👉 Background: James Hardie is the Australian buildings material company known as the largest manufacturer of fibre cement products globally. While it was once infamous for asbestos litigation, James Hardie turned itself into a market darling, doubling in value between 2022 and 2024.

‍ 👉 What happened: This week, James Hardie’s revenue of $900 million USD fell well short of the $953 million USD expected for FY25. On top of that, its adjusted EBITDA dropped 21% to $226 million USD, with underlying profit around 20% below what analysts were pencilling in.

‍ 👉 What else: This is a VERY big miss particularly since just a few months ago, the James Hardie management team shared a fairly rosy picture about its products in the US. But with this miss, the cracks in the walls are starting to show… and investors jumped ship.

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‍What's the key learning?

‍💡Investors don’t just punish weak results, they punish weak levels of company trust. James Hardie’s numbers were pretty darn ugly, but the bigger blow was loss of investor trust in the James Hardie management.

💡Guidance is meant to be the blueprint for investor expectations. Investors and analysts use the previous financial results, plus guidance to model out what they think the business should or could be worth. But when you provide guidance, you also have a responsibility not to mislead the market (and to ensure you update the market if anything changes).

💡In December 2020, the ASX updated its recommendations to companies with regard to ‘earnings surprises’. Based on James Hardie’s previous guidance, analysts had expected profit numbers 20% higher than where they landed - so now  investors are now starting to question their trust in the management.