James Hardie Industries PLC

ASX:JHX

Earnings Call Analysis

James Hardie Shows Resilience Amid Market Challenges

James Hardie reported a robust start to FY '25, achieving 4% growth in net sales to nearly $1 billion and record Q1 adjusted EBITDA of $286 million, up 2% from the previous year. North American sales grew 5%, driven by a 4% price increase, achieving an EBIT margin of 31.2%. Despite market softness, strategic cost management helped maintain strong margins. Similarly, Europe saw an 8% sales increase in euros, while Asia Pacific faced a 2% decline due to lower market volumes. FY '25 guidance was reaffirmed, forecasting North American EBIT margins of 29%-31%, and total adjusted net income between $630-$700 million .

Strong Start to Fiscal 2025

James Hardie delivered a strong start to the fiscal year 2025. The company focused on driving profitable growth and executed well on strategies across all regions. Total net sales grew by 4% to just under $1 billion, while record first-quarter adjusted EBITDA reached $286 million, a 2% increase from the prior year. This was driven by robust performance across North America, Asia Pacific, and Europe.

North American Performance

In North America, net sales grew 5% in the quarter, mainly driven by a 4% rise in the average net sales price. The company implemented its annual price increase in January 2024, contributing positively to the quarter's results. Despite a slight rise in volumes to 751 million standard feet, challenges in new construction, particularly in the South, moderated growth. EBIT margin stood at 31.2%, a slight decrease of 10 basis points from the prior year. However, EBITDA grew by 5% to $263 million with an EBITDA margin increasing to 36.1%.

Guidance for North America

For the full fiscal year, James Hardie expects its North American EBIT margin to be between 29% and 31%, with total adjusted net income projected to fall between $630 million and $700 million. Capital expenditures are forecasted to be within the range of $500 million to $550 million. In the upcoming quarter, North American volumes are expected to decline mid to high single digits, ranging between 705 million to 735 million standard feet. EBIT margin for the second quarter is projected to be between 27.5% and 29.5%, while adjusted net income is anticipated to be between $135 million and $155 million.

Asia Pacific Challenges

In the Asia Pacific region, sales decreased by 2% in Australian dollars due to a 9% decline in volumes, offset by a 7% increase in the average net sales price. The market, particularly in Australia, faced headwinds from housing affordability issues and negative consumer sentiment driven by high inflation and elevated interest rates. Despite these challenges, James Hardie continues to work with homebuilder partners to identify consumer needs and develop new products. The EBIT margin for this region was 30.4%, with EBITDA declining by 9% to $46 million.

European Market Update

European net sales reached record levels, increasing by 8% in euros. Sales growth in both fiber gypsum and fiber cement products was driven by a 7% increase in volumes, despite challenging market conditions in key countries like the UK and France. In Germany, the company's largest European market, there are signs that market demand is beginning to stabilize. Innovative products like Therm25 flooring are showing promising results, with a grassroots training campaign initiated to support further growth. EBIT margin in Europe was 9.6%, with segment EBITDA growing by 5% to $20 million.

Strategic Investments and Capital Allocation

James Hardie continues to invest in organic growth while maintaining a strong balance sheet. The company expects to complete several expansions, including projects in Prattville, Alabama; Orejo, Spain; Cleburne, Texas; and Crystal City, Missouri. In the first quarter, $75 million was deployed to share repurchases, bringing the total to $225 million under the program. The company has nearly $1 billion in total liquidity and a leverage ratio of 0.66x.

Outlook for Repair and Remodel Segments

The outlook for repair and remodel (R&R) spending remains weak due to high borrowing costs and affordability pressures, leading homeowners to defer projects. Market volumes for R&R are expected to decline mid to high single digits for the fiscal year. In new construction, the first quarter saw choppy conditions as single-family homebuilders faced high rates and rising inventories. Consequently, volume growth for the company's products in single-family new construction is now expected to grow low to mid-single digits, down from the previous high single-digit forecast.

Commitment to Long-term Growth

James Hardie remains committed to long-term growth and market outperformance. The company aims to deliver 4 points of market outperformance, supporting its full-year North American volume expectations of 2.95 billion to 3.15 billion standard feet, representing flat volumes versus fiscal 2024. The company reaffirmed its fiscal 2025 guidance based on the solid start to the year and ongoing strategic actions to protect its strong margins and accelerate share gain.

Earnings Call Transcript 2025-Q1

[Operator]

Welcome to the James Hardie Fiscal First Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Joe Ahlersmeyer, Vice President of Investor Relations. Please go ahead.

[Joe Ahlersmeyer, executive]

Thank you, operator. Hello, everyone, and thank you for joining today's call. Please note that on today's call management will be referring to non-GAAP financial measures and making forward-looking statements. You can refer to several related cautionary notes on Page 2 for more information.

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 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 discuss our strategy before handing it over to Rachel, who will go through our results in more depth, detail our outlook and guidance and provide an update on our financial position and capital allocation framework. Then Aaron will return to summarize and close out our 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.

[Aaron Erter, executive]

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. Our employees truly represent the very best in our industry, and I am proud of their ongoing contributions to James Hardie's success.

Now, let's begin on Page 4. The collective effort and focus of our teams enabled a solid start to the year. I believe, our results continue to serve as proof points that we are driving profitable share gain through this dynamic and uncertain market environment and that our superior value proposition is helping our customers grow and achieve success. This is of particular importance and is especially appreciated by our business partners in what has been a challenging market.

Our operational focus starts with executing our strategy and delivering on our commitments. As I will discuss in a moment, we have strong conviction in our strategy to be homeowner focused, customer and contractor driven. But it starts with our people, and I believe, we have the best team in the industry. We are well positioned to win in the marketplace and drive consistent value for our stakeholders.

In the quarter, business conditions [ remained ] challenging. We anticipate that our markets will contract low single-digits to mid-single-digits for the fiscal year and that the second quarter will be particularly challenging. But as an organization, we're being proactive and are positioning ourselves for when markets transition to recovery. Our people are managing decisively through the current environment, relentlessly pursuing outperformance versus our end markets.

We continue to deliver robust profitability while simultaneously investing to scale for growth and gain share through our efforts across the value chain. This is a deliberate choice that will enable us to maintain our position of strength and accelerate our profitable share gain to generate sustained double-digit top line growth and even stronger margins over the long-term.

We delivered a solid start to the year. We surpassed our bottom line expectations and delivered on each of our first quarter commitments by achieving all 3 of our guidance metrics. North America volumes rose slightly in the quarter and were within the range we committed to in May despite headwinds in certain important geographic markets.

We acted to offset these pockets of softness through targeted cost savings and delivered a 31.2% North America EBIT margin, just above the midpoint of our guidance. We are investing, and we will continue to invest prescriptively and strategically across the value chain as the underlying fundamentals speak to the opportunity for sustainable growth, even as we anticipate our markets will remain challenging in the coming quarter and for the remainder of the fiscal year.

Finally, we achieved total adjusted net income of $178 million, which surpassed our expectations, driven by robust operating results across each of our regions.

In addition to delivering on our Q1 commitments in North America, I am proud of how our teams in Asia Pacific have performed while continuing with softer markets. With strong execution against our strategic priorities to defend and grow share along with the strong profitability we have continued to demonstrate in our core markets, I remain very optimistic about the future of our APAC business.

And in Europe, our teams delivered record sales, driving strong growth in our high-value products with these sales up low double-digits in the quarter. The foundation we are building today will serve as a solid platform for profitable growth in the years to come, and I look forward to sharing our continued progress along the way.

Our near-term playbook is working as we navigate the current environment, and I have confidence in our team's ability to continue to win in the market by delivering on our strong customer value proposition. This confidence underpins our ongoing commitment to outperform our end markets and enables us to reaffirm our full year guidance.

Please turn to Slide 5. During the quarter, we hosted an Investor Day where we brought our value proposition to life and showed you firsthand what it means to be homeowner focused, customer and contractor driven. We have been doing this in one form or another for many years. The enhancement in the strategy today versus those of the past is that our approach has become a holistic effort by our teams across the entire value chain.

Importantly, we are doing it the right way and not sacrificing on our foundational imperatives. Zero Harm in the Hardie operating system are our commitments to putting world-class safety at the forefront of all that we do and continually improving how we get work done across the company.

As a testament to this commitment, we recently celebrated 5 years without a lost time incident at our manufacturing plant in Orejo, Spain. Nothing is more important than the safety of our workforce. So to each of our team members who share in this achievement, I say, thank you.

Sustainability is foundational at James Hardie. Each of our employees plays a role in putting sustainability in the action and this cross-functional collaboration is driving progress towards meeting our ambitious commitments. That's why I'm so proud of our teams for recently earning James Hardie recognition by Green Builder Media as a 2024 Eco Leader, a distinction that honors the most forward-thinking manufacturers in the industry.

Next week, we will publish our FY '24 sustainability report, which I encourage everyone to read to learn more about how we're building a culture of sustainability and making progress against our ambitious goals.

And of course, when it comes to our people, I believe we have the best talent in the industry. Day in and day out I see the drive, talent, commitment and passion as we work towards our purpose of building a better future for all, and it's even better when those outside our organization agree.

Recently, 2 of our leaders, Kelly Pehler and Justine Simmons were recognized by HBSDealer as Top Women in Hardware and Building Supply, the industry's premier award for celebrating the impact of women and recognizing female leaders who possess the traits of business excellence and the potential to make a difference in their companies and communities.

Kelly and Justine were selected from over 600 nominees. Kelly's leadership, cross-functional collaboration and commitment to her team earned her recognition as an honoree for Business Excellence. And Justine's accomplishments as a results-driven and inspirational people leader earned her a spot as a Rising Star honoree. I couldn't agree more with these selections and I'm honored to have Kelly and Justine on the James Hardie team.

Put simply, everything you see on this slide is our blueprint by which together we move James Hardie forward. I remain confident in our team and our strategy. Together, they position us to execute at a high level and drive profitable share gains in all 3 regions.

Please turn to Slide 6. Our regional leaders detailed at our Investor Day how their priorities align with James Hardie's 3 strategic initiatives. As a reminder, those overall strategic initiatives are: first, to profitably grow and take share where we have the right to win; second, to bring our customers high-value differentiated solutions; and third, and finally, to connect and influence all participants in the customer value chain.

I will now briefly summarize each region's aligned strategic priorities. In North America, led by Sean Gadd, our first 2 strategic priorities aligned to the vast opportunities within our repair and remodel and new construction end markets. Within repair and remodel, we know we can go and win against vinyl and wood, driving material conversion by leveraging our superior product offering. But by building an ecosystem across the value chain, we can leverage the access that our products provide to create additional value with our customer and contractor partners.

Efforts like Dream Builder events amplify our messaging through our customers to get incremental contractors to appreciate the overall value proposition and buy into our contractor alliance program.

For new construction, it is about bolstering our share with our national homebuilder partners and extending our reach across all scaled homebuilders. We continue to integrate deeper with our existing customers as we demonstrate our unrivaled business support and the dependability that comes along with our strategically located network of manufacturing plants throughout the U.S., a clear competitive advantage.

Customer integration is taking the form of delivering the value that our homebuilder partners seek by setting goals and objectives that align with our customers' efforts around design, growth targets and efficiency.

In recognition of our unrivaled business support, this year we were once again recognized as a National Preferred Partner by David Weekley Homes, representing our 17th award in 20 years.

Meritage Homes, the fifth largest builder in the country, elected to deepen their strong relationship with James Hardie by signing a national hard siding and trim exclusive agreement extending to all divisions nationwide. This agreement expands our partnership, creating a new position for James Hardie products in several divisions and sets the standard on every new Meritage home built across the country, a win that will influence what defines a beautiful home in these communities for decades to come.

And with our third strategic priority, we are accelerating profitable share gain through targeted marketing efforts to each participant across the value chain. This means driving brand awareness and building an ecosystem that allows us to be the partner and product of choice.

Our marketing investments are vital accelerators of our market share and our leading indicators give us confidence that we are investing in the right things. We will continue to employ a prescriptive test-and-learn approach that allows us to adapt rapidly and iteratively, adjusting as needed by capitalizing on what is clearly working. We remain encouraged by the leading indicators we've previously shared with you at Investor Day around brand awareness, website traffic, qualified leads and increases in our contractor alliance program.

Regarding our Asia Pacific region, led by [ John ] O'Neill, our teams are defending and growing market share with both builders and homeowners with an emphasis on leveraging our right to win and customer integration. The material conversion opportunity is significant in our efforts to change the way homeowners remodel and builders build, position us to accelerate growth in fiber cement's category share. Finally, we continue to innovate to compete and win against brick and masonry.

The concept of right to win is integral to where our efforts and resources should be focused to drive future value, and that is why today we announced our intention to exit the Philippines market. We conducted a thorough review and ultimately determined that operating in the Philippines was not consistent with our value creation strategy. This was a very difficult decision, but it is the right decision for James Hardie.

Turning to Europe, led by Christian Claus. Our team is laser-focused on driving profitable growth through increased sales of high-value products. Within fiber cement, we continue to build a foundation for growth, concentrating our demand creation efforts with decision-makers, namely architects and specifiers. Within fiber gypsum, increasing our product penetration using innovative solutions like Therm25 remains a key opportunity for us to further drive our value proposition with customers.

The collective focus on high-value products along with our efforts to drive efficiencies across our business underpins our plans to improve the profitability of this business significantly in the coming years.

In Germany, we were recognized for our exceptional and consistent focus on our customers, receiving the German customer award, which considers transparency, customer feedback and additional traits that align to our core organizational values. I am proud to say that our team achieved the highest score ever for a winner of this award, demonstrating a real commitment to being customer driven.

Turning to Slide 7, I'll summarize how our strategy builds upon its own momentum to drive long-term value creation. Starting with demand creation. We have prescriptive test-and-learn marketing programs. Leading indicators tell us that these are working. With respect to innovative solutions, we have the right products for the right customer at the right time.

Turning to unrivaled support, we are bringing value to our customers, but increasingly, we are harnessing the power of our customers to be our best salespeople, which means having not just hundreds, but thousands of feet on the street.

And finally, what has been our heritage and what I believe our team is best in the industry at delivering is material conversion, one home, one neighborhood, one region at a time. And with the scale we've achieved today and the support we have built around our teams, we believe we can accelerate material conversion. Each individual component of this cycle is perpetuated and amplified by the others, illustrating how together they form a flywheel for long-term value creation.

Now turning to Slide 8. This is where I will share how our strategy and value creation flywheel translate to our aspirations for long-term performance. We've talked about our track record of material conversion, which has led to more than 11 million homes in North America to be clad with James Hardie. It took us years to do this to scale the business. And while this is a tremendous achievement for our organization, we accomplished this overwhelmingly to our superior product.

We continue to have what we truly believe is the best product in the market. But what excites me most is that we pulled together the best pieces of our strategies to address each individual member of the value chain and have moved to a holistic approach that is embodied in our strategy of being homeowner focused, customer and contractor driven. That is what will allow us to more than double our presence across Americas housing from 11 million to 25 million homes over the next decade.

And as we do that, we can aspire to drive peer-leading financial results in our North America business that include double-digit top line growth and 500 basis points of adjusted EBITDA margin expansion. Altogether, we believe, achieving these goals would enable us to triple our North American segment adjusted EBITDA.

Now, I would like to hand it over to Rachel to share more details about our first quarter results. Rachel?

[Rachel Wilson, executive]

Thank you, Aaron. Please turn to Page 9. As Aaron noted, our collective effort and focus has led to a solid start in FY '25, and our consolidated financial results were consistent with our expectations. In each of our regions, we are focused on driving profitable growth, and our results continue to demonstrate that we have the right strategy.

Our North America teams delivered first quarter results in line with our volume and margin guidance. And regionally, we are responding to softer markets by actioning plans to win against competitive cladding materials and positioning our business to outperform the market.

At our Investor Day, we discussed the investments we are making to scale our business and accelerate profitable share gain and these investments remain essential to sustaining our outperformance as markets transition to recovery. Funding these types of investments, especially during cyclically weaker markets, means focusing even more [ intently ] on delivering our value proposition to our customers and prioritizing investments and rationalizing expenses to defend our strong margins.

In Asia Pacific and Europe, our teams demonstrated a strong commitment to driving outperformance in top markets, delivering first quarter results consistent with our expectations. In Asia Pacific, we are executing well on our strategies to defend and grow share. And in Europe, our growth in high-value products is encouraging.

Across all 3 regions, our results and strategies demonstrate a commitment to delivering profitable growth. Ultimately, our first quarter results demonstrate how our strong margin delivery leads to substantial cash generation. This supports our growth aspirations while maintaining the strength and flexibility of our balance sheet.

Please turn to Page 10 for the financial highlights of our fiscal first quarter. Total net sales grew 4% to just under $1 billion. We achieved record first quarter adjusted EBITDA of $286 million, an increase of 2% versus the same quarter of fiscal 2024.

And finally, adjusted net income was $178 million, modestly ahead of our expectations. We continue to execute on our share repurchase program in the quarter, buying back $75 million of our stock and increasing our authorization to $300 million.

We exhibited strong say due in the quarter in achieving results within our guidance, generating solid cash flows and maintaining balance sheet strength and flexibility and deploying excess capital to shareholders.

Let's move to Slide 11. Prior to our detailed review of segment performance, we have provided a year-over-year adjusted EBITDA bridge. Ultimately, we believe, this cash-focused metric draws a more direct connection between our operational performance in the quarter and our cash generation. EBITDA also aligns to our capital allocation framework, which addresses our investment priorities and disciplined deployment of cash.

In the quarter, we delivered record total adjusted EBITDA of $286 million, an increase of $7 million or 2% growth versus the prior year. North America contributed $13 million to overall adjusted EBITDA growth primarily through mid-single-digit sales growth. Our segment EBITDA includes the impact of a noncash asset impairment charge of $4 million related to manufacturing equipment no longer needed to support growth in one product line.

Also, as expected, we incurred start-up costs in the quarter associated with recent capacity additions coming online. These startup costs will continue into the second quarter and step up modestly. Even still, our profitability improved year-over-year despite further headwinds from ongoing inflation in categories like labor, freight and cement. Importantly, we also continue to invest to scale the organization and position ourselves for future outperformance, incurring these costs in advance of anticipated volume growth.

Europe also contributed positively to overall growth, adding $1 million driven by higher volume and average net sales price, while Asia Pacific reduced overall adjusted EBITDA by $5 million as higher average net sales price was more than offset by the impact of softer market volumes. Research and development and corporate costs were mostly in line with the prior year on a percentage of sales basis, including a noncash benefit from lower stock compensation primarily related to movements in our stock price in the first quarter.

Please turn to Slide 12, where I will provide more details on first quarter results within our North American segment. North American net sales grew 5% in the quarter, primarily driven by a 4% rise in average net sales price.

We implemented our annual price increase effective January 2024 at the beginning of our Q4. Our fiscal first quarter reflected the full benefit of this price increase, consistent with our prior expectations. Volumes rose slightly to 751 million standard feet driven by low single-digit growth in our exteriors business. Volume growth across much of the country was offset by market-wide softness of new construction in the South.

Builders came into the year expecting strong growth, but persistent affordability challenges have led to more modest home buying demand. Builders have responded by slowing the pace of starts to manage their inventory of [ unsold ] homes and have maintained this pace of production.

The structural foundations for new construction growth are highly attractive. We continue to deepen our relationships with [ scaled ] homebuilders, as our expanded agreement with Meritage demonstrates, while executing against our material conversion strategy.

EBIT margin was 31.2%, down 10 basis points versus the prior year, but above the midpoint of our guidance. This includes $36 million of depreciation expense, which incorporates our new ColorPlus finishing capacity in Massachusetts, which came online in the quarter.

Importantly, we did not begin to recognize depreciation for our new capacity in Prattville during the fiscal first quarter, but have begun to do so during our fiscal second quarter.

North America EBITDA grew 5% to $263 million with EBITDA margin increasing 10 basis points to 36.1%. The benefits of our annual price increase and savings from cost initiatives were partially offset by unfavorable labor, freight, cement and start-up costs as well as the $4 million manufacturing asset impairment charge.

We are proactively responding with surgical reductions in spend to align to the current environment and market outlook. We are prioritizing investments into the contractor, customers and our product innovation, while reducing spend in areas, such as the development of new marketing collateral and [ T&E ]. Overall, the team continues to execute well as North America contends the dynamic market.

Turning to Page 13 to discuss the Asia Pacific results. Sales decreased 2% in Australian dollars, primarily due to a 9% decrease in volumes, partially offset by a 7% growth in average net sales price. Lower volumes were mostly driven by weak market demand in Australia. The Australian market continues to be challenged by housing affordability and negative consumer sentiment arising from persistently high inflation and elevated interest rates.

Despite this backdrop, we continue to work with our homebuilder partners, identifying consumer needs and collaborating on new product development, each of which better positions us to gain profitable share as markets transition to recovery. We remain focused on winning category share and will continue to do so even amidst a challenging backdrop. Encouragingly, we have seen a modest improvement in orders from homebuilder customers, that will take time for these early green shoots to translate to higher production and sales.

Asia Pacific EBIT margin was 30.4%, which includes depreciation and amortization expense of $5 million. EBITDA declined 9% to $46 million and EBITDA margin decreased 210 basis points to 34% as a benefit of higher average net sales price from favorable price and mix was offset by lower market volumes and our continued investments across the customer value chain. Similar to North America, we are pleased with the team's execution as [ it ] contend with dynamic and uncertain markets.

Turning to Page 14 to discuss the European results. Net sales reached record levels and increased 8% in euros with sales growth in both fiber gypsum and fiber cement products. We delivered 7% higher volumes even as our markets remain challenged with the impact of higher rates, continuing to impact demand for our products in key countries such as the U.K. and France.

These geographies are especially important for growth in high-value products, including our fiber cement plank offering in the U.K. and our panels business in France. We are making progress, but the market environment has been an impediment to what we see as the full growth potential for the segment.

In Germany, our largest European market, we are optimistic that market demand is beginning to bottom. Finally, on our top line performance, we are encouraged by the results of innovative new products, such as Therm25 flooring. Our initial launch has demonstrated the value this product brings to our customers, which we highlighted at our Investor Day. To accelerate this performance, we've initiated a grassroots training campaign, which will enable us to reach 3,000 installers throughout fiscal 2025.

EBIT margin was 9.6%, inclusive of $7 million depreciation and amortization expense. Segment EBITDA grew 5% to $20 million and EBITDA margin decreased 20 basis points to 15.5% as the benefits of volume leverage were more than offset by the unfavorable impact of higher freight and paper costs. The focus for the EU team is execution on growing high-value products. This strategic emphasis will support the longer-term margin expansion opportunity.

As we previously shared on April 1st, we adjusted our transfer pricing on the intercompany sale product from the U.S. to Europe. This impact for the full fiscal year, which, as we said, is approximately 200 basis points to Europe EBIT margin, will be reflected in the EU segment in FY '25 with the offsetting value fully accruing to North America, and thus, there is no impact on a consolidated basis. This impact became effective April 1st, but given the time it takes for the new higher cost inventory to work through to Europe's cost of sales, only a limited impact was felt in Europe's P&L during the quarter.

Now turning to Page 15. I'll provide our latest expectations on our end markets in North America. Starting with repair and remodel. The outlook for repair and remodel spending remains weak, with higher ticket discretionary projects feeling more pressure than other categories. High borrowing costs remain the primary challenge to affordability and enthusiasm for home improvement, which has contributed to homeowners deferring projects.

In the near term, we continue to anticipate softness from remodeling activity, and our expectation is that market volumes could decline mid to high single-digits this fiscal year. When we spoke to you in May, we shared that external data providers expected R&R to decline approximately low to mid-single-digits in calendar year 2024.

Turning to new construction. The first quarter was relatively choppy as single family homebuilders contended with high rates, rising inventories and soft traffic. Housing starts decelerated and then fell sequentially and homebuilder sentiment weakened throughout the quarter with survey participants citing softness in current traffic and sales. We believe it is prudent to moderate our view on new construction and assume that the softening in 1Q remains with us further into the year.

We now expect volume growth for our products in single family new construction to grow low to mid-single-digits compared to the external forecast, which called for high single-digit growth for calendar year 2024 from our May call. For multifamily, we still anticipate a significant decline in activity, mostly in line with the prior external forecasts.

Taken together, we see overall market volumes declining low to mid-single-digits. I cannot stress enough our commitment to outperforming in any market environment, which is why we are reaffirming our expectation of delivering 4 points of market outperformance as measured by primary demand growth, or PDG, supporting our full year North American volume expectations.

As we mentioned at our recent Investor Day, we remain bullish on the long-term prospects for repair and remodel as record home equity levels and rapidly aging housing stock should drive [ resetting ] activity for years to come. We remain similarly optimistic about the long-term prospects for new construction, given relatively lower levels of homebuilding over the last decade, have an outlook for growth in households in line with long-term trends. These structural underpinnings make it even more necessary to position ourselves now to sustain our outperformance as markets transition to recovery.

Please turn to Page 16. We are reaffirming our fiscal 2025 financial guidance. This is enabled by our solid start to the year and the actions we are taking to both accelerate our share gain and protect our strong margins. On the previous slide, I detailed our expectations for our end markets, which remain challenging. Our base case expectations are unchanged. Markets will remain challenging as we move through our fiscal year.

That said, our updated forecast for North American volume in FY '25 continues to be within the range we provided on our fourth quarter call, 2.95 billion to 3.15 billion standard feet, which represents roughly flat volume versus fiscal 2024, plus or minus 3%.

As a reminder, this incorporates 4 points of market outperformance or PDG, as detailed on the previous slide. We expect North American EBIT margin for the full year to be between 29% and 31%, unchanged from our prior expectations, with a range directionally corresponding to the volume [ range ].

We continue to prioritize the right expenses, those that are necessary to scale the company for the future and accelerate our share gains as markets transition to recovery. We also continue to expect our total adjusted net income to fall within the range we provided in May, $630 million to $700 million, and our plans for capital expenditures are also unchanged with expected spend between $500 million and $550 million for the fiscal year.

Our ability to reaffirm our fiscal year guidance demonstrates our organizational focus and commitment to controlling the controllable and resource prioritization. As we look to the second quarter, our markets remain challenging. And while we've identified actions sufficient to offset incremental weakness across our fiscal year, it will take time to recognize these [ offsets ].

With this context, our guidance for the coming quarter includes second quarter North American volumes within the range of 705 million to 735 million standard feet, down mid to high single-digits versus the prior year. Second quarter North American EBIT margin in the range of 27.5% to 29.5% and total adjusted net income between $135 million and $155 million.

Please turn to Page 17, where I will discuss our cash generation and review our capital allocation priorities. It all starts with our strong margins driving cash generation, the primary source of our available investment dollars.

In the quarter, we fully covered $130 million of CapEx spend and $75 million of share repurchase through our strong cash generation. We generated solid EBITDA, which we view as a measure to assess our cash generation abilities. Despite the challenges in our end markets, we expect to generate sufficient cash flow to fund our internal growth needs this year. And as markets transition to recovery, we expect to be even more cash generative.

As we grow our cash flows, we will diligently follow our capital allocation priorities, which, as a reminder, are first and foremost to invest for organic growth, while maintaining a strong and flexible balance sheet. Once we've achieved our 2 primary priorities, we look to deploy excess capital to shareholders. And finally, consideration of inorganic growth also sits within the full range of our capital allocation levers.

Coming back to our 2 core priorities, investing for organic growth and maintaining a flexible balance sheet. We continue to execute on our pipeline of approved expansion actions. This fiscal year, we expect to complete our expansion of sheet machines 3 and 4 and continue work on the ColorPlus finishing line in our Prattville, Alabama facility, continue our brownfield expansion in Orejo, Spain, begin work on our brownfield expansion in Cleburne, Texas, and advance the planning of our Crystal City, Missouri greenfield project.

Our financial position is strong. We have nearly $1 billion of total liquidity between our cash balance and available capacity on our revolver despite investing $130 million in CapEx in Q1 and continuing to execute on our share repurchase program. Our leverage ratio improved in the quarter to 0.66x, the 15th straight quarter at or below 1x.

Now moving to deploying excess capital. We deployed $75 million in the quarter to share repurchase, a continuation of our commitment to returning cash to shareholders. In total, we have repurchased $225 million of James Hardie stock as part of this program. In June, the Board of Directors approved a $50 million increase in this program to $300 million.

And finally, our approach to capital allocation is holistic and includes evaluating potential opportunities that may create value for our shareholders.

And assessing the merits of potential inorganic opportunities, we have established 3 [ clear ] criteria: first, the opportunity must accelerate our current strategy; second, it must enhance our value proposition to our customers; and finally, it must be financially attractive and create clear financial value for shareholders over the long-term.

We view diligent stewardship of investor capital as an essential part of our overall success and effectiveness as a management team and believe we have the right framework in place to enhance shareholder returns through capital allocation.

And with that, I'll turn it back over to Aaron.

[Aaron Erter, executive]

Thank you, Rachel. Please turn to Slide 18. We delivered a solid start to the 2025 fiscal year with strong results in the first quarter. We are driving profitable share gain and executing consistently on our strategy. This positions us well to deliver on our commitments for the year and will position us to drive performance toward our long-term financial aspirations when markets transition to recovery.

At James Hardie, we have been and are a growth company. The legacy principles that got us here are clear. We established the foundations and moats that afforded us our leading position in the market, and we did this primarily through a focus on our superior product performance.

We have been customer and contractor focused and drove efficiency in our operations through a focus on manufacturing scale and productivity. The result of our past efforts, strong growth in sales and profits, high returns and significant cash flow generation, this established our track record of growth.

Now on Slide 19, as we look ahead, we believe the future of James Hardie as a growth company is now even more compelling with 3 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 aspirations 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 work towards achieving our longer-term aspirational targets.

With that, operator, please open the line for questions.

[Operator]

Our first question comes from the line of Matthew McKellar with RBC Capital Markets.

[Matthew McKellar, analyst]

Let me first, just -- [indiscernible] me out a little bit, what are the 2 or 3 things you need to get right in the new construction space in North America over the next year to deepen your relationships with homebuilders and ensure that you're setting up the business for above-market growth over the long-term as markets improve?

[Aaron Erter, executive]

Yes. Matt, great question. Look, I think that we are getting it right with homebuilders. We've talked before about our success with the large homebuilders, whether that be the top 25 or the top 200, and it's really making sure we bring value to them. So that's understanding the needs that they have for each of the markets that they participate in.

I think the Meritage recent announcement is really key and an example of what we're doing and the value we're bringing, not to speak to Meritage, but they have really aggressive growth plans in the future. And I think it's symbolic that they picked us, right, because we're there to be able to service them around the country, right? If you think about our local manufacturing, you think about the support. The list goes on and on with the value proposition that we're able to bring them.

[Matthew McKellar, analyst]

And as a second question, at the Investor Day, you talked about wanting to accelerate material conversion and growing R&R in the Northeast and Midwest specifically. Is there anything incremental you can share with us today that gives you confidence that homeowner interest in James Hardie product in those regions specifically is increasing or that your base of contractors ready to serve increased demand for James Hardie siding is growing, even if you're not seeing it in the volumes today?

[Aaron Erter, executive]

Yes, Matt, another great question. You're 2 for 2 here. I think as we look at the challenges with R&R, we've talked a lot about the percentage of our business, that is it represents almost 2/3 of the business. But what we look at right now, obviously, is how do we set ourselves up for future growth and long-term material conversion opportunities. There's a tremendous amount of vinyl when you think about the Midwest, you think about the Northeast, where you've illustrated that and brought it to light in our Investor Day.

So what we like to talk about is some of the investments we're making. So as the markets start to come back, we're going to be there. We're going to help homeowners. We're going to help contractors to really accelerate that conversion.

So from a contractor standpoint, we're focusing on our contractor alliance program, so bringing them the support that they need. If we think about the journey for the homeowners, they decide to [ reside ] their homes, how do we make that journey shorter and easier for them. And that's a lot of what -- the branding that we're bringing.

So I look at a combination of all these things. We've talked about it before. We talked about in our Investor Day, some of the leading indicators that we look at and all of those are pointing the right way for us. So I'm very pleased with our progress.

[Operator]

Our next question comes from the line of Lee Power with UBS.

[Lee Power, analyst]

Aaron, just if we think about volumes were flat the first quarter, the second quarter has declined, and it's probably a bigger 2H Q than we would usually see. I get that the market volume slide that you've given is probably slightly softer than it was last time. Can you maybe chat a little bit about the trends that you've actually seen in the 2Q to date? Is it as simple as just the end market demands continuing to slow? Or is there something else that's going on that explains that?

[Aaron Erter, executive]

Yes. Lee, so I think probably what you're getting at is a little bit of seasonality with our volumes, if you look at it from a traditional standpoint. What our guide points to is really [ it ] reflects what we're seeing in the marketplace right now. And Rachel mentioned that as she was going through her presentation on the opening remarks. Near term in Q2, we have seen R&R. We have seen single family new construction softening a little bit. So that really reflects the guidance range that we put out there for Q2.

[Lee Power, analyst]

And then, Rachel, maybe I'd just be interested to hear how you're thinking about input costs, like the FY '25 guide unchanged? Like have your assumptions around input costs for the business changed? And maybe remind us of what you're kind of thinking into the back half?

[Rachel Wilson, executive]

Yes. So I've pointed out consistently that cement, pulp and to a lesser degree freight, the labor, our input costs that we expect to be unfavorable year-over-year into the headwinds. We are expecting that to increase as a headwind as we go into Q2. But importantly, as we think about what we've been able to do with our cost savings and with ASP being up in all regions, we are positioned to work against some of those raw material headwinds.

[Operator]

Our next question comes from the line of Keith Chau with MST Marquee.

[Keith Chau, analyst]

First question for Rachel. So in your prepared remarks, Rachel, you talked about some weakness in the sales, particularly with homebuilders. It sounds like there is a channel impact in the second quarter as homebuilding aligned to what [ we're ] seeing for underlying sales and perhaps reducing the inventory levels, but can you give us a bit more detail and clarity around that dynamic? And have you tried to quantify what the potential impact could be in the second half? Because ultimately, if you look at your volume guidance for the full year, it does assume an acceleration of growth into the second half. So underlying, it seems like there's not too much of an issue, but certainly for the second quarter there is. So can you give us a sense of what you think that potential impact is with what the homebuilders are trying to do with their starts, please?

[Rachel Wilson, executive]

Sure. So I'll start with the second quarter. And -- as you have heard on the public builder calls, they have cited affordability pressures continuing to impact demand and traffic levels, and that has caused some of the builders to moderate their start pace and manage their inventory. So we are seeing that and reflecting that in our second quarter.

But as we think about the second half of the year and in total -- first of all, we only have one quarter completed under our belt. So let's start there. I think we're really proud of the team that they did do what they said they would do and delivered and set us up. There's a lot of uncertainty in the markets right now, and there's a wide range of estimates out there. And look, we expect those near-term challenges, as I said, in Q2.

But as you think about our annual guidance, that -- really that range does continue to reflect the breadth of that uncertainty. And then, as we do recognize as soon as we get there, there's a lot of pent-up demand in new construction and R&R, so when those markets transition to recovery when they're deployed to get there.

[Keith Chau, analyst]

And my follow-up question to Aaron. So Aaron, given the -- what we're seeing, the uncertainties in the market at the moment, there's obviously a lot of discussion on SG&A at the last result call. But I'm keen to understand how you're thinking about SG&A now? Is the foot still on the pedal or do you need to press the clutch given your expectations of the volume profile into the rest of FY '25 and beyond?

[Aaron Erter, executive]

Yes, Keith, a good question here. Look, we've always said that we've set up our SG&A to have the ability to pedal and clutch if we need to. I think the key here is to make sure that we're not hurting any of our long-term strategic initiatives. So we do have some clutch efforts in place.

Let me give you an example of what those would be. So as we think to Q2, we were scheduled to do production on a new television commercial. That's something that the team, we decided we could clutch on. What I won't clutch on is making sure we're investing in our customer. So if we think about the contractor alliance program, that's something that we're full steam ahead on.

So this really is about prioritization. We're not going to hurt ourselves from a long-term standpoint. We don't manage the business quarter-to-quarter. We manage the business for the long-term, which we have a lot of confidence, as I expressed in Investor Day, that there's going to be a long-term opportunity for us to really accelerate rate growth through material conversion. And we need to make sure we're investing in the right things.

[Operator]

Our next question comes from the line of Andrew Scott with Morgan Stanley.

[Andrew Scott, analyst]

Rachel, just a quick one on the North American margin guidance. Just want to be clear, is -- the range you've given there, is that in your view consistent with just the lower volume sensitivity? Or is there anything else playing out bringing that margin down for the second quarter?

[Rachel Wilson, executive]

It is the lower volume that is consistent with that. We also pointed that we do feel raw materials are going to be particularly hard in Q2.

[Andrew Scott, analyst]

And just the exit of the Philippines, the thoughts on what that does to the margin for the Asia Pacific region?

[Aaron Erter, executive]

Yes, I can answer that. If we think from a long-term standpoint, our Asia Pacific margin will increase as we exit the Philippines. Look, just to talk about this, this was a decision we didn't take lightly. As we looked at our business, we've looked at all the segments, we've looked at all the geographies, and we need to focus on our first strategic [ tenet ], is focus on areas where we have the right to win and we're going to be able to create long-term value, and that's why we made the decision to exit.

[Operator]

Our next question comes from the line of Harry Saunders with E&P.

[Harry Saunders, analyst]

Just a question, perhaps asking a different way. Given that softer guidance for the second quarter volumes and looking at the midpoint of your full year, guidance does assume a step-up in the second half. So I guess what gives you confidence to that midpoint of sort of improvement presumably in markets versus the first half?

[Aaron Erter, executive]

Yes. Harry, I'll start out, and just reiterating, we're confident in the range. I don't know that we should talk to a lot of hypotheticals out there. This is all about our team's ability to go out there and outperform the market. So that gives us confidence in the range.

[Rachel Wilson, executive]

Look, part of our job here, as Aaron pointed out, we've got to control the controllables and we really prioritize, and with the right spend and the right investments. And if you look at the 3 points of guidance, there's a lot -- 2 points of those are very much the control the controllables.

And on the volume point, look, if the market stays as it is, that was clearly -- if it stays weak and there's no improvement, that would give us towards the lower part of the range and obviously reach the higher part of the range. We have to do around the [ 800 million ], which we've done before. So again, there's a big breadth in that range, and we're confident that's in the range.

[Harry Saunders, analyst]

And my follow-up would be just, can you give us a sense of how your internal view of R&R across FY '25 has changed over the last 3 months? I appreciate you gave us external previously. And perhaps what does the cadence of R&R comp performance look like through the balance of the year?

[Aaron Erter, executive]

Yes. Look -- Rachael, go ahead.

[Rachel Wilson, executive]

Yes. Look, for R&R, we always want to go back to -- there's 4 factors we think about, right? So first one that we always talk about is consumer confidence. And right now it has moderated a little bit given some of the geopolitical instability and frankly, uncertainty around some of the rates, or contract or sentiment, while it's positive, it basically has remained flat, same level since June. We look at existing home equity prices, and we are encouraged. We are seeing higher prices there. And for the big box transactions, unfortunately, they've been calling negativity for [ 8 or 9 ] straight quarters of decline, particularly for the larger part.

So as we think about those 4 areas, our own assessment would be that it is probably softer than when we spoke in May. In May externally, remember it was low to mid, and now some of the [ pundits ] are really talking about mid-single-digit to high single-digit decline and particularly with a little bit of a weaker half to 2H. So again, that's a bit of the external view and also our internal [ view ].

[Operator]

Our next question comes from the line of Brook Campbell-Crawford with Barrenjoey.

[Brook Campbell-Crawfrod, analyst]

Just, I guess, back to seasonality. I know you've invested a lot in sort of people and systems over the last while, Aaron, you've talked how that's really helping the business. So just, I guess, at this stage, what's your view around seasonality between 3Q and 4Q? Are you still expecting a pretty even outcome like what you were suggesting in May? Or is there some factors there to call out?

[Aaron Erter, executive]

Yes. Brook, I think if we look at the seasonality of our business over the last few years, who can really say there's been much of seasonality, right? It's been so much uncertainty. I'd like to say that the markets have been a little lumpy, if you will.

So look, as I mentioned before, really, our guide reflects what we're seeing in the marketplace. And we've given the 2Q guide, we're confident in what our range is for the entire year. So we're going to keep it at that. I don't know, as I said before, that we want to talk about any types of other further hypotheticals out there.

[Brook Campbell-Crawfrod, analyst]

And obviously, exiting the Philippines, did you do a broader sort of assessment of your business and any other aspects of the group that perhaps you're considering noncore at this point?

[Aaron Erter, executive]

Yes, Brook. So as I mentioned before, as we developed our strategy, we did a really comprehensive review of our geographies, our business segments, products, you name it. And the Philippines that -- we came to the conclusion, as I said before, that we couldn't see any long-term value creation there. It's been a nice business for us. We have a great team there. But if I think about resources, right, and where we have the right to win and we're going to get our greatest return, I felt that we could take those resources and put them elsewhere.

[Operator]

Our next question comes from the line of Peter Steyn with Macquarie.

[Peter Steyn, analyst]

May I just ask you around PDG for the year and perhaps early into next year? Just your perspective of how some of your additional contracts -- So Meritage, I'm thinking about [ Horton ] last year. How those are coming through for you annualizing, accelerating some of your performance and perhaps contributing to better outcomes relative to market? Just how to think about that?

[Aaron Erter, executive]

Yes. Pete, look, we think we're on track to hit what we stated as our goal for North America, 4% PDG. Look, we're one quarter into the year. And as I've said before, it's best to look at PDG on an annual basis. So certainly, as we think about wins like with the Meritage and as we continue to get more and more wins, that's going to certainly help our [ cause ].

[Peter Steyn, analyst]

And if I may, just a very quick follow-up on that. Rachel, inventory up $30 million in the quarter, probably not atypical for this time of the year. But anything to think about there, perhaps a little bit more going into the channel associated with some of this?

[Rachel Wilson, executive]

Absolutely. So I think one of the things we really look at is what's our service level associated with that inventory. And we want to make sure that it's investment to our customers and to delivering well. And we do feel that, that was an appropriate investment, that we had the right level of inventory to maintain those high levels of service and standards that we have [ put ] ourselves [ accountable ] to.

[Operator]

Our next question comes from the line of Daniel Kang with CLSA.

[Daniel Kang, analyst]

Congrats on the record result in Q1. Firstly, can you discuss, I guess, the competitive landscape with regards to other substrates in the quarter? Have you noticed any increase in competitive intensity? How do you see that impacting the pricing outlook?

[Aaron Erter, executive]

Daniel, great question there. Look, as we've talked before, and I think we've talked over the last 2 years, the competitive environment is as severe as ever, right? Particularly when you have tough markets, everyone is doing everything they can to get every piece of board out there -- to take every piece of board. What we do believe is, look, we continue to outperform the markets we participate in. And just a reminder for everyone, we're in large R&R, new construction, working with large builders and multifamily.

The reason I say this, it's difficult given this market context to compare kind of like-for-like with our competition. That's why I think it's really good to look at our share gains over a longer period of time. And if you do so in exterior cladding, I think you will see that we consistently have profitable share gain out there.

[Daniel Kang, analyst]

My follow-up is, with market expectations of rate cuts rising over recent weeks, I'm just wondering if that is factored into your broader guidance for a recovery in the second half from, I guess, the near-term softness that you're witnessing for 2Q?

[Aaron Erter, executive]

Yes, Daniel, it's very encouraging as we see this, right, and we hope to see more. But it's still early days. And the guidance that we put out there is reflected, what we said from the beginning of the year. I think, actually, if you go back and listen to our May call, we're about exactly where we said we would be.

[Operator]

Our next question comes from the line of Sam Seow with Citi.

[Samuel Seow, analyst]

Look, clearly, a lot of questions on guidance, but I just want to clarify, so we can look at the volume guidance in clear light. Can you perhaps talk to the interior growth assumption in your 2Q guide and also what you expect from interiors in the second half?

[Rachel Wilson, executive]

Yes. So we talked about how exteriors were up low single-digits and interiors were down, but my [ anticipation ] mid-single-digits. And so, that is the trend that we are seeing right now. And as we said, I think on the exteriors and where it goes, we are into the hypothetical and speculation, as Aaron pointed out, but we feel very comfortable with the breadth of our range incorporating those [ eventualities ].

[Samuel Seow, analyst]

And then I guess, given the emerging difference between large and small projects, I'm sure you've looked into the average side of the -- average Hardie project in the funding source. So just wondering if you could share with us any inflow or details on the, I guess, the average dollar size of a remodel and the funding source or any additional detail there?

[Rachel Wilson, executive]

Yes. I'll go back to the question before, it's a little bit on the mortgage rates coming down a little bit and how do you feel about that. Obviously, that's a nice leading indicator. But for R&R, the things that have to come down are the rates that help with -- we're getting a HELOC or credit. So those are really some of the elements that we're waiting.

And I did mention those 4 factors that we look at for R&R. So right now, we are seeing that, for R&R, we do feel still constrained. I think there is a lot of pent-up demand. We know we've got the strong fundamentals waiting there. But again, financing, particularly for these larger sized projects are an important element, and that piece is not yet in play.

[Operator]

Our next question comes from the line of Niraj Shah with Goldman Sachs.

[Niraj-Samip Shah, analyst]

Firstly, just on start-up costs. I think they were about $4 million in the first quarter. Just curious, and apologies if I missed it, but what is embedded on that front for the second quarter and then for the full year?

[Rachel Wilson, executive]

Previously, we talked about the full year being about $10 million, but we did not give specific quarterly guidance on the start-up ramp up costs.

[Niraj-Samip Shah, analyst]

But the second quarter is expected to accelerate versus the first quarter?

[Rachel Wilson, executive]

Yes, we did say that. Yes.

[Operator]

Our next question comes from the line of Shaurya Visen with Bank of America.

[Shaurya Visen, analyst]

I'm just trying to ask a question that the billion [indiscernible] guidance in a slightly different way, and I appreciate if you can't give us more color. Look, I'm just looking at the midpoint of your full year guide and sort of take the second quarter midpoint, it sort of implies second half volumes to increase like 3%. And if you think about what we've done at the first quarter, flat volumes, your second quarter implies [indiscernible] [ 7% ]. I'm just trying to think what gives you the confidence that you'll have such a sharp pickup? And especially considering, Rachel, your comments that second quarter commentary from homebuilders has been very weak, given affordability concerns.

And last one, just on PDG, I know you don't like speaking to it every quarter, but could you give us a sense if that number was around the 4% number for this quarter?

[Aaron Erter, executive]

Yes. There's a lot of questions there. Let me see if I got all of them there. But good questions. Look, I would just say again and reiterate, we're confident in the range that we have. I don't want to talk any type of further hypotheticals. As we think about the range from a high-end standpoint, if things stay weak, we would have to do [ $800 million ] plus, which we have done before. But we are confident in the range that we have.

And look, from a PDG standpoint, I'm going to stick with what I've said for the last, call it, 8 calls, is, we're not going to talk about PDG from a quarterly standpoint. It's best to look at that from an annual basis, and we'll stick with that.

[Operator]

Our next question comes from the line of Kai Erman with Jefferies.

[Kai Erman, analyst]

Just a follow-up on what Shaurya just asked. But in terms of your guided North American volumes in the second quarter and thinking about traditional seasonality, could you please step through what you've assumed for market conditions in third quarter and fourth quarter '25, if you guys are assuming a material recovery there to hit your full year guidance?

[Rachel Wilson, executive]

Yes, happy to take that, Kai. If you kind of look at the low end, again, there's the 3 points of guidance as a reminder, right? It's not just volume, you also have margin and you have net income. And obviously, 2 of those are a lot more controllable than the top line. But it was a lot of focus on the call right now on the volumes in particular because of the uncertainty in the environment and the [ confluence ] of what rate cuts will come, when will they come, when will the pent-up demand transition.

On the low end of our volume guidance range, basically, we can have the same pace, the same types of quarters and that would hit us towards the lower end of our guidance range of volume. On the high end, as Aaron pointed out, it implies doing about [ $800 million ] plus, and we have done that before. So again, that would be where are the macros and what is the environment we are in.

[Operator]

And today's final question comes from the line of Al Harvey with JPMorgan.

[Alistair Harvey, analyst]

Just looking at the organic growth piece on Slide 17, I was just wondering if you'd be willing to indicate exactly what works going on at Cleburne and the planning for Crystal City in 2025? And just to confirm whether or not that falls within the $500 million to $550 million CapEx range?

[Aaron Erter, executive]

Yes. I'll start out. So we do have some preliminary planning that should be in the guidance we gave for the Cleburne brownfield, and we do have activity that's going on in Crystal City as well there, Al.

[Rachel Wilson, executive]

Yes. There is a large -- a large piece of that end is the Cleburne brownfield. That's correct.

[Operator]

Just going to have a follow-up there. Just -- maybe just in that context, I wonder if you could just kind of step out more broadly CapEx plans in North America and how you're thinking about getting the '25/'35 over there over the next decade or so?

[Rachel Wilson, executive]

Yes. We actually detailed that in our investor presentations during the roadshow. So I can give a follow-up there with Joe to go through the detail of that, but we have a build as to what capacity would be required to reach that volume and thus, how would we plan for it. So we'll have that covered for you, and they can direct you to that slide.

[Aaron Erter, executive]

Look, I just want to end the call with saying thank you to all our team mates around the world for focusing on working safely while providing solutions to our customer partners.

Look, in summary, hopefully, what -- the takeaway here is our plan is working by our Q1 results and we are positioned to continue to accelerate growth and material conversion as the markets transition to recovery. Thank you all for the time. Appreciate it.

[Operator]

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