Bounce went the shares of building products group James Hardie Industries yesterday, jumping more than 22%, or over $1.20 to $7 on expectations that the slump in the US housing market had bottomed.
That was despite the company posting a first quarter loss for the current financial year.
The shares ended up $1.29 at $7.07 yesterday, the highest close since August 2007.
The net loss for the three months ended June 30 was $US77.9 million ($93.93 million) and compared to a profit of $1.4 million in the previous corresponding quarter.
The result includes asbestos liabilities, legal expenses and tax adjustments.
Excluding those impacts, it made a net operating profit of $US41.6 million ($50.16 million), up 4%.
"While the US residential construction market appears to be nearing the bottom it remains too early to ascertain the timing, rate or extent of any potential recovery," James chief executive Louis Gries said yesterday.
But the company hinted that its US operations had improved their first half profitability, despite the slump.
So when the group said it expects to report a fiscal 2010 net operating profit, excluding asbestos and other impacts, around the top of the current range of analyst forecasts, the market got encouraged and chased the shares higher.
"Management cautions that conditions remain uncertain and notes that the costs of some inputs, particularly pulp and energy, have recently increased," the company said in yesterday’s statement.
The range is for a profit between $US39 million and $US67 million ($47.03 million and $80.79 million) for the year ending March 30, 2010.
"Top line results continue to reflect weakness in housing construction activity in the US and general economic conditions, where sales declined compared to sales in the corresponding quarter of the previous year.
"According to the US National Association of Home Builders (NAHB), seasonally-adjusted US housing starts in June 2009 were at an annualised rate of 582,000, 46% below the June 2008 rate and down 74% from the January 2006 peak of 2.265 million annualised starts.
"Despite a decrease of 21% in net sales in the USA and Europe Fibre Cement business for the quarter compared to the corresponding quarter of the prior fiscal year, EBIT was 5% higher at US$68.8 million for the current quarter, as a result of lower average unit manufacturing costs, lower freight costs, decreased SG&A spending, improved plant performance and an increase in average net sales price."
"For the first quarter, Asia Pacific Fibre Cement net sales were down 26% and EBIT decreased 31% to US$10.9 million.
"The decreases were primarily due to unfavourable foreign exchange rate movements of the Asia Pacific Fibre Cement business’ currencies compared to the US dollar and lower gross margin performance partially offset by lower SG&A expenses."
