Building products group James Hardie has downgraded its profit guidance, suspended its dividends, and will close three plants around the world at the cost of more than 370 jobs as it increases its preparedness for the impact of the COVID-19 pandemic and lockdowns around the world.
As well capital expenditure has been slashed by two thirds for the coming 2020-21 financial year – a saving of around $US180 million. It has also introduced an immediate hiring freeze and a significant reduction of non-essential and controllable expenses.
The plants to be closed are at Cooroy in Queensland, Summerville in Alabama in the US, and Penrose in New Zealand. The closures mean the loss of about 375 jobs, the company told the ASX in a detailed update on Tuesday morning before the market opened.
The Queensland plant, on the Sunshine Coast, will close in the middle of the while the closure of the company’s New Zealand plant will mean the end of its manufacturing operations in New Zealand.
The fibre cement products made at Penrose in New Zealand will instead be made at two Australian plants, at Rosehill (in Sydney) and Carole Park (in southeastern Queensland).
“These decisions are always extremely difficult. Our leadership team took this action with considerable thoughtfulness, with the strategic objective of preserving and enhancing the global organisation’s competitiveness over the long term,” Hardie CEO Jack Truong said in the statement.
Hardie told the ASX that said it now expected a full-year adjusted net operating profit of $US350 million ($A546.1 million) to $US355 million ($A554 million), which is down from previous guidance of $US350 million to $US370 million.
The closure of the three manufacturing plants will result in impairment expenses in the company’s fourth-quarter results of about $US90 million for the final quarter of financial year 2020.
A fourth plant at Siglingen, Germany will be closed temporarily to allow supply and demand in Europe to rebalance.
Dividends have been suspended until further notice, as approved by the Board of Directors. This is to retain cash in the business.
Capex will be slashed to a range of US$80 – US$95 million in 2021, compared to a historic three-year, annual average of approximately $US240 million, Hardie said in the statement.
And Hardie says it will now make its annual contributions to Asbestos Injuries Compensation Fund (AICF) in quarterly instalments, versus one lump sum payment in July 2020, as allowed under the provisions of the Amended and Restated Final Funding Agreement (AFFA).
Hardie says that its financial position has improved “As of 30 April 2020, the Company’s liquidity position was US$578 million, an increase from US$510 million at 31 March 2020 and US$464 million at 31 December 2019,” the company said yesterday.
Hardie shares rose 4.8% to $21.82.
