Rewrites throughout, adds details on outlook in paragraphs 3-4, analyst comment in paragraphs 5-6, updates shares

By Roshan Thomas and Roushni Nair

May 21 (Reuters) - ASX-listed building materials group James Hardie JHX.AX forecast tepid earnings growth for its North American business while reporting a drop in annual profit on Wednesday, hammering its shares.

The results raised fresh concerns about the group's planned $8.8 billion acquisition of Chicago-based building products maker Azek AZEK.N, as looming U.S. trade tensions and tariffs threatened to further dampen homeowner spending on renovation projects.

Investors noted weakness in its North American operations, the company's biggest market and profit engine, where volumes fell 2% year-on-year in the fourth quarter and missed consensus estimates by 1%.

The world's biggest fibre cement maker projected softening North American market volumes in 2026, sales growth in the "low single digits", and lower capital spending overall at $325 million.

"There is softness in the U.S. across both large projects and repair and renovation markets - similar to what U.S. peers have been saying," John Lockton, head of investment strategy at MST Financial, said.

While the company's guidance factored in a cut in capital expenditure for fiscal 2026 and flagged a lower earnings base, the leverage ratio after the Azek acquisition remained "uncomfortably high", Lockton added.

James Hardie had said in March it planned to fund the cash portion of the Azek deal through debt financing.

The group said on Wednesday the deal "will further accelerate our sales growth by an incremental two and a half percentage points on top of our double-digit trajectory... and delivery of $500 million of run-rate commercial synergies over the next five years".

The company's Australia-listed shares were among the top drags on the main index .AXJO, falling as much as 8.3% to A$35.30 before paring losses.

James Hardie said it expected low single-digit growth in total adjusted operating earnings in fiscal 2026, below consensus expectations of 8% growth.

It did not provide a clear profit outlook number for fiscal 2026 in its earnings announcement on Wednesday, contrary to similar announcements in the past.

Annual adjusted net income came in at $644.3 million, down from $707.5 million a year ago, but slightly ahead of analysts' estimates.

(Reporting by Roshan Thomas and Aaditya Govind Rao in Bengaluru; Editing by Alan Barona, Sonali Paul and Jan Harvey)

((Aaditya.govindrao@thomsonreuters.com; Roshan.Thomas@thomsonreuters.com))