As expected James Hardie Industries will appeal a Federal Court decision that upheld a ruling that it owes the tax man $US318 million ($339 million).
James Hardie told the ASX yesterday that its subsidiary, RCI Pty Ltd, will appeal to the Full Federal Court of Australia after Federal Court Judge Margaret Stone upheld the Australian Tax Office’s (ATO) ruling that RCI owes the back taxes and interest.
The tax man claims RCI tried to avoid paying the taxes when moving ownership of its US subsidiaries offshore in 1998-99. Hardie denies the charge.
James Hardie said yesterday that regardless of the appeal to the Full Federal Court, the company was likely to be required to record a charge.
Had the charge been required at June 30, it would have been about $US330.4 million ($352.3 million).
The company said it would remain in compliance with debt covenants should the charge be taken.
Other than quarterly payments by RCI of interest on the unpaid balance of the amended assessment of $US168.8 million, no cash would need to be paid to the ATO until the matter was resolved.
James Hardie said it would update the market about the charge when it reports second quarter results on November 15.
The company said it wouldn’t comment further on the matter till then.
Justice Stone handed her decision down at the start of this month when the share price closed at $5.05.
James Hardie shares fell 9c to $5.55 yesterday, meaning they are up 10% since the start of the month, despite a downgrade to the company’s outlook issued last week.
Hardie last week downgraded its 2010-11 outlook in a presentation to investors.
"The recovery in the US remains weak and fragile.
"Hopes for an accelerated recovery have dissipated after expiry of the US government tax incentive at the end of April 2010, together with low consumer confidence and continuing competition from foreclosed properties, combined to inhibit activity in the residential housing sector.
"Other challenges – highlighted in previous quarters – remain, including: Higher raw material costs; Constrained credit conditions for prospective buyers and developers; Weak employment markets; Uncertainty in the overall economy.
"Additionally, a slowdown in key states such as Texas has further dampened the recovery."
