Updates share moves; Adds analyst comments in paragraphs 7-8, 13

By Nikita Maria Jino

May 20 (Reuters) - James Hardie Industries JHX.AX forecast annual earnings below market expectations on Wednesday, as inflation and housing affordability pressures hit homebuilding activity in its key North America region.

The soft outlook from one of the world's top fibre cement makers underscores the pressure facing building materials manufacturers due to elevated mortgage rates, house prices, and stretched affordability.

Elevated energy prices due to the U.S.-Israel war with Iran are also weighing on household budgets, prompting homeowners to defer large-scale renovation projects.

"The operating environment remains uncertain. We are not assuming a market recovery," finance chief Ryan Lada said in a statement.

The company's Australia-listed stock slid as much as 5.1% to A$25.41, a seven-week low and its steepest intraday drop in nearly three weeks.

Net sales of $5.25 billion-$5.41 billion projected for the year through to March 2027, and total adjusted operating earnings of $1.45 billion-$1.50 billion, were both below Visible Alpha consensus at the midpoint.

With demand conspicuously absent, the challenging near-term outlook is further underscored by the latest results, said Greg Smith, an investment specialist at wealth manager Generate KiwiSaver Scheme.

"So even though Hardie has executed well operationally, it’s fighting a cyclical headwind."

The group's 2026 adjusted net income fell to $595.7 million from $644.3 million a year ago, slightly below the Visible Alpha consensus estimate of $597.7 million.

Net sales surged 25% to $4.84 billion, but missed Visible Alpha expectations, hurt by lower product volumes, weather-related headwinds and affordability pressures.

"Market conditions remained challenging, with subdued building activity and ongoing affordability pressures," the company said.

Last year's acquisition of U.S. outdoor products maker AZEK helped the topline grow in this period through integration.

However, Smith said the deal was poorly timed cyclically, with the new business exposed to the same housing slowdown.