James Hardie rides US recovery wave
James Hardie shares have soared to a record high after the company doubled its first-half profit amid long-awaited signs of improvements in the US housing market.
Investors added $690 million to the construction materials company, pushing its shares up 14.9 per cent. The surge puts the company's value at $5.3 billion, more than long-time rivals CSR and Boral combined.
Hardie, which is domiciled in Ireland and reports in US dollars, recorded an operating profit of $US108.3 million ($115.9 million) for the six months to September 30, up from $US56.3 million a year earlier.
This excludes asbestos, regulatory and liability adjustments, which would put its profit higher at $US194.1 million. It has upgraded its full-year earnings target to between $US180 million and $US195 million.
Hardie, which has been dogged for years over its past involvement in asbestos production, also revealed a rise in the number of claims relating to mesothelioma, the cancer caused by exposure to the substance.
Chief executive Louis Gries said the second quarter had benefited from an increase in sales in its US and European business due to improvements in the housing and construction sectors.
James Hardie dominates the US market for fibre cement. It also makes flooring and interior walls used in residential construction, with the health of the housing market a key driver of sales.
"Last year, we invested significantly in organisational capability in expectation of market growth in the US," he said.
"This year we are benefiting from that investment, as evidenced by improved earnings before interest and tax margins."
Hardie said it expected further improvements in the US and Australian housing markets and announced new plans for a $100 million expansion in the US.
The company declared a dividend of US8¢ a share, up from US5¢ a year earlier. This helped shares in the company jump $1.56 to close at $12 each.
Credit Suisse analyst Andrew Peros said investors were buoyed by the company's strong cash position and its investment plans in the US.
"This highlights management's confidence in the US housing outlook and underpins the longer-term growth strategy."
James Hardie said its results had also benefited from the recent fall in the Australian dollar, which reduced its liability for asbestos claims by $US90 million.