Fitch revises James Hardie outlook on European divestiture

Fitch Ratings maintained James Hardie International Group Ltd.'s Long-Term Issuer Default Rating at 'BBB' and upgraded the outlook to 'Stable' following the company's decision to sell its European business. The agency also affirmed the 'BBB+' rating on the issuer's senior secured notes, secured term loans, and secured revolver. James Hardie agreed to sell its European walling and flooring solutions business, Fermacell, to Holcim Group for approximately EUR840 million, or $980 million, at an 11.5x FYE 2026 EBITDA multiple.

The deal is anticipated to close in the first half of 2027, subject to customary conditions. James Hardie plans to close its European fiber cement operations. As of FYE 2026, EBITDA leverage stood at 3.9x, accounting for debt taken on to finance the AZEK acquisition in July 2025. In the first quarter of fiscal 2027, the company repaid its $400 million senior unsecured notes prior to their 2028 maturity, reducing EBITDA leverage to 3.2x.

Fitch anticipates that a combination of free cash flow and $600 million from the net sale proceeds will be utilized to further reduce debt, aiming for a deleveraging trajectory to 2.5x by FYE 2027. European operations contributed $557 million in revenue and $85 million in EBITDA in fiscal 2026, accounting for 11.5% and 7.2% of consolidated totals, respectively.

Fitch perceives the loss of geographic diversity negatively, as it may lead to increased earnings volatility during regional downturns. The company's Fitch-adjusted EBITDA margin was 24.3% in fiscal 2026. For fiscal 2027, Fitch expects EBITDA margins to range between 25.5% and 26.5%, while for fiscal 2028, the margins are projected to be between 26% and 27%, assuming cost synergies of $70 million to $80 million in fiscal 2027 and $105 million to $115 million thereafter.