Welcome to the James Hardie Fiscal Fourth Quarter 2025 Earnings Conference Call. After prepared remarks by management, there will be an opportunity to ask questions. Please limit yourself to one question. 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 related cautionary and other notes on Slide 2 for more information. Forward-looking statements made during today's conference call and in the presentation materials speak only as of the date of this presentation. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements. Also, unless otherwise indicated, our materials and comments refer to figures in U.S dollars, and any comparisons made are to the corresponding period in the prior fiscal year. Now please turn to slide three, 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 begin our prepared remarks by reviewing our FY '25 accomplishments, discussing our focus and outlook into FY '26, and detailing our progress against key strategies in North America. Then he will provide an overview of our core business opportunity and speak to the long-term outlook of our organic business before discussing our combination with The AZEK Company. Rachel will then review our financial results for the fourth quarter and discuss FY '26 guidance before turning the call back over to Aaron to conclude prepared remarks. At that time, we will move to Q&A. I'm now pleased to hand the call over to our Chief Executive Officer, Mr. Aaron Erter.

Thanks, Joe. Before I begin, I would like to thank our team around the world whose dedication and hard work enable us to continually delight and win with our customers, doing so with an uncompromising commitment to safety. Together, we are living our company's purpose of building a better future for all and working towards accomplishing our mission to be the most respected and desired building products brand in the world. I also want to welcome those new to our call, along with our longstanding participants. We look forward to sharing James Hardie's compelling investment profile and detailing how we execute on creating significant value for all shareholders. Given the expanded participation on today's call, our prepared remarks will be a bit longer than usual as I intend to review some of the key aspects of our competitive positioning that are critical for developing and understanding of James Hardie's value proposition. These include the substantial runway of our material conversion opportunity against vinyl and wood, the unmatched resilience and beauty of our innovative and differentiated product offerings, our localized manufacturing, unrivaled by any other siding player, and instrumental to the growth plans of our largest, fastest-growing customers. And of course, our purposeful strategies to create demand across the value chain, winning over homeowners, contractors, and customers with our value proposition and fostering loyalty to the James Hardie brand. So with that, let's begin on Slide 4. We delivered solid business and financial results in the fourth quarter, and our fiscal year 2025 performance reflects our commitment to invest to scale the organization and grow profitably, even in a more challenging market environment. We are executing on our growth strategy and are confident that our actions are driving outperformance in our markets and positioning us well to sustain this outperformance. We…

Thank you, Aaron. Please turn to Slide 11. We again delivered solid results to close out FY '25 performance, while remaining focused on scaling the organization and investing to profitably grow our business. We achieved each of our FY '25 guidance metrics despite a more challenging macro environment as compared to May of last year when we initially provided this outlook. In North America, our team delivered a solid fourth quarter, and we achieved our guidance points both in our second half and full year for volume and EBIT margin. Our mid-30s EBITDA margin for the full year demonstrates diligent cost control and full delivery of cost savings, which together help mitigate unfavorable volume leverage from softer end markets. Looking ahead, we will stay focused on the key strategies that have underpinned our financial performance, 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, with results consistent with our expectations. In Asia Pacific, we are executing well on our strategies and winning by partnering with our customers to own material conversion opportunity. Focusing on the ANZ markets given the Philippines exit, Q4 net sales increased modestly in local currency as we offset a challenging market and outperformed peers. In Europe, we achieved record Q4 sales as our portfolio of high value products is performing well. This top-line momentum coupled with the current manufacturing facility rationalization positions Europe for improved margin performance. Across all three regions, our results and strategies demonstrate a commitment to delivering profitable growth. Our strong margin delivery continues to drive our robust cash generation, which enables us to execute on our capital allocation priorities. This includes…

Thanks, Rachel. Wrapping up on Slide 19. Our ability to expand the reach of our products by capitalizing on both underlying market growth and our material conversion opportunity and to gain share through our superior value proposition has not only supported our historic peer-leading growth, but also underlies our expectation for continued long-term outperformance. We are a profitable growth company, aligned as an organization around our purpose of building a better future for all. 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 the best team in the industry, dedicated and focused on bringing our customer partner solutions that enable them to win. And third, our financial profile is attractive and will only continue to improve as we diligently allocate capital and work towards executing our strategy. We believe our combination with AZEK will further accelerate our sales growth by an incremental 2.5 percentage points on top of our double-digit trajectory due to AZEK's faster growth profile and delivery of $500 million of run rate commercial synergies over the next 5 years. We also expect that the transaction will be accretive to our organic margin expansion target of 500-plus basis points, driven both by AZEK's own organic margin improvement potential and by the $125 million of run rate cost synergies that we expect to achieve over the next 3 years. Our combined business will be an engine of tremendous cash flow generation, and once run rate cost synergies are achieved, we expect to generate robust annual free cash flow of greater than $1 billion. And finally, I'm excited to bring together the two leading teams in the industry that will be dedicated and focused on bringing differentiated solutions to our customers to help them win each and every day. Our team is poised to execute on FY '26. We look forward to welcoming the AZEK team into James Hardie and becoming the leading solutions provider in the building products industry. With that, operator, please open the line for questions.

Thank you. [Operator Instructions] Your first question comes from Harry Saunders with E&P. Please go ahead.

Good morning, Rachel and Aaron. Thanks for taking my question. Just wondering if you could split out your internal view of North American R&R and new single-family end markets in FY '26 and maybe your approximate sort of above-market growth expectations or PDG within that guidance, please?

Yes, Harry, thanks for the question, and good to hear from you. Look, as you know, when you look at the history of our company, what we've been able to do is outperform no matter what the markets are. We've been proud of doing that. We will continue to do that. As we look at some of the external forecasts out there from an R&R perspective, you see anything from down mid-single digits to high single digits. And, again, we expect to outperform those markets in which we participate in. I think even more recently, you saw one of the large home improvement retailers as early as today talk about some of the softness in large R&R. And that speaks to the uncertainty that we're seeing in the marketplace. I think what's important is if you look at our guidance, we can tolerate that type of depression in the market because we will outperform.

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

Hi. Thanks for taking my question. Just a high-level one. Regarding AZEK and your top priorities around integration, what do you need to get right in the first, call it 6 to 12 months as a combined company to really set yourselves up to be able to achieve the commercial synergies in particular you're targeting over the first few years. Thanks.

Yes. Hey, Matthew. Great question. Look, I think more than anything, and having done this before, the most important thing you have to get right starts with people. And that means putting people in the right positions and also making sure that you retain people. And then be able to clearly lay out the priorities for them. So it all starts with people. And I'm really excited because if I look at the James Hardie team, the AZEK team that I've had a chance to have some exposure to, we truly do have the best teams in the industry.

The next question comes from Shaurya Visen with Bank of America. Please go ahead.

Good morning, Aaron. Good morning, Rachel. Thanks for taking my question. Aaron, I had a question, if something you alluded to earlier in your comments. So could you give us some more color on the recent agreements that you've signed? And I'm looking at, like, more the last 1-month. And I'm thinking more like Daiwa, CPH, Mackenzie, Davidson. What is the nature or duration or scope of these agreements, and perhaps a related question is, as you talk to your potential and existing customers, do you get a sense that you are incrementally getting more traction as AZEK's products? I'm thinking more like trim decking are complementary to yours. And directly looking at next 6 to 12 months. Thanks, Aaron.

Yes. Shaurya, thank you for the question. Look, I think just in summary here, we've been talking about our focus and putting resources around large homebuilders for some time. You can see that strategy is paying off as some of the recent wins. We talked about really having a focus on the top 200. So that's what you're seeing come to fruition here over the last couple of years. And it's -- we put an exclamation point on it with some of these newer agreements. I would say they're different. Each one of them is different, so I won't go through each one of them. But most of them are multiyear. And they include hard siding and trim as well. So you are seeing us partner more and more with these large homebuilders. And as we think forward and the opportunities not only for our core business but as we align with AZEK, there's going to be tremendous opportunity moving forward.

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

Hi, Aaron. Hi, Rachel. Thanks for taking my question. Just while I want to talk about the channel at the moment. Quite clearly, the end market demand is soft. There's -- it's been selling season didn't transpire. It's expected. So just wondering if you can give us a sense of what you're seeing in channel, how you're feeling about channel inventory levels and with a inherent [ph] risk of destocking just going back to the experience in 2022. So just seeing if, you're seeing anything like that at the moment or whether you're happy with channel inventories at the moment. Thank you.

Yes. Hey, Keith. I'm having a hard time understanding. I think I got what are we seeing out there in the channels and maybe what the inventory levels are. Did I get that correct?

Yes. That's correct. Thank you.

Yes. So, look, I think as we look at the channel and it's different for different customers, of course. But in general, I would say that we are seeing normal stock levels out there, just as a general statement. If we think about from a repair and remodel standpoint and look, one of the things that is always one of my favorite things to do is be able to be out with our customers. So I was able to be with hundreds of them at IBS, and I was able to be with many of them at our James Hardie events, whether that be at our contractor summit or James Hardie Invitational. And more recently, just being out in the field with our contractors. So from a large homebuilder standpoint, I think you're seeing some of the press out there with the different blips on the radar. But I think we're going to see a challenge from a large homebuilder standpoint as we look at single-family new construction. If we look at R&R, it continually is soft out there, and that's some of the comments that we talked about as we started this call. But as I said before, Keith, look, with that said, there's still a lot of share out there for us to be able to go out and get after. And I do believe we have the strongest value proposition. We are partnering with our dealer partners. We are partnering with our contractors. We are partnering with our large builders as we bring differentiated solutions. And no matter what the environment, we're going to go out and win.

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

Thank you. On the mid-single-digit decline in volume in North America on the guide, could you talk about what influence the interior products and multifamily is going to have on that number?

Yes, Keith, so if I look at the mid-single-digit decline, we talked about R&R being down mid single digits to high single digits. Single-family new construction, we are looking at it being flat, but it could be down, particularly some of the things that you're hearing more and more from some of the large homebuilders, the challenges they're having. And then multifamily, we would say is down, going to be down, but not as much as FY '25, because we did see it significantly down, Keith, and that's what we cited in our call. If we look at our single-family, call it exteriors business, we saw good traction and solid growth there. Really, what was a detractor was the multifamily and also our interiors business.

Your next question comes from Will Wilson with UBS. Please go ahead.

Hi, Aaron and Rachel. Evening. Just want to get a feel for how things have progressed this quarter in the U.S. Other [ph] things kind of slowed down significantly March through to April, but have started to pick up since. Is that what you're hearing on the grounds?

You want to take this one, Rachel?

Sure. I think what we are saying is that we are being a little bit more conservative in the uncertainty in the markets right now. We are seeing performance in at -- for the months to date as we would expect. But, look, we are going to be a little cautious out there, and our guidance is reflective of that. But, again, we are performing very much to our plan.

Your next question comes from Brook Campbell-Crawford with Barrenjoey. Please go ahead.

Good evening, Aaron and Rachel. Thanks for taking my question. Just I do have one on market share. The annual report notes that share gains in North America in FY '25 were positive, but below target levels, which seems a little bit at odds with all the positivity you've talked about in the prepared remarks around share gains and wins. So just if you don't mind just spending a minute or two just talking on base, perhaps what led to that shortfall in share gains in 2025 and how -- what you're going to do effectively to help change that going forward. Thanks.

Yes. Hey, Brook, just really simply and I think we mentioned this before. Our single-family exteriors business, right, which is the bulk of our business grew in what was a down market. So we're outperforming. And I think Keith just asked the question, and I gave a little bit of clarity there. Where we did see some slippage was in multifamily, which that whole category was down dramatically. And then if you look at our interiors business, it was down, call it high single digits as well. And the interior business really correlates to large interior remodeling projects. Yes, go ahead, Rachel.

I think it's also important to add as Aaron was talking with some of those wins that you've been experiencing and what are you expecting. And I think what we should talk about is there we do expect strategic acceleration, and that's reflective of that progress we are making with new construction, where we've announced those wins, but those volumes ramp up throughout the year. We've had momentum that we are building with our contract on R&R, and that's the result from that ColorPlus, which demonstrates the progress even in softer markets. And we've had contribution from new product releases like TimberHue, again, as Aaron talked about, and we expect those to build throughout the year. We've had innovations to improve on-the-wall costs, as Aaron discussed, yielding encouraging early results. So I think those are some of those strategic initiatives as we look ahead and think about volumes for next year.

Thank you. Your last question today is from Andrew Scott with Morgan Stanley. Please go ahead.

Thank you. Aaron, I was a little surprised just by the 1% ASP in North America. It seems relatively low realization versus the increase. I think you told us that you'd gone out with a mid-single-digit price increase. So can you just talk about what's driving that? Are we seeing more discounting or increased use of rebates, or is it just -- is there something in mix? And then if we extend it forward, do you expect better realization as the year progresses? Because mid-single-digit down plus a bit of PDG. So you're definitely going to need better price realization to get to the mid to the low single-digit growth for the full year.

Yes. Hey, Andrew. Thanks for the question. Look, we are continually bringing value to our customers. We are creating value in the marketplace. I think long and short of it, we are not a commodity. And if you look at our history, we've been able to consistently go out there and get value in the marketplace because of the proposition that we bring to our customers. Look, we put it in January. We put through our annual price increase. And we are recognizing our underlying ASP gains, as we anticipated. I think the thing that you're seeing there is what we were just talking about as some of this headwind as it relates to multifamily. If you would take out the multifamily just in our fourth quarter, I mean, that accounted for a headwind of almost a point and half. So, we did see some of the negative headwinds from multifamily, and it was reflected in our pricing as well. But look, as we move forward, and I think you've heard me say this since I've been sitting in this chair, is we are going to move forward and continually have positive ASP.

That is all the time we have for questions.

All right. Operator and everyone on the line, thank you. Again, I want to thank all of the team around the world who work safely to really bring our customers the solutions they need to help them drive their business. And furthering our purpose of building a better future for all. Thank you, everyone, for the time.

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