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James Hardie First-Quarter Profit Is Up, But Housing Clouds Outlook

Building materials group James Hardie Industries posted a 10% rise in first-quarter profit on Wednesday, despite a fall in U.S. housing construction, but warned of challenging market conditions ahead.

Hardie said its quarterly net operating profit for the period ending June 30 was US$39.1 million compared to US$35.5 million a year ago.

It said it was comfortable with bottom end of analysts' forecasts for the year to March 31, 2008, in a range between $187 million and $233 million.

Hardie, which makes about 80% of its sales in the United States, said it expected full-year earnings at the bottom end of analysts' expectations, and pointed to uncertainty in U.S. housing.

Hardie also announced it would buy back up to 10% of its issued capital or about 46.8 million shares to improve its capital structure.

It said new housing construction in North America fell in the period but pre-tax earnings at its U.S. fiber cement business rose slightly due to cost controls and improved selling prices.

"The outlook for North America is for further weakness in new housing activity through the remainder of the year," Chief Executive Louis Gries said in a statement.

The U.S. housing market is cooling off as higher interest rates and slowing demand take their toll, hitting the construction sectors as well as the broader stock market.

Hardie was once Australia's top maker of asbestos products and has been embroiled in a long-running dispute with the government over a fund it set up to make compensation payments to workers suffering from asbestos related illnesses.

Australia's corporate watchdog, the Australian Securities and Investments Commission (ASIC), in February began civil proceedings against Hardie and 10 present or former officers and directors, alleging the company made misleading statements over the asbestos compensation fund.

Hardie reiterated it did not expect the ASIC proceedings to have a material impact on its current financial statements, but they could become material in the future.

Shares in Hardie hit a life high of A$10.24 on Feb. 14, but fell after the ASIC charges. The stock closed Tuesday at A$7.50.

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