James Hardie Profit Slides 61%, Shares Sink


Building materials group James Hardie Industries reported a worse-than-expected 61 percent drop in fourth-quarter profit on Thursday, hit by a slump in U.S. home-building, knocking its shares down as much as 8 percent.

Construction work

The company, which makes most of its earnings in the United States, warned that construction work there was unlikely to grow in face of an overhang of unsold homes, a weaker economy, poor consumer sentiment and tighter credit.

"Indicators of future housing construction activity suggest some further weakness is to be expected," Chief Executive Louis Gries said in a statement. 

Gries said the fourth quarter was disappointing because the normal seasonal pick-up in home-building expected in March in the United States had not come through.

Net operating profit, excluding expenses related to compensation it is paying to victims of asbestos-related diseases and plant closure costs, fell to $20.1 million for the January-March quarter, from $51.4 million a year earlier.

James Hardie's shares sank as much as 8.3 percent to A$5.53, and were last trading down 5.5 percent at A$5.70 in a broader market down 1.2 percent.

The company is focusing on cutting costs and increasing the market share of fibre-cement against other home-siding materials to cope with the housing downturn.

After closing a fibre-cement plant last October in Blandon, Pennsylvania, it decided to close its Hardie Pipe plant in Plant City, Florida, on Thursday, booking a A$25.4 million writedown in on the value of the plant.

It also wrote down $13.2 million in the quarter for buildings and machinery in the United States.

As a result, it booked a net operating loss of $146.9 million for the quarter, against a net operating profit of $103.1 million in the same quarter in 2007.

Its U.S. fibre-cement sales fell 20 percent in the fourth quarter as volumes fell, and its U.S. earnings before interest and tax fell 41 percent to $50.3 million due to higher manufacturing costs.

The company was once Australia's top maker of asbestos products. After several years of negotiations, it made the first payment of A$184 million ($177 million) last year for a compensation package for victims of asbestos-related diseases.