A decision to cut earnings guidance after a weaker-than-expected December quarter has prompted James Hardie investors to sell shares of the building materials maker, which warned an"organisational reset" could take two or three years to complete.
The shares fell below $20 soon after the market opened and traded down 3.9 per cent at $20.03 by midmorning as the company, which makes most of its earnings in the US, signalled earnings pressures will continue through the year ahead.
In the December quarter, the group's net profit fell 6 per cent to $US52.6 million, forcing the company to warn that earnings for its financial year ending March would come in at between $US245 million and $US255 million "assuming, among other things, housing conditions in the United States continue to improve". That's below analyst profit forecasts of $US252 million to $US269 million for the year.
"We're posting some numbers we're not proud of," the chief executive Louis Gries said, with earnings squeezed by a series of operational issues, including an ongoing issue of higher than preferred staff turnover at some plants.
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"We're not having as good a year as we want to have," Mr Gries told analysts, "but we're investing for the future. We want to get extra capacity into the system to allow for growth.
"We're expecting a bounce back year next (financial) year in terms of an earnings perspective," Mr Gries said. "We'd be looking to get some runs on the board early next year."
The company outlined plans for a new plant in Tacoma, Washington state, where construction is now getting underway and which is expected to start up in fiscal 2019, costing $US121.5 million. It's planning another plant in either New England in the north-east or the mid-south of the US, where land will be bought in the year ahead, to begin operations in fiscal 2020.
These expansion plans are being pursued as it is bringing back onstream capacity at plants in both Florida and Texas, restarting an idled plant in South Carolina as well as capacity in Fontana.
The chief executive said the group would look at "basically three new sites" for its near-term expansion plans as it angles to benefit from rising housing starts coupled with ambitions to take market share from rival products.
Once the planned round of new plants are operational, the focus will shift to boosting capacity at existing plants, Mr Gries said, while also indicating a plant could be built at Colorado.
The poor earnings came against the backdrop of declining asbestos claims along with a fall in settlements due to fewer large claims nd lower settlement costs for most cases, it said. The number of claims received in the quarter fell to 143 from 159 a year earlier, with the average cost pre settlement running at $195,000 down from $275,000, which was also well below actuarial estimates.
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