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February 21, 2018

James Hardie profit surges, but asbestos claims still rising

Building materials firm James Hardie has more than doubled its profit and announced a special dividend.

The company’s statutory net profit rose to $US99.5 million for the year to March 31, up from $45.5 million in its previous financial year.

James Hardie says its underlying full-year profit was $US197.2 million when its significant asbestos compensation exposures, ASIC expenses, New Zealand product liability, asset write-downs and tax adjustments are excluded, up from $US140.8 million last year.

The firm’s chief executive Louis Gries says James Hardie’s US and European businesses contributed much to the profit surge.

“Net sales increased 22 per cent in the quarter and 19 per cent for the full year, reflecting stronger volumes, a higher average net sales price and the continued strengthening of the US housing construction market,” he noted in the report.

The company says US single family housing starts were 615,400 for the year to March 31, up 9 per cent on the prior year according to the US Census Bureau.

In the Australian market, the number of detached home approvals – which generate the most demand for the firm’s key fibre cement building products – was up 16 per cent to 104,394, but James Hardie says that has been partially offset by a fall in renovations.

Mr Gries says the construction turnaround is prompting significant investment to increase its manufacturing capacity.

“During financial year ’14, we confirmed our commitment to build the infrastructure to grow our business with the reopening of our Fontana, California location, the commencement of capacity expansion projects at our Cleburne, Texas and Plant City, Florida locations and the construction of a new manufacturing line at our Carole Park, Queensland location,” he said.

“To further capitalise on the projected growth in the US housing market, and our anticipated market share growth across all of our businesses, the company intends to increase its levels of capital expenditure to an average of approximately US$200 million per year over the next three years.”

In addition to the capital investment, James Hardie has announced a full-year special dividend of 20 US cents per share, in addition to its ordinary dividend of 32 US cents per share.

James Hardie securities were up 3.7 per cent to $14.19 by 12:20pm (AEST) on the Australian market as a result.

Asbestos exposures

James Hardie has reported $US195.8 million in adjustments for asbestos liabilities in its annual accounts, up from $US117.1 million last year.

The company says accounting firm KPMG’s current estimate of total asbestos liabilities for Australia, net of insurance claims, has risen to $1.547 billion this financial year from $1.345 billion last.

The main reason for the rise, according to the report, is a continued increase in claims by asbestos victims suffering mesothelioma, a rare form of cancer generally affecting the lungs and typically caused by asbestos exposure.

James Hardie says actuaries had previously assumed a peak in mesothelioma claims to have occurred in 2010-11, however the past two years of claims have been above expectations.

In the year to March 31, a total of 608 asbestos-related claims were received, a 12 per cent rise from 542 claims the previous year, and well above expectations of 540 claims.

James Hardie says 604 claims were settled in its 2014 financial year, with an average settlement of $253,000, resulting in a total payout of $140.4 million for the year.

Mesothelioma claims jumped almost 20 per cent in the year to March 31 2014, to 370, up from 309 the year before, 259 in 2011-12 and 268 in 2010-11.

KPMG had previously expected only 300 mesothelioma claims in its forecasts.

Mesothelioma claims are far more expensive for the company, with the average settlement sitting at $308,000, compared to around $100,000 for asbestosis or lung cancer.

There were also seven “large” mesothelioma claims over $1 million, worth a total of $11.6 million.

The company warns that, if claims do not start reducing until after 2018-19 the estimated claims total of more than $1.5 billion could rise a further 22 per cent on top of this financial year’s increase.

KPMG says it is too early to tell whether the higher number of claims will be sustained based on one year’s worth of increased claims.

However, James Hardie’s chief financial officer Matt Marsh says the impact on the company’s bottom line will be capped, and it is fulfilling all its requirements to the asbestos compensation fund.

“We’ll make a payment in July of $US113 million and that will be in compliance with our obligation under the [agreement] to contribute up to 35 per cent of our operating cash flow,” he told analysts on an investor briefing.

“The second part of that question is will that be enough to pay for the liabilities, and that’s a question that’s better asked of the AICF [Asbestos Injuries Compensation Fund].”

Credit:

James Hardie profit surges, but asbestos claims still rising

Former James Hardie boss thought asbestos health concern was 'a beat-up'

Former James Hardie boss thought asbestos health concern was ‘a beat-up’

National

Date

David MacFarlane, former managing director of James Hardie Industries, outside the hearing.

David MacFarlane, former managing director of James Hardie Industries, outside the hearing. Photo: Anthony Johnson A

The man credited with deciding in 1978 to eliminate asbestos from James Hardie products said he thought at the time that widespread health concern about its use in building materials was a “media beat-up”.

David MacFarlane was the managing director of James Hardie Industries between 1978 and 1989 and has never before given evidence about his role in the company, which manufactured and distributed building and other products containing asbestos.

He told the Dust Diseases Tribunal in Sydney on Tuesday that on taking the top job he received a brief from the Hardie board.

Stephen Wickham, who is suing James Hardie, with his wife Wendy outside the James Hardie ( Amaca Pty Ltd ) hearing.

Stephen Wickham, who is suing James Hardie, with his wife Wendy outside the hearing. Photo: Anthony Johnson

“My job was to get rid of asbestos … just to do it as quickly as possible,” he said.

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Former James Hardie boss thought asbestos health concern was 'a beat-up'

Asbestos claims rising but James Hardie doubles profit

Costly to settle: Asbestos-related claims are rising for James Hardie, particularly in relation to mesothelioma.

Costly to settle: Asbestos-related claims are rising for James Hardie, particularly in relation to mesothelioma. Photo: Sylvia Liber

James Hardie says it is seeing an increase in the number of asbestos claims relating to mesothelioma, the deadly cancer caused by prolonged exposure to the substance.

The construction firm, which revealed it had doubled its first-half profit on Thursday, said the number of asbestos claims relating to the cancer had risen above the company’s expectations.

In half-yearly statements released to the stock exchange on Thursday, Hardie said the average cost of asbestos claims for the six months to September was higher than the previous year due to an increase in mesothelioma claims, which were more costly to settle.

“We have seen some concerning trends in mesothelioma claims, which we have highlighted previously,” chief financial officer Russell Chenu said.

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“We’ve now got a better handle on the ‘what’ and the ‘how’, but what we still don’t understand is the ‘why’.

“There’s still a lot of work going on in that space, but there is a definite trend in an increase in mesothelioma claims that the fund is experiencing.”

James Hardie’s payments for asbestos claims are tied to its cashflow. It pays up to 35 per cent of its annual net operating cash flow to an asbestos fund.

The company said the number of mesothelioma claims could be higher than its predictions due to the way it calculates a peak year of claims.

It forecast mesothelioma claims to peak in 2010-11, but said that, had it forecast a peak to occur later – for example, in 2015-16 – the estimates could change significantly.

“Mesothelioma is the most expensive of the asbestos disease types in terms of compensation,” Mr Chenu said.

“The fund is seeing an increase in the inflow of claims, and almost all of the increase in claims appears to be mesothelioma disease, rather than the other types of disease.

“That’s increasing the amount of payments relative to both last year and relative to an actuarial assessment that was done at March 2013.”

Mr Chenu said he could not say more on the topic because it was a matter for the fund and “as far as I’m aware, we don’t fully understand the cause of the increase in claims as of yet”.

James Hardie shares soared 14 per cent on Thursday morning after the company revealed it had doubled its operating profit in the first half of the financial year.

The company, which reports in US dollars, said its operating profit for the six months to September 30 was $US108.3 million ($116.4 million), up from $US56.3 million a year earlier.

The profit figure excludes asbestos, regulatory and liability adjustments, it said. Without stripping these out, its profit was higher at $US194.1 million.

Chief executive Louis Gries said the second quarter had benefited from an increase in sales in its US business, which reflected an improvement in the housing market relative to last year.

“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.”

The company’s results benefited from the recent fall in the Australian dollar, which reduced its liability for asbestos claims in US dollar terms.

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Asbestos claims rising but James Hardie doubles profit

Asbestos illness leaves victim baffled

A man who has the deadly asbestos-related disease mesothelioma fears he may have contracted it when he was a student at a school in Wagin more than 30 years ago.

Diagnosed in July last year, Ballidu resident John McDonald, 49, is appealing for information from anyone who was a student or teacher at Wagin junior high school in the 1970s, when he believes the school used asbestos in an extension.

Slater and Gordon lawyer Tricia Wong said Mr McDonald was considering seeking compensation from building products manufacturer James Hardie and from the Education Department.

It was a race against time and he would need help from others who were at the same school to be able to mount a case for compensation.

She said there were public records that showed James Hardie building products were used in construction projects at the Wagin school in the 1970s.

Ms Wong said an added concern was that other students and teachers may also have been exposed at the school.

Mr McDonald, who spent more than 20 years working as a chef and nearly a decade as a farm worker, cannot recall any other asbestos exposure in his employment history.

“When someone tells you that you have months to live it’s quite hard to believe,” he said.

“I was quite numb when I was first confronted and then I found out there’s no cure. That was quite devastating.”

Ms Wong said lawyers were seeing more people with asbestos- related diseases who were initially unsure where they had been exposed to the deadly dust.

An Education Department spokeswoman said it settled a claim last year for a teacher generally exposed to asbestos in Wittenoom in the 1940s, but it did not have any other active claims.

She said there may have been historic claims relating to industrial disease before RiskCover was established in 1997 but no central record had been kept of those claims.

All asbestos roofs in WA public schools were replaced by 2001.

Excerpt from:  

Asbestos illness leaves victim baffled