February 3, 2017 / 1:04 AM / 6 months ago

UPDATE 1-Australia's James Hardie cuts full-year guidance again

3 Min Read

(Recasts, adds shares and analyst quote, updates CEO quote)

By Byron Kaye

SYDNEY, Feb 3 (Reuters) - Australia's James Hardie Industries Plc, the world No. 1 maker of fibre cement home panelling, cut its guidance as unexpectedly high production costs hit third-quarter profit, sending its shares down by the most in eight months.

Six months after lowering its full-year profit guidance, the company which makes 80 percent of its revenue selling wall sidings in the United States housing market, trimmed its guidance again on Friday, citing unforeseen plant expansion and manufacturing costs.

It now expects an annual net profit of $245 million to $255 million, compared with the pared-back $260 million to $290 million range it offered in August last year. The company posted a net profit of $244 million in fiscal 2016.

The downgrade suggests James Hardie faces new headwinds from the cost of the raw materials and energy it needs to make its products, adding to the ever-present uncertainty of future housing demand. The company said it was hit by pulp, gas, cement and electricity prices at its U.S. plants.

"The reality is it just got us more than we thought this quarter," said Chief Executive Officer Louis Gries on a call with analysts and investors.

Expanding and opening new factories to serve a market with 1.2 to 1.3 million new homes expected to built in the year to March 31 "is costing us more than anticipated," Gries added.

James Hardie's Sydney-listed shares fell nearly 4 percent in morning trading, their biggest percentage fall since April 2016, while the broader market was up 0.3 percent.

As Australia enters its first corporate reporting season since the 2016 U.S. presidential election, investors are keeping a close watch on companies with major U.S. interests in light of protectionist trade and tariff policies promised by new President Donald Trump.

James Hardie, which makes its products for North America in factories in eight U.S. states from Texas to Illinois, did not comment on Trump's policies on Friday.

For the three months to Dec. 31, the company said net profit fell 6 percent to $52.6 million, missing the average forecast of analysts polled by Reuters, which was for a quarterly profit of $61 million.

"This is clearly a disappointing result that is unlikely to be well received," said Royal Bank of Canada analyst Andrew Scott in a research note.

"We expect that the market will need to gain comfort that margin issues will not recur in FY18 and that the growth trajectory will resume from thereon."

Reporting by Byron Kaye and Tom Westbrook in Sydney, editing by Richard Pullin

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