UPDATE 1-James Hardie cuts earnings forecast, shares slide

Wed Nov 14, 2012 8:59pm EST

* Cuts FY earnings f'cast to $140-$150 mln vs $140-160 mln

* Q2 profit $34.8 mln vs analysts' estimate $38.4 mln

* Shares touch 3-month low before trimming losses

By Naomi Tajitsu

WELLINGTON, Nov 15 (Reuters) - Australian building materials group James Hardie Industries Ltd cut its full-year earnings forecast after posting a surprisingly weak quarterly profit, sending its shares to a near three-month low.

The 16 percent drop in second-quarter profit came as the world's largest maker of fibre cement products - which earns two-thirds of its revenue in the United States and Europe - was hurt by falling product prices and weak consumer confidence.

James Hardie said on Thursday that it now expects profit in a range of $140 million to $150 million for the financial year ending in March, lower than its previous projection of $140 million to $160 million. The company's chief executive, Louis Gries, said profit would likely come in at the middle of the new forecast range.

"We think we'll be looking more like flat, than right at the bottom of the range we gave you," Gries told reporters.

James Hardie said it saw the early stages of a slight recovery in the U.S. housing market, and Gries said the market would improve next year despite the possible impact of U.S. fiscal risks.

Still, the company said the extent and rate of improvement was uncertain given tight credit conditions, high unemployment and a low consumer confidence.

"Management cautions that housing market conditions remain uncertain and notes that some input costs remain volatile."

It added that the Australian market remained subdued and consumer confidence was sluggish, while the New Zealand market remained near cyclical lows despite some improvement. The Asia-Pacific region accounts for approximately one-third of the company's sales.

Shares of James Hardie fell as much as 6.5 percent to A$8.320, their lowest since late August, before trimming losses to trade around A$8.700.

"The initial impression was that the guidance was off ... the stock price had some rosy assumptions built into it," said Peter Esho, chief market analyst at CityIndex.

Second-quarter net profit - excluding tax adjustments and the impact of payments related to a compensation fund for asbestos victims - fell to $34.8 million from $41.2 million a year earlier. The company's earnings were reported in U.S. dollars.

The result was below the average forecast of $38.4 million in a Reuters poll of five analysts. Their estimates had ranged from $21 million to $48 million.

James Hardie announced an interim dividend of 5 cents per share for the first half, higher than 4 cents a year earlier.

A higher accounting provision related to liability claims offset the impact of higher sales volumes in the three months to September. That resulted in a 35 percent fall in profit for the first half, to $78.6 million.

Revenue from the United States and Europe fell 7 percent in the second quarter, for a 1 percent fall in the first six months, due to lower prices, along with higher manufacturing and organisational costs.

Cautious optimism about the U.S. market has been tempered by sluggishness in Australia's housing market, with the firm saying that consumer confidence remained low in Australia even as the Reserve Bank of Australia has been cutting interest rates.

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