Building products maker James Hardie Industries expects a higher operating profit in fiscal 2012 despite weak housing construction in Australia and the United States.
Chief executive Louis Gries said new housing and repair work remained low, particularly in its major market of the US.
“Unless things were to get worse, it is probably the last time we are going to use the word `difficult’ because I think the reality is this is just what our market is now,” he told analysts.
“Demand is fairly soft, but that’s what we’re living with quarter to quarter now, so we set our business up to optimise around that.”
Net profit dropped 99 per cent to $US1 million ($A953,562) in the three months to June 30, due mainly to unfavourable adjustments in its asbestos liabilities because of the higher Australian dollar.
Net operating profit, which excludes the effect of what James Hardie calls “legacy issues” – asbestos liabilities, court costs and tax adjustments – was $US39.4 million ($A37.57 million), down three per cent from the previous corresponding period.
The company expects a full-year net operating profit between $US126 million and $US140 million ($A120.15 million and $A133.5 million) – which would be higher than the previous year’s $US117.6 million ($A112.14 million).
Mr Gries said earnings had become much more predictable in recent months, and the seasonal downturn in the second half was not expected to be significant.
The forecast, plus the reiteration of a commitment to resume paying dividends this fiscal year, led to James Hardie shares gaining five cents, or 0.9 per cent, to $5.40.
The full-year guidance is highly conditional, as it assumes housing industry conditions remain stable.
It is based on an average Australian dollar exchange rate of 106 US cents to the year ending March 31, 2012.
Mr Gries said there was a risk conditions would worsen in the US.
“There is a possibility the demand we have seen so far could be knocked around a bit by further lack of confidence due to the financial markets,” he said.
“At this point we’re assuming that’s not going to be the case.
“But assuming that it is, we have already done contingency planning and we would be quick to react to that.”
The Australian economic environment had deteriorated, with new housing and repair and remodelling markets expected weaken in the current financial year, he added.
New housing in New Zealand remains at historically low levels.
