can have a more integrated network to serve our market a lot better.

Sophie Spartalis -- Bank of America -- Analyst

Okay. So you're going down the route of dedicated plants for different products servicing the entire U.S. region?

Jack Truong -- Chief Executive Officer and Executive Director

Correct. So for example, I think we have announced in the last quarter earnings that the -- some of the plant in South Carolina that we're about to recommission, and that plant will be pretty much dedicated to producing our siding brand products, for example.

Sophie Spartalis -- Bank of America -- Analyst

Okay. That's clear. Thanks Jack. And then just in terms of the geographical mix that you now are seeing for these higher value product initiatives. Are you gaining share in sort of your traditionally weaker markets? Can you maybe just provide some color as to where the volumes are going, particularly in the U.S. and Europe?

Jack Truong -- Chief Executive Officer and Executive Director

Yes, you know because during -- with the recent COVID environment, the consumer behavior has really changed. Let me walk you through it. There's a couple of examples. In the U.S., we have more and more people want to remodel their homes, because the price of home is going up and certainly, new construction have not been building enough homes, to satisfy the needs in the marketplace. And so there has been a heightened awareness, that's what's needed for homeowners to do stay put, and then remodel their home. So that's -- so we can see a lot more of the remodeling activities. And so if we're able to reach those homeowners and we're about to want to remodel, and that's just where a lot more of our high value products, like the Hardie brand Exterior with color, that where we can deliver different, many different types of designs that would fit the homeowner's needs.

And until someone in new -- in Northeast of the U.S. is going to have the shingles, with the cedar shape type of look or the wood look. And then someone in the West Coast of the U.S. can have a more mortar [Phonetic] and a flat look. And we do have those products now, that can satisfy those needs. And then if you move across to Europe, for right now there's -- in Germany, for example, there is a lot more folks that like to reremodel their condo, their apartments, because that's really the living behavior in Germany, for example. And so when that happens, what we see more and more people would like to use the fiber gypsum product from James Hardie, particularly in the flooring products, where our products are very durable. It is one board that can deliver on the impact resistance, the acoustics attenuation properties, as well as complying with the fire rating code. So it's really -- a lot of these behaviors are happening now is really -- play into our strength, having the diverse portfolio of products that can satisfy those changing consumer needs.

Sophie Spartalis -- Bank of America -- Analyst

Perfect. That's great. Thanks Jack.

Operator

Thank you. Your next question comes from Simon Thackray from Jefferies. Please. Go ahead.

Simon Thackray -- Jefferies -- Analyst

Thanks very much. Good morning, Jack. Good morning, Jason.

Jack Truong -- Chief Executive Officer and Executive Director

Hi, Simon. Good morning.

Jason Miele -- Chief Financial Officer

Good morning.

Simon Thackray -- Jefferies -- Analyst

Good morning. Good morning. Just wanted to explore a little bit more, the mix shift that you observed, that got you to your 7% in North America. In particular with Cemplank, just want to understand, how much of that that shift was by convincing folks that a significant price rise in the commodity board was occurring. What was the sort of extent of price rise or price lift that you saw in commodity board, that helped convince products also to move toward value product -- branded product?

Jack Truong -- Chief Executive Officer and Executive Director

Simon, it's more of the fact that we're able now to communicate the value that we deliver, not only throughout direct customers, but also to the homeowners and the builders in that with the Hardie brand Exterior products. We have a much better service and at the same time, our product have much better -- the Hardie brand products have much better warranty for the homeowners and those are really the key value that we're able to move the market from Cemplank to Hardie brand.

Also at the same time, the Cemplank brand is more of the fighter brand. It's not so much of a brand that would deliver more value to the consumers and homeowners. And then through the Hardie brand experience, they can upgrade to different combination with colors and then really have the total Exterior of the home that have many different types of designs, that various homeowners around the country really want and need, which is not [Speech Overlap] the Cemplank brand. Yes.

Simon Thackray -- Jefferies -- Analyst

So the value, it was really the value proposition that did the shift, more so than pushing out on price in Cemplank to convince people of that value proposition metrics?

Jack Truong -- Chief Executive Officer and Executive Director

So first and foremost is really about having the homeowners, really be able to have different designs based on the broad portfolio of Hardie brand products. I mean, the Cemplank is also a very narrow brand. And also at the same time, we also took some really big price increase on Cemplank at the same time, to make sure that we can narrow that gap. So it's a combination of -- to really push it across.

Simon Thackray -- Jefferies -- Analyst

Yeah, no. That makes sense. You said, in your comments, previously price mix expectations were 4% to 6% and now 7% to 9%, which is showing great confidence and great traction with the strategy. I'm interested from both of you, how that upgrade to price mix is also influencing your thoughts around capex and capacity going back to Peter's original question, to what extent has that sort of increased your ambitions or accelerated your ambitions for capacity and capex for the business to meet future demand?

Jack Truong -- Chief Executive Officer and Executive Director

Well, I think Simon, and a couple of things that really -- I mean, that this is what we mentioned in our Investors Day, is that we're now in the position of driving -- creating and driving demand among our products and through market indirectly to the homeowners, and then of course, through innovation. Because, the reremodeling market is a very large market in the odd geography that we operate in. And up until now is for the exterior of the homes is -- no brand, and no company really talked to the homeowners and really showed them the different benefits that a product can deliver. And we are -- that's our strategy, it's really about driving, creating demand of our high value products directly to the homeowners and being able to bring that demand to our customers.

So it is a -- the early success that we have, is really give us some really good confidence, that as we continue to drive more profitable growth, that we can reinvest in marketing and innovation, and then to be in a position to accelerate growth. And through that, we know that we have to look very hard at our capacity plan and to make sure that we have the right planning in place to be able to be in a position to grow at that level.

Simon Thackray -- Jefferies -- Analyst

That's super helpful, Jack. And just against that background though, I mean, the homebuilders have talked about capacity constraints. We talked about them in Australia and New Zealand and increasingly in Europe, has that been a limiter, or do you think that's a limit on some of the volume aspirations? Are there bottlenecks in industry that are perhaps even holding back what are very impressive numbers in this quarter? Is there any sort of -- not concerns, but are there any sort of speed limiters within the industry, the construction industry for you guys, that you can see this year?

Jack Truong -- Chief Executive Officer and Executive Director

Simon, it's really about as we look at capacity and then the expansion of our footprint and growth, we want to make sure that that because now that we have building the capability to communicate directly and marketing directly to the homeowners. We want to show that we market and sell high value products as opposed to market and sell a low-end stuff. And that really add little value to the homeowners. So, we're -- as we make this transition to drive growth, it's important that, that we would as stick to our strategy for really driving growth of those key products, as opposed to just grab volume -- just for sake of volume.

Simon Thackray -- Jefferies -- Analyst

Sure. But, sorry, I think what I was saying is, are you seeing any industry bottlenecks, any industry constraints on just being able to actually physically do the work, get the work done?

Jack Truong -- Chief Executive Officer and Executive Director

Yeah. Certainly, the trend of lack of skilled labor is still -- it's a pretty strong limiting factor, and I think that has really been faced across all geographies.

Simon Thackray -- Jefferies -- Analyst

Thanks Jack. Thanks Jason. Appreciate it.

Jack Truong -- Chief Executive Officer and Executive Director

Thanks Simon.

Operator

Thank you. Your next question comes from Daniel Kang from CLSA. Please. Go ahead.

Daniel Kang -- CLSA -- Analyst

Hey Jack. Hey Jason.

Jack Truong -- Chief Executive Officer and Executive Director

Hey Daniel.

Jason Miele -- Chief Financial Officer

Welcome back.

Daniel Kang -- CLSA -- Analyst

Thank you. Glad I could do that. I had -- I guess I had a question on North America, really strong performance, another record result, sales up 28%, but EBIT was only up a similar amount by 29%. So we're not seeing that operating leverage come through. Is that due to primarily just the reinvestment and growth initiatives?

Jason Miele -- Chief Financial Officer

That's correct, Daniel. We have a very big market and integrated marketing campaign that we started, really about the beginning of the year and then accelerate through the quarter, and that will continue to be a key driver for profitable growth in our company. And to that, that is what you saw is the -- not as much in leverage to the bottom line as you see in other regions. And also at the same time we have -- this also comped toward the backdrop of very high inflation on input costs that we experienced during the quarter.

Daniel Kang -- CLSA -- Analyst

Got it. And then the price mix performance, very impressive, just very early in the campaign, both in North America and ANZ, you provided some guidance for North America 7% to 9%, which makes sense as the campaign gains momentum, accelerates. Should we expect a similar scenario for ANZ from 6% toward that 7% to 9% level?

Jack Truong -- Chief Executive Officer and Executive Director

It is too early to tell yet in ANZ, Daniel, because the key driver that we have in North America that we started, consumer marketing campaigns, just about the beginning of the year. So we are gaining that momentum here in the U.S., and we have yet to start in Australia. So that remains to be seen.

Daniel Kang -- CLSA -- Analyst

Right. I'll live with that. Thanks very much, Jack.

Operator

Thank you. Your next question comes from Keith Chau from MST Marquee. Please go ahead.

Keith Chau -- MST Marquee -- Analyst

Good evening, Jack and Jason. Just, my first question focusing on the North America division, a great outcome for the period obviously. Just wondering if you can give us some steer on how exteriors and interiors volumes are tracking in the second quarter to-date? And for the first quarter just completed, were there any particular standout regions in the U.S., where you saw outsized growth or whether there were any competitive sub-straights you think you took share from at a higher rate, than what you'd normally consider?

Jack Truong -- Chief Executive Officer and Executive Director

Well, I think for first of all your -- the first question, Keith, is that in North America, we see very, very strong growth in the low west area, and it's no surprise, that's the area where the color product gains a lot of penetration and that's also the area that high concentration of remodeling type of jobs. So it is an area that we gain a lot of momentum during this past quarter, along with, of course in our traditional area.

Keith Chau -- MST Marquee -- Analyst

Sorry, Jack, did you say the lower U.S.?

Jack Truong -- Chief Executive Officer and Executive Director

The low -- in the low west, which is the Northeast, Canada and Pacific Northwest.

Keith Chau -- MST Marquee -- Analyst

Okay. Great. And sorry, just going back on the interiors and exteriors growth in the period to-date. Can you give us a bit of a steer on where that's tracking at the moment?

Jack Truong -- Chief Executive Officer and Executive Director

Well, so our focus is really on -- really drive high value product mix. So we now look at the total volume and we're running around mid-teens.

Keith Chau -- MST Marquee -- Analyst

Yeah. Okay, cool. And then just to follow-up on the question on capex and the potential European plant, in periods gone by, you've always been a fan of kind of setting key milestones before setting new targets. One example being the EBIT margin target for the North American Fiber Cement division. So in that context, if you look at intentions to put on a fiber cement plant in Europe, what are some of the key milestones that you'd want to see as a management team for that business to be tracking that, before formally committing to a plant -- fiber cement plant in Europe?

Jack Truong -- Chief Executive Officer and Executive Director

What is right now, the key that -- we keep that in internal confidence right now. But certainly what I can share is this, is that the target that we set out for Europe back into February 2019, in terms of having the exit EBIT margin coming out at the end of this year, that we will be in that 14% range, is kind of the first milestone that we really want to and to get to -- to be able to have the right, the operating approach to put investment for fiber cement. Because to really get to that level, it means that we needed to have certain amount of revenue in fiber cement at the right mix, that will allow it to accelerate toward our ambition of having the EUR1 billion business -- of total business in Europe, with 20% EBIT margin by '29.

Keith Chau -- MST Marquee -- Analyst

That's great. Thanks very much, Jack. Appreciate your time.

Jack Truong -- Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. Your next question comes from Peter Wilson from Credit Suisse. Please go ahead.

Peter Wilson -- Credit Suisse -- Analyst

Thanks. Morning. Would you mind giving us market commentary, specifically commentary on the repair and remodel market in North America? Because in recent weeks, there has been a bit of mixed commentary from U.S. companies. Some saying that the R&R market is still very strong and others saying that demand is starting to come off. So just interested in what you're saying right now in that R&R segment?

Jack Truong -- Chief Executive Officer and Executive Director

Good morning, Peter. What we actually see is R&R market is quite strong. I mean what we saw, particularly this past quarter is that the market -- we estimate the market growth of R&R is roughly 15% in the U.S. particularly. And then also given that the, I think someone asked about the effects of COVID, the Delta variant, so -- it's still -- a lot of folks still want to work from home, and so there's the heightened need to continue to remodel their homes. And also at the same time, there's not enough of new homes been built to duly satisfy the needs of all the demand for homes out there. And also the low interest rates is still here. So we still -- we see a lot of key indicators that continue to point to a strong R&R market going forward.

Peter Wilson -- Credit Suisse -- Analyst

Okay. Good. And then in the context of your expectation in North America to deliver above market growth this year, can you speak about the customer piece right now in North America? Because I imagine, for Hardie's, there are some very happy customers, but for some of the other suppliers who are capacity constrained and have customers on allocation, that there's some pretty dissatisfied customers. Can you speak to, what it's like on the ground there now and how that customer piece feed into your expectations for the rest of the year?

Jack Truong -- Chief Executive Officer and Executive Director

Well, I think that the key for us, is that we continue to add more value to our customers by ensuring that our customers make more money, selling our products than our competition. And that means that we need -- our job and our role is to create demand of our high value products with the homeowners, so that we can bring that demand to our customers, returning through sales for them and then sales for us.

And at the same time, as we integrate our supply chain with our customers, is it has allowed us to serve the market throughout customers better than our competition. So those are the key -- two key values that we're delivering to our customers, to ensure that we continue to add more value to them, so that we continue to build stronger partnership every day with our customers. Not only in North America, but it's also in Asia Pacific and also in Europe and if you see that our results across all three geographies, they have really been -- really strong for the last four quarters.

Peter Wilson -- Credit Suisse -- Analyst

Good. Okay. Thanks Jack. I'll leave it there. Cheers.

Jack Truong -- Chief Executive Officer and Executive Director

Cheers.

Operator

Thank you. Your next question comes from Paul Quinn from RBC Capital Markets. Please go ahead.

Paul Quinn -- RBC Capital Markets -- Analyst

Yeah. Thanks very much. Just two easy questions. One, great to hear that Prattville is coming up nicely. Just if you could remind us what the volume addition to that plant is on a North American basis?

Jason Miele -- Chief Financial Officer

Yeah Paul. On a nameplate capacity basis, both those lines are 300 million standard feet nameplate capacity.

Paul Quinn -- RBC Capital Markets -- Analyst

Each.

Jason Miele -- Chief Financial Officer

Each. Correct, so total for those first two sheet machines in Prattville is 600 million standard feet, nameplate.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. And then just on ColorPlus, if you could give us an indication, I mean, that seemed like one of the areas for growth for ASP, what the market penetration is. So what ColorPlus is, as a percentage of Hardie branded products?

Jack Truong -- Chief Executive Officer and Executive Director

It is still relatively lower than the -- now expectation and it's really frankly hasn't grown -- that mix hasn't grown during the past few years. So it is a big focus for us and the key driver for us is really being able to market and reach directly to the targeted homeowners, to be able to tell that value story and that is really the key initiative of consumer market and we're driving it to really accelerate the growth of color, because that is a big opportunity for our company going forward. Particularly when -- with the remodeling segment is a growth segment that we see.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. So to help us track, where are you at now then?

Jason Miele -- Chief Financial Officer

I don't think we disclosed that...

Paul Quinn -- RBC Capital Markets -- Analyst

Any round numbers?

Jason Miele -- Chief Financial Officer

Yeah, we certainly don't disclose the split of ColorPlus versus Hardie brands, Paul.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. So there is basically no way for us to track the growth of ColorPlus, right?

Jack Truong -- Chief Executive Officer and Executive Director

Not today. But I think where -- when your contractors worry about high value product mix that we disclosed, we just include the Hardie brand Exteriors, the Hardie brand Exterior with ColorPlus, and then some [Phonetic] with all the Hardie brand market led innovations.

Paul Quinn -- RBC Capital Markets -- Analyst

Great. That's all I had. Thanks.

Jack Truong -- Chief Executive Officer and Executive Director

Thanks, Paul.

Operator

Thank you. There are no further questions at this time. I'll now hand back to Dr. Truong for closing remarks.

Jack Truong -- Chief Executive Officer and Executive Director

Well so before we end the call, I would just like to take the opportunity to extend my gratitude and thanks to all James Hardie colleagues from around the world. Our exceptional financial results in the first quarter fiscal year 2022, a direct result of their continued execution of our global strategy together as a global company. These outstanding first quarter results are another indication that we are truly a new James Hardie company. A company that continues to leverage on its global reach, its global capabilities and its global scale, to execute together and deliver on our financial results consistently. I'm excited for the remaining fiscal year 2022 and beyond, as we continue this next phase of profit growth.

Thank you and have good night and good morning.

Operator

[Operator Closing Remarks].

Duration: 65 minutes

Call participants:

Jack Truong -- Chief Executive Officer and Executive Director

Jason Miele -- Chief Financial Officer

Peter Steyn -- Macquarie -- Analyst

Andrew Scott -- Morgan Stanley -- Analyst

Lee Power -- UBS -- Analyst

Lisa Huynh -- Citigroup -- Analyst

Sophie Spartalis -- Bank of America -- Analyst

Simon Thackray -- Jefferies -- Analyst

Daniel Kang -- CLSA -- Analyst

Keith Chau -- MST Marquee -- Analyst

Peter Wilson -- Credit Suisse -- Analyst

Paul Quinn -- RBC Capital Markets -- Analyst

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