UPDATE 1-James Hardie asbestos fund faces shortfall

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SYDNEY, April 23 (Reuters) - Building materials group James Hardie Industries NV (JHX.AX), hit hard by the U.S. housing slump, cannot afford to keep contributing to a fund for victims of asbestos poisoning, the firm said on Thursday.

Hardie was once Australia's largest asbestos maker and set up the fund for workers at its plants and others who were made ill by the material. The fund was once expected to be worth up to A$4.5 billion ($2.9 billion) over 40 years. But the Asbestos Injuries Compensation Fund (AICF), also backed by the government of Australia's New South Wales state, now faces a shortfall over the next two years, the firm said, adding that other funding options were being considered.

It gave no details on these options, other than to say the funds could switch to paying victims and their families by instalment rather than lump sum. It stressed that it would not be able to make any additional contributions in any case, beyond those it was obliged to make once it cash flows revived.

"The company considers that the potential shortfall in the AICF is regrettable, but contributions to the AICF have been affected by the decline in the company's cash flow as a result of, among other things, the unprecedented downturn in the US housing markets," James Hardie said in a statement.

(Reporting by Mark Bendeich; Editing by Cecile Lefort, Bruce Hextall)