Building products maker James Hardie fears Australia’s soft housing market will be a drag on the company’s earnings this year.
Chief executive Louis Gries says the residential market has contracted mainly due to a drop in consumer confidence, which has weakened despite the Reserve Bank’s interest rate cuts.
“Over the year we’re anticipating we will be down a bit in Australia on a much softer market,” he told reporters and analysts at the company’s full year results briefing on Monday.
“So we think we’re going to do well relative to market but we do think the (housing) market is going to be down enough to pull us down a bit.”
Mr Gries said while he expected an improvement in the US residential housing market, the recovery was moving at a slower pace than current investment market expectations.
This could be attributed to tight credit conditions, high levels of unemployment and uncertain house values, he said.
His comments came as James Hardie revealed it was back in the black with a net profit of $US604.3 million ($A613.16 million) for the year to March 31.
The result was a turnaround from the $US347 million ($A352.09 million) loss it posted in the previous corresponding period.
The latest result was boosted by a $US485.2 million ($A492.31 million) benefit from a High Court victory against the Australian Taxation Office (ATO) in March.
Net operating profit excluding legal-and-asbestos-related issues in the year to March was $US140.4 million ($A142.46 million), up 20 per cent from $US116.7 million ($A118.41 million) in the previous corresponding period.
Analysts had forecast a net profit of about $US138 million ($A140.02 million).
Meanwhile, James Hardie said its Asbestos Injuries Compensation Fund would be boosted to more than $200 million, mainly due to the legal win against ATO.
The company poured $US138.7 million ($A133.4 million) into the fund on April 2 after the legal win, taking the AICF’s funds to $A195.9 million.
It will make a further contribution of about $US45.4 million ($A46.30 million) on July 1, when it would normally pay part of its full year cash flow into the fund.
The fund paid out $99.1 million in claims in year to March 31.
Experts have revised down their estimates for the fund’s total future liabilities, $1.58 billion, down $30.6 million from its previous forecast.
Another recent High Court ruling that found former James Hardie directors misled investors about the fund will have cost implications for the company despite it not being a party in the proceedings.
However, Mr Gries said James Hardie was unable to assess the costs until the NSW Court of Appeal made its ruling on liability, penalty and disqualification.
Shares in James Hardie closed 10 cents lower at $6.95.