Us Housing Dead But James Hardie Is Living In Hope

Sydney Morning Herald

Friday February 29, 2008

Scott Rochfort

JAMES Hardie Industries has predicted a further slump in the already ravaged US housing industry and warned its full-year profits will be at the low end of analysts' forecasts.

The building products concern continued, however, to display it had escaped the worst of the slump, with its US operations reporting a 6 per cent fall in third-quarter revenues - which compares to the 23 per cent slump in housing starts in the same period.

Hardie reported a net profit of $US17.1 million ($18.2 million) for the three months to December 31. The previous corresponding period had an $US8 million loss. Leaving aside one-offs, Hardie said its gross profits fell 7 per cent.

"Basically I think it's a good result in a very difficult market," said Hardie chief executive Louis Gries.

The result included a writedown of $US32.4 million from the closure of one of Hardie's US plants, which had already been flagged in October.

Hardie shares yesterday fell 1c to $6.22, with Mr Gries's negative outlook on the US market casting a cloud over the otherwise strong result.

Mr Gries labelled the US market as "dead", and said he was yet to receive any sign of when the US housing market - which is recording fewer than half the starts it did in 2005 - would turn around.

"We really don't know when it will bottom out, at what level or how long it will last," said Mr Gries. "It just seems the market is dead."

The company said it expected to post a full-year net profit at the lower end of the $US175 million to $US194 million range set by analysts, ensuring it could be hit by a slew of broker downgrades today.

With Hardie's siding products often the last thing to be put on a new home, Mr Gries said the so-called lag effect meant Hardie was only starting to feel the slump in the market that began in September and October.

But he said he believed that Hardie had proved it was better prepared than any other building materials group for a downturn, given its aim of growing its share of the siding market.

Hardie's chief financial officer, Russell Chenu, said the company was also continuing to consider moving its head office from the Netherlands, where it moved for tax reasons.

Mr Chenu argued, however, that the company was continuing to gain tax benefits from having its corporate base in Holland - where it has no other operations - despite paying a higher tax rate for the third quarter.

The company has constantly stressed that its move to the Netherlands had no connection to the liabilities it has in Australia to compensate asbestos victims.

Despite the company's lowering its outlook, it provided the strongest hint yet that it may lift dividends paid to shareholders after refinancing some of its $US490 million in debt.

© 2008 Sydney Morning Herald

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