Welcome to the James Hardie Fiscal Third Quarter 2025 Earnings Conference Call. After prepared remarks by management, there will be an opportunity to ask questions. Please limit yourself to one question and one follow-up. If you have additional questions, please rejoin the queue. I would now like to hand the call over to Joe Ahlersmeyer, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and thank you to everyone for joining today's call. Please note that during the course of prepared remarks and Q&A, management may refer to non-GAAP financial measures and make forward-looking statements. You can refer to several cautionary notes on Page 2 for more information. Also, unless otherwise indicated, our materials and comments refer to figures in US dollars and any comparisons made are to the corresponding period in the prior fiscal year. Now please turn to Page 3, where you will find the agenda for today's call. I am joined by Aaron Erter, Chief Executive Officer of James Hardie; and Rachel Wilson, our Chief Financial Officer. Aaron will share key messages for the quarter and provide an update on the business before handing it over to Rachel, who will review our financial performance, detail our outlook and guidance, and speak to our cash generation and capital allocation framework. Then Aaron will return to conclude our prepared remarks before we move to Q&A. I am now pleased to hand the call over to our Chief Executive Officer, Mr. Aaron Erter.

Thanks, Joe. Before I begin, I would like to take the opportunity to thank all our employees around the world who work to safely deliver the highest-quality products, solutions and services to our customers. Just weeks ago, wildfires caused immense destruction and absolute devastation throughout the Los Angeles area. As a leadership team, our first priority was to get in touch with our teammates in the region to ensure that all of them and their families were safe and accounted for, and we were relieved to learn that they were. Zero harm is at the forefront of everything we do in our plants and in our offices, at home and out in our communities. Within the span of just a few months, two groups of James Hardie employees have been dealt unimaginably dangerous circumstances, and I am inspired by the resilience our team showed in handling these hardships and proud of how our entire organization has mobilized to support our affected colleagues in their times of need. Our purpose as a company, building a better future for all clearly guides our actions in the wake of such events. From contributing to organizations safeguarding our communities and responding in the aftermath to being a critical partner in the rebuilding efforts. Now let's begin on Slide 4. We delivered strong business and financial results in the third quarter and our year-to-date performance shows that we have a strong handle on our business as we continue to scale the organization and invest to grow profitably. We are executing on our growth strategy, and we are confident that our actions are driving outperformance in our markets and positioning us well to sustain this outperformance. We are winning by partnering with our customers, contractors and homeowners, and this success propels our organization forward and fuels…

Thank you, Aaron. Please turn to Slide 8. We again delivered results in line with our expectations in the quarter and our year-to-date performance demonstrates that we are managing decisively as we continue to scale the organization and invest to profitably grow our business. Our North American teams delivered a solid third quarter, giving us increased confidence in our ability to deliver on our second-half and full-year guidance for volume and EBIT margin. In the final quarter of the year, we will stay focused on the key strategies that have not only underpinned our financial performance this year but have also positioned us for double-digit growth in years to come, including aligning our spend to the market environment, investing ahead of recovery and evolving our plans to accelerate our market outperformance. In Asia Pacific and Europe, our teams continue to demonstrate a strong commitment to driving outperformance in challenging markets, delivering year-to-date results consistent with our expectations. In Asia Pacific, we are executing well on our strategies and winning by partnering with our customers to own the material conversion opportunity. And in Europe, our portfolio of high-value products is performing well in the early days of our long-term strategy. Across all three regions, our results and strategies demonstrate a commitment to delivering profitable growth. And finally, our strong margin delivery continues to drive our robust cash generation. We are thus able to fund our capital priorities from cash generated by our operations while also executing our returns-driven capital allocation framework. Please turn to Slide 9 for the financial highlights of our fiscal third quarter. Total net sales were 3% below last year's record third quarter, but relatively consistent with our expectations at $953 million globally. We delivered $262 million of adjusted EBITDA in the quarter with an adjusted EBITDA margin…

Thanks, Rachel. Continuing on Slide 16. With our fiscal year drawing to a close, I reflect with pride on the resilience our teams have shown throughout FY ‘25. The opportunity in the years to come is substantial and the investments we have made throughout the year are foundational enablers of scale and critical accelerators of our future growth. But this year is not over and our business leaders remain focused on finishing strong to cement a strong foundation for the coming years. Our market demand expectations have not changed, but importantly, neither has our commitment to outperforming our end markets and managing the business decisively to sustain our peer-leading profitability. Thanks to the hard work of our teams and our decision to boldly continue investing, we are set up to sustain our leading position in the industry and accelerate our outperformance. We continue to plan for recovery and growth in both repair and remodel and new construction. Our teams continuously evolve our plans to deliver sustained market outperformance and capture the value that our products demand in the marketplace. While it is still too early to quantify our expected results for FY ‘26, we are planning for sales growth and adjusted EBITDA margin expansion across each of our segments and for the company as a whole. And of course, we remain confident that we will achieve our long-term growth and profitability aspirations. Now, please turn to Slide 17, where I will conclude our prepared remarks. James Hardie's value proposition as a growth company is highly compelling with three primary pillars for shareholder value creation. First, we have the right strategy, one where our success perpetuates driving even greater success. Second, we have bold ambitions and a talented team that delights in pursuing and achieving challenging goals. And third, our financial profile is attractive and will only continue to improve as we diligently allocate capital and work towards achieving our longer-term aspirations. With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from Andrew Scott with Morgan Stanley. Please go ahead.

Thank you. Aaron, we hear a lot on these calls in the past about the pedal and clutch approach. At the risk of laboring the metaphor, it's hard to accelerate with the clutch depressed, especially when you're traveling uphill. If we do see another challenging 12 months, is there a point we have to make a decision between investing in share growth and maintaining those near-term margins?

Yeah. Hey, Andrew, great question. Look, I think we've demonstrated really throughout the last two years our ability to pedal and clutch and prioritize those growth initiatives that are really going to help us with our long-term growth. A couple of things that we never sacrifice on. Number one is our investment in our customer, right? That's something that continues as evidenced by the alliance program and that's going to serve us from a long-term standpoint. The other piece is zero harm. That's just part of our foundational imperatives. But I think one of the things that is rather new as we talk about our business really over the last two years is our Hardie Operating System. And this is something that is not a one-time initiative. This is really ingrained in our culture. It's the way we get things done and the way we get things done more efficiently. So it was really inspired by HMOS, our Hardie Manufacturing Operating System, and how do you permeate the rest of the organization with those same guiding principles. How do we get things done more efficiently? We've exhibited this not only in our HMOS system, right? If you look at this year, what I'm particularly proud of and I have to commend all the manufacturing leaders out there, but also Ryan Kilcullen, who leads our HMOS efforts is we've had lower volumes this year, but our yields have been at record levels. So as much as we think we've reached a certain level of this is as good as we can get, we continually exceed that. Then I look from a HOS perspective on things like procurement, which we just centralized about a year and a half ago, reformulation. So the list goes on and on. So to answer your question, yes, we got to continue with pedal and clutch when needed, but not forgoing investment in long-term growth. But what HOS is for us is to help aid in those investments and also for us to continue to be able to deliver those strong margins without sacrificing our volume growth.

Okay. Thank you. And just a second question, just, Rachel, if I can. On the buyback, I think there's some confusion from investors out there. And I appreciate US corporates often take a bit of a different approach to the Aussie corporates, but we're probably accustomed to companies announcing a buyback and then getting into the market as soon as internal governance allows. Can you think it was -- help us to think about how you approach to the buyback more broadly, and then was there anything specific keeping you out of the buyback at the end of the period?

Absolutely. And first and foremost, after funding organic growth and maintaining our strong balance sheet, share buyback is one of our capital allocation priorities. Share repurchases remain an important tool in our toolkit and there's no change in our philosophy around capital return. Our current buyback program authorizes us to repurchase up to $300 million of our stock, as we mentioned through the end of October 2025. We don't have any specific quarterly requirements with that. And as a reminder, we did repurchase $150 million so far this year. And it's our policy generally, however, not to comment on the timing and frequency of our share repurchase programs.

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

Hi, Aaron. Hi, Rachel. Aaron, just on the ColorPlus commentary in your stuff around succeeding. Can you give us an idea of kind of how that's been progressing?

Hey, Lee, can you repeat that? I didn't catch that.

It was just your -- you called out ColorPlus, and in the past, you've talked about growth rates for that versus the rest of the market. I think today you talked about ColorPlus succeeding. Can you give us any more incremental color around maybe how that's kind of been progressing given the importance to the business?

Yeah. Hey, I got you now, Lee. Hey, just maybe it's good to talk a little bit about the market, right? If we look at the market, I would characterize it, and I was talking to one of our largest customers today is being a bit choppy out there. If you think about R&R, which is our largest segment, it's down high-single digits. New construction is up, we would say double-digits, but trending more towards flat as we get towards the end of our year, and then multifamily is down considerably. And I think the importance of calling out ColorPlus is it really talks to some of the investments in our strategy moving forward, right, particularly focused on R&R. So I will say we're seeing pockets of where we're putting our marketing efforts and more feet on the street, where we're seeing some really good results as it relates to ColorPlus. I think the other thing we've talked so much about remodeling being down for the last year or so is for the first time, we saw remodeling sentiment improve. Really its first increase since Q4 of 2023. So, although the market is down, we always talk about and we will outperform the market and our strategy and our investments really point to us getting ready as that market comes back. So that's the importance of ColorPlus for us.

Yeah. I guess you've called out some good things there with the market and obviously, there's seasonality in your business, and then the price increase potentially shifts between the 3Q and the 4Q as well. I think I heard earlier Rachel talked to kind of a flat quarter-on-quarter volume-outcome into the fourth quarter. How do we process that? Does it sound like from your comments that what the market is continuing to slip more despite your R&R comments? Is that the takeaway from that kind of summary?

I don't know that I've said it. It's flipped more. I would say we got some positive news on the screen if you will. Rachel, you want to just handle that.

Yeah. What I'd start with is, look, we had a strong third quarter, which gives us confidence to reaffirm that FY ‘25 guidance, right? And so that's kind of step one. And so we are reaffirming what we had. We have always said that guidance at the low end, it precludes and says that we're not expecting market recovery. So we don't have a change view. And what I noted on the call is that we are expecting Q4 volumes to roughly look much like a 3Q volume.

Okay. Excellent. Thank you.

Okay. Thanks, Lee.

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

Hi, Aaron and Rachel. First question, I just want to cover off of the margin profile of the business and just noting for your FY ‘26 planning assumptions, you've talked about high single-digit inflation in raw materials, but offset by HOS savings, ultimately leading to margin expansion at the EBITDA level. So just keen to understand perhaps, Rachel, what's driving that high-single-digit cost inflation. We can see it potentially for pulp, but in the other key cost categories is not as obvious. And then what does that actually mean for HOS savings, like what's the quantum we can expect very broadly for FY ‘26, please?

Yeah. So, let's talk about FY ‘26 raw materials where we said we are expecting high single-digit inflation and what are some of the key drivers. Actually, for pulp, absent, we don't know, of course, what's going to happen with tariffs, but absent tariffs, I think we think that will be probably more benign. I think cement is our usual one that we talk about. Alumina and resins are other ones of some of our raw materials that we are looking at FY ‘26 year-over-year. Now having said those expectations, the other important point here is we fully expect that our HOS efforts and HOS savings will offset that inflation. So that is part of more than a mindset. This is something we do every year. And I think as Aaron outlined in his responses, we do feel HOS here is in its infancy and we have strong planning around how we will address this expected increase in raw material.

Okay. Thank you. And it doesn't sound like we'll be furnished guidance on HOS savings and I can respect that. But perhaps, Aaron, these exercises are ongoing and the challenge always for businesses and programs like this is how do you actually retain those benefits going forward. If the market does come back or costs fall, how do you ensure that the benefits achieved by HOS are retained and the business just doesn't start putting costs back into the business if input costs are moving the other way?

Yeah. Hey, Keith, as I said before, HOS is not a one-time initiative. It never ends for us and it's really permeating in our culture at every single function, at every single level. We have targets internally as a company, but also we have targets for each functional group as well. So as we started this, this was really about how do we get things done and how do we get things done more efficiently. And we took the example of our HMOS manufacturing system. So this is not a one-and-done. This never ends. So this is going to continue whether you have challenging markets or when markets come back. This is going to be a way of life for us.

Okay, great. Thanks very much.

Thanks, Keith.

The next question comes from Keith Hughes with Truist. Please go ahead.

Thank you. Just going back to raw materials. If you look at the results of the quarter, the margin compression from -- it's like cost is over price. What specific -- what input causing the most problems like?

So for 3Q, if you look year-over-year, I've been talking about pulp and cement, I think, on every quarter and this is no exception. So when you look year-over-year, pulp and cement are significantly up in 3Q and that is the majority of what we're seeing in terms of that raw-material inflation.

Is either one particularly worse than the other?

No, they're both up.

They're both the same. Okay. So I guess moving forward, with the price increase that you put into place for January, will we get to the point during the next calendar year where price does offset cost, or are you going to need some of the HOS savings to get to even?

Yeah. And I -- just to distinguish. I think we talk about raw-material inflation in particular, that's something where we really want to look to HOS to help us in particular. But obviously, we also do have pricing as a lever, but we don't price based on cost. We really price thinking about our value. So that's something I also want to make clear that we don't just -- it's not a cost-plus way as we think about how we price.

Yeah, I get that. Yeah. I'm just talking, in general, what is the price increase enough and also the -- for example, HOS could be enhancing the margins so do you want to add at all?

Yeah. Hey, Keith, it's a good question. I mean, from what we see right now, we're going to be able to offset some of the -- most of the raw materials through re-pricing, right? If those do go up over, right, which they can change, that's when HOS is there to help offset the entire amount. HOS also helps us as we fund growth initiatives, but also obviously helps our margins as well. That's the beauty of it for us. It's an area that we can tap into to help offset price rises in raw materials, but also help us as we try to fund growth initiatives as well.

Okay. Thank you.

Thank you.

Your next question comes from Harry Saunders with E&P. Please go ahead.

Good morning. Thanks for taking my questions. And firstly, just wondering, despite your comments earlier on R&R sentiment improving, we've seen some very weak R&R comps overnight, calling for the market to be down low to mid-single-digits in calendar '25. So could you just comment on whether you think volume growth is achievable in FY ‘26 if your end-markets were to be down by this much, please?

Yeah. Harry, what I would say is we wouldn't put those type of planning assumptions out there if we didn't have confidence in it. And the confidence that we have really goes to what we've been talking about for the last two-plus years is the value proposition that we offer, the entire value chain, but also augmented by the investments that we've been making in that. So, we believe whatever the market does, we're going to outperform it. But we see R&R and obviously, this can change as being more flattish out there and we're going to be able to grow. So that's the planning assumptions that we put out there. So at this point in time, we feel confident of that.

Understood. Thank you. And maybe sort of interrelated with that. What sort of primary demand growth expectations do you think you have into '26? And maybe could you talk through the various factors that may influence PDG over the next year, please?

Yeah. Harry, and PDG, obviously, as a measure we've talked about for years here at James Hardie. It's best to talk about that extended time period at least a year. So as I said before, we're really confident we're driving market outperformance through the cycle. Part of this too, and I'll let Rachel go through some data, but you have to look at just the sheer amount of wins that we've been having out there, which I think is going to serve us well as we look forward with our business. Think about new construction. Every single time we talk to you, we continue to gain share with homebuilders. Today, we announced David Weekley Homes. We talked about M/I. The list continues to go on and on. And just for your information, we now supply around 80% of all hard siding to homebuilders doing more than 100 homes per year. 80%, right? And those homebuilders are talking about they're going to grow in calendar year '25. And R&R, we're not only gaining important partnerships. We talked about Thompson Creek, windows and siding, the list goes on and on, but we continue to invest in our alliance program, which we're adding more and more contractors day after day. So those are some of the highlights. Rachel, you want to go through some of the data related to PDG?

Yeah. We're not really expecting FY’ 26 to be different than historical patterns. And just to put a little more data around it, if you think about FY ‘23 through FY ‘25, our North American market has been down three years in a row. Cumulatively, though, if you look at our exposure or proportions, as you think about our exposure to single-family, multifamily and R&R, our market with our mix is down about 20% over that three-year time frame. Our volumes, however, are down only 5% below FY ‘22. So if you kind of extrapolate, it says what that indicates is we've had that outperformance over the three-year period, that would mean about by about 5% per annum over this period. So when we talk about that aspiration for market outperformance, again, we always say it's not in a quarter, right? It's over a longer period of time. But we have that demonstrated track record and we expect to continue that, particularly with some of the customer wins and customer experiences that Aaron was talking about as we enter FY ‘26.

That's really helpful. Thank you. One final related one, if I may. And just in the context of high single-digit inflation, if markets were to be a bit worse than that flattish you're talking to, say, down low mid-single-digits, and given you've already announced pricing for the year, do you still think you could expand margin within that environment?

Yeah. Harry, I don't think we should be speculating on things that aren't happening.

Great. Thank you.

Your next question comes from Matthew McKellar with RBC Capital Markets. Please go ahead.

Hi. Thanks for taking my questions, and congratulations on your announcements with M/I and David Weekley. Just on the back of that, I'd like to ask about your trim attachment rates for new residential business in North America. Can you give us a sense of how your metrics have trended here over the last couple of years and what kind of improvement you've been targeting as you look forward a couple of years out?

Yeah. Matt, great question, and thank you for the congratulations. The team has done a fantastic job really partnering with our customers. Look, just very simply, over the last couple of years, we've really been focused on full wrap. So if we think about our trim attachment with all the large builders out there and we talk about some of these deals, most of these new deals that we're talking about include full-wrap solutions. So that's obviously, going to increase our trim attachment as we move forward.

Okay. Thanks for that color. And then next for me, with the threat of tariff issues between the US and Europe, do you see any need to accelerate or assign a higher priority to your plans to build fiber cement capacity in Europe?

Yeah, really good question. If we think about what we're doing with Europe, we're pleased with how we're progressing. So I've talked about Europe before. I don't think they have the right strategy in Europe. I think we have the right strategy now, a very simplified strategy that's really focused on high-value products. So those products that are really profitable for us. And it's a fiber gypsum business and also we have a fiber cement business. So very simply, we're focused on fiber gypsum wall and floor and the floor product being very innovative and then our panel product. We need to prove out our ability to win in that market. So we're in the early days there and as we proved that out, I think we'd have more of the right to be able to build a fiber cement plant and substantiate that type of investment.

Okay. Thanks very much. I'll turn it back.

Thanks, Matt.

Your next question comes from Al Harvey with JPMorgan. Please go ahead.

Good Morning, team. Just quickly on Prattville, just wanted to confirm when the fourth Sheet Machine will come online and if you can provide any detail on how much is left to come out CapEx-wise on that project.

Yeah. I'll turn it over to Rachel, but very simply, when we need it. So if we think about Prattville 3 just coming online this quarter. We have Westfield coming on this quarter so all big wins for us. The other thing before I turn it over to Rachel, I think that we're finding and I talked about HOS and our HMOS system is we're becoming more and more efficient with our manufacturing. So in essence, being able to increase our capacity through our efficiency. But Rachel, do you want to talk in more detail?

Yeah. So in terms of Sheet Machine number 4, as you know, we are still in construction, and as Aaron noted, the actual commissioning is dependent on not only the collision and the testing but as well as market demand. So we have Sheet Machine 3 now complete, we've got Westfield complete and continued work. We do feel that we've got a really good ability to support that comeback of the market and certainly over the short-to-medium term. As we think medium to longer-term and that is where some of this other capacity that I mentioned in the call went through in detail will come more into play.

Yeah, sure. Thanks for that, Rachel. And I suppose just following on from that then I suppose just given that capacity on the organic side, I just wanted to get a sense of how you're thinking about inorganic opportunities at this point in the cycle when you -- yeah, I suppose you do have that firepower, you've got, Cleburne and Crystal City potentially to come through medium-term. So how do we -- how do you guys balance up the two?

Yeah. Al, look, really good question. As we think about inorganic, I mean it's part of when we think about our capital allocation strategy, it definitely figures in there, right? Organic first, we want to maintain a flexible balance sheet. We want to return capital to shareholders, and look, evaluating inorganic opportunities. We've made it clear for some time now, I mean, really any potential acquisition has to satisfy three things. It has to accelerate our current strategy, increase our value proposition to our current customers, and then be financially attractive over the long term.

Sure. Thanks, Aaron. Thanks, Rachel.

Thanks, Al.

Your next question comes from Peter Steyn with Macquarie. Please go ahead.

Good afternoon, Aaron and Rachel. Thanks for your time. Perhaps just want to get a bit of a sense, Aaron, of how you're anticipating the R&R market in the context specifically of some of your decisions to take the architectural panel product national a little bit later in the year, presumably that sort of feeds into a general level of confidence in where you're positioned and how the market may or may not support that at a national level?

Yeah. Look, I mean, we talked a little bit about R&R, Peter, and some of the indicators out there around R&R that we look at. Look, it's the majority of our business. So, we've obviously been investing quite a bit in that when we think about the entire customer value chain. The panel product, I think you're referencing and we're going to be showcasing that at IBS is a great product that we've done well within in the Australia market. Also, we brought it over to Europe. I think more than anything, we talk about bringing our customers solutions. So, this is just another solution that we can bring to our customers as they think about differentiating and bringing the homeowner what they want. So, it's all about bringing the right solution to our customers.

Yeah. And perhaps -- sorry. Maybe I'm getting a little too deep in the weeds here, but that's obviously a pretty high-value product. So how are you thinking about the R&R opportunity in the upper end of the market as opposed to perhaps your bread-and-butter vinyl replacement markets as the year progresses?

Yeah. Peter, really good question. Look, as we think about some of the areas that can come back sooner than others as we think about the top of the market. So, certainly being able to bring those type of products to play are our benefit and helps us really to penetrate that top of the market. It's not only things like panel, but if you're out at IBS, you're going to see things like Artisan Lap, right? Those are all very high-end products and really focus on the top of the market.

Yeah. Thanks, Aaron. I'll leave it there.

Thanks, Peter.

That is all the time we have for questions today. I'll now hand back to Mr. Erter for closing remarks.

Hey, just want to thank everyone for their time, and I want to thank all the James Hardie team members around the world for all they do in helping us build a better future for all. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.