James Hardie says US housing downturn near bottom
By Jordon ChongTue Nov 24 00:45:05 EST 2009
Mon Nov 23 13:45:05 UTC 2009
SYDNEY, Nov 23 AAP - James Hardie Industries NV says the downturn in the US housing market appears to be nearing the bottom as it looks forward to about an 18.8 per cent rise in full year underlying earnings.
The building products supplier's shares surged on the back of the favourable outlook even though the company booked a $US97.5 million ($A106.56 million) net loss for the six months to September 30, compared to a $US154.9 million profit in the prior corresponding period.
The first half result included an "unfavourable asbestos adjustment" of $US182.5 million ($A199.45 million) due to the rising Australian dollar.
After excluding asbestos compensation payments, ASIC expenses and tax adjustments, James Hardie recorded a net operating profit of $US79.2 million ($A86.56 million) in the six months to September 30, up four per cent.
The company said on Monday it expected operating profit for the full year ending March 31, 2010, excluding asbestos-related expenses, to be at the higher end of analysts' forecasts, which range from $US77 million ($A84.15 million) to $US115 million ($A125.68 million).
That would compare to its fiscal 2009 net operating profit of $US96.9 million.
The company also reiterated it expected to be able to make a contribution to the asbestos compensation fund, set up to cover its liabilities, in calendar 2010.
James Hardie shares closed up 47 cents, or 6.35 per cent, at $7.87 after trading as high as $8.20.
Chief executive Louis Gries said the company's business model had proven it could go through shock such as experienced in the US housing market well.
"The good news is we've gone through the downturn without losing any market share," Mr Gries told reporters on Monday.
"We've grown right through the downturn, although not at the same rate as we were growing prior to the downturn.
"The external environment is still relatively challenging, but we expect our businesses to perform very well."
Mr Gries said the US residential construction market remained volatile and it was "too early to ascertain the timing, rate or extent of any recovery."
James Hardie said US housing starts remained subdued.
"Despite this, there are some initial signs that the cycle appears to be nearing the bottom," the company said.
This included "recent improvements in the number of monthly housing starts, albeit from a low base, a small increase in the number of single family permits, and some improvements in the NAHB/Wells Fargo Housing Market Index builder confidence index, again from a very low base."
"Challenges to a recovery remain, including restricted access to credit for prospective home owners, the expiration of the first-time home buyers credit at the end of April 2010, the October 2009 decline in housing starts to a six-month seasonally-adjusted annualised low of 529,000, and prevailing employment market conditions.
"In Australia, while housing starts in 2009 are unlikely to exceed 2008 numbers, underlying momentum in the industry appears to be gathering pace.
For the second quarter of fiscal 2010, James Hardie recorded a $US19.6 million ($A21.42 million) net operating loss, compared with a $US153.5 million profit in the prior corresponding period.
With asbestos, ASIC expenses and tax adjustments removed, the net operating profit was up four per cent to $US37.6 million ($A41.09 million).
Mr Gries said the company had benefitted from lower input and freight costs, as well as improved plant performance and a higher average net sales price, compared with a year ago.
"In this low-demand environment, the business continues to perform well financially and has stayed on strategy with product leadership initiatives," Mr Gries said in a statement.
