James Hardie and Sims are feeling the pinch from inflation in FY23 and investors hate the bad news
Nick Sundich, November 8, 2022
James Hardie (ASX:JHX) and Sims Metals Management (ASX:SGM) have been the latest companies to reveal that inflation was having an impact on them. Shareholders punished both companies despite unveiling positive results for 1HFY23
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James Hardie hit by the housing market
James Hardie unveiled its results for 2QFY23, reporting 10% higher sales (at US$997.6m) and 13% higher net income (at US$175.8m). The results for the entire first half were positive with US$2bn in sales and US$330.5m in net income.
But, James Hardie cut its full year net income guidance from US$730-US$780m down to US$650m-US$710m. The latter would be higher FY22’s result (US$620.7m net income) but is a significant downgrade from its previous guidance. The company blamed challenging macro-economic conditions and housing market uncertainty. It also observed unfavourable weather conditions in Australia along with high inflation and supply chain issues reared their ugly head.
Sims hit too
Metals recycling company Sims is holding its AGM today and gave a trading update. Like James Hardie, it cited high inflation which resulted in lower economic activity and consequently, lower metal scrap volumes. And measures to cut costs had only been partially successful in offsetting inflationary pressures, even with $50m less capex forecasted for the entire year.
For 1HFY23, it is expecting A$65-$75m EBIT. This would be well down from 1HFY22 which was $341.4m, and even 1HFY21 which was $78.5m. The company admitted to the short term pressures but claimed that the long term still appeared positive. CEO Alistair Field claimed the decarbonisation of steel making and the energy transition bode well for the company. But, like James Hardie, Sims could not hide from the short-term difficulties.
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