(Recasts, adds shares and analyst quote, updates CEO quote)
By Byron Kaye
SYDNEY Feb 3 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
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
"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)