Building and construction products manufacturer James Hardie Ltd has announced an 11 per cent increase in quarterly profits as improved conditions in the United States and Europe offset a more subdued environment in the Asia Pacific and in Australia.
In a statement on Monday, the company said net operating profit, excluding asbestos claims, ASIC expenses and tax adjustments for the June quarter came in at $43.8 million – up 11 per cent compared with the previous corresponding quarter last year.
Company chief executive officer Louis Gries says the result reflected improved operational performance in Europe and the US, albeit with these results being constrained by a subdued Asia Pacific result.
“Our US and European segment delivered improved operating earnings, reflecting a step-up in sales volume in the US and Europe in the first quarter, largely due to improved market conditions in the US,” Gries says.
In these regions, a combination of higher sales volume, lower input costs (mainly pulp), and lower freight costs led to a five per cent increase in earnings in the company’s fibre cement business, albeit with these factors being offset by higher fixed manufacturing and organisational costs and a lower net sales price.
In the Asia Pacific Region, net sales fell in US dollar terms by seven per cent thanks to a higher Australian dollar and tough residential conditions in both Australia and New Zealand, though the New Zealand market has picked up in recent months. The company reported modest gains in The Philippines.
Going forward, the company says it expects operating profit excluding asbestos-related matters to come in at between $US140-160 million – lower than the forecast ranges of some analysts ($156-$177 million).
While the company is reasonably positive about prospects in the US and expects conditions in the Philippines to remain robust, it sees the Australia and New Zealand markets continuing to operate at subdued levels and pulp and freight costs remaining high compared to long-run historic averages.
The company’s report comes amid increasing signs of difficult conditions for manufacturers of building products in Australia.
The latest manufacturing data shows that production volumes of building and construction materials in Australia contracted again in July – the third such monthly decline on record.
Furthermore, the latest ABS quarterly figures show that while activity in cement manufacturing is holding up reasonably well, that in brick and tile manufacturing remains at subdued levels.
The latest results also comes amid gloomy near-term expectations for the Australian residential construction market.