Higher costs dent James Hardie’s profit

Higher production costs have contributed to a 34 per cent fall in quarterly profit for building products maker James Hardie.

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The company’s sales in the three months to June 30 were up six per cent from a year ago, but its net operating profit of $US57.4 million dropped from the prior year’s $US87.1 million.

James Hardie said its earnings margins were pressured by manufacturing inefficiencies and higher production costs.

It said it expects to make an operating profit of between $US240 million and $US280 million in its 2017/18 fiscal year, excluding asbestos payments, which is weaker than analysts’ forecasts of $US248 to $US297 million.

James Hardie shares dropped 5.8 per cent to $17.78.

Chief executive Louis Gries said almost all of the company’s input costs in north America, where the majority of its earnings are generated, were higher than a year ago.

Sales of the company’s fibre cement products in north America were up six per cent on the previous first quarter, as capacity constraints dampened demand, Mr Gries said.

Earnings in Australia rose 31 per cent, as stable market conditions and price increases lifted sales.

Mr Gries said the company’s earnings from its Asia Pacific operations rose 10 per cent due to the strong performance of its businesses in Australia and New Zealand.

James Hardie received 146 asbestos claims in the quarter, down five per cent on the same period a year ago, and the average claim settlement of $A228,000 was up two per cent on a year ago.

James Hardie also made a $A135.1 million payment to the Asbestos Injuries Compensation Fund, its annual contribution, at the start of July.

JAMES HARDIE HIT BY PRODUCTION COSTS

* First quarter net profit down 34pct to $US57.4 million

* Sales up 6pct to $US507.7m