UPDATE 2-James Hardie Q4 slumps, suspends dividends

* Q4 operating profit slumps, hit by U.S. housing

* Dividend suspended until economic conditions improve

* Outlook for housing activity remains depressed

* Shares fall as much as 3.4 pct, lag market (Adds CEO comment, updates share price)

WELLINGTON, May 20 (Reuters) - Building materials group James Hardie Industries NV (JHX.AX) believes the housing slump which caused a 57 percent dive in fourth-quarter operating profit is near the bottom, but any recovery will be tentative and slow.

The company, which makes 80 percent of its earnings in the United States, suspended its dividend in response to the sharp drop in sales, sending its shares down as much as 3.4 percent.

Despite falling revenues, the company was still managing to make reasonable margins and generate cash, indicating it was in a good position to ride out the recession, said Akshay Chopra, an analyst with fund manager Karara Capital.

"Where a lot of building material companies are losing money, at least Hardie is still making money, ex all the operational issues, so that's the key positive," Chopra said.

January-March net operating profit, excluding costs related to plant closure and compensation payments to victims of asbestos-related diseases, fell to $7.2 million from $16.6 million a year earlier.

For the 12 months ended March, net operating profit excluding asbestos-related expenses and plant closure costs fell 44 percent to $96.9 million.

The market for new U.S. houses is close to bottoming out, with a tentative recovery seen as possible later in 2009, the company said, citing building industry data. But he U.S. house refurbishment market, which now accounts for about half of sales, is expected to remain weak as the recession and lower house prices impact activity, James Hardie added.

"The market is not in good shape, its continuing to decline, but the business is running really well," Chief Executive Louis Gries told a media briefing, adding the outlook for the company's Asia-Pacific operations was also weak.

James Hardie did not provide a specific earnings outlook.

The company said it would not pay a final dividend to preserve capital and suspended future dividends until global economic conditions improved significantly.

James Hardie's shares last traded down 2.3 percent at A$4.29. The stock has fallen 5.6 percent so far this year, underperforming a 2.5 percent gain in the broader market .AXJO.

The company is focusing on cutting costs and increasing its market share to cope with the U.S. downturn. In November it said it would suspend production at two U.S. plants to cope with falling demand.