February 4, 2019 / 10:13 PM / 5 months ago

UPDATE 2-Australia building materials firm James Hardie lifts outlook; shares climb

* Third-quarter profit $65.9 mln vs $72.9 mln a year earlier

* Forecasts U.S. housing growth, lifts guidance

* Shares jump more than 7 pct to two-month high (Recasts on outlook; Adds shares, background and analyst quote)

By Tom Westbrook

SYDNEY, Feb 5 (Reuters) - The world’s biggest fibre cement maker, James Hardie Industries PLC adjusted its annual profit forecast range a little higher on Tuesday, even as a U.S. housing slowdown knocked 10 percent off quarterly profit, sending its shares up sharply.

The company, which sells building materials such as decking and trim besides cement, said soft demand meant sales hardly grew in the three months to Dec. 31 while costs rose, squeezing margins and pushing operating profit down to $65.9 million.

The U.S. housing sector, its biggest market, has been stalled by higher mortgage rates in recent months, already prompting Hardie to slash its full-year outlook in November, when single family home completions hit an 18-month low.

But in a show of confidence in a recovery, the Australia-listed company lifted the bottom end of its range for annual operating profit slightly, raising it to $295 million from $280 million. It trimmed the upper limit to $315 million from $320 million, raising the midpoint by $5 million.

James Hardie shares rose as much as 7.6 percent to A$16.28 ($11.73), a two-month high, in a strong broader market that was up 2.4 percent.

“Expectations were relatively low, but the forward guidance was upgraded slightly and in that context that’s not so bad,” said Mathan Somasundaram, a market strategist at stockbroker Blue Ocean Equities in Sydney.

He added the company was better placed to manage production in a downturn than rival Boral Ltd, which hit a record profit last year after buying U.S. cement ingredient maker Headwaters but downgraded half-year profit expectations on Monday.

Both firms are heavily exposed to construction markets in Australia and the United States where long booms are showing signs of winding down, and their shares have come under pressure since 2018 peaks as both warned of slowdowns.

James Hardie said in a statement that it had won some major customers and gained market share in Australia, where building approvals hit a five-year low in December.

But in the United States, cement earnings, which make up 88 percent of total earnings, fell 15 percent to $86.1 million compared to the same quarter a year earlier as labour, freight and raw materials costs climbed and weak demand kept sales flat.

“Demand was soft across most geographies and customer segments,” James Hardie chief executive Jack Truong said of the U.S. business. “Our exteriors business continues to improve and grow slightly above our addressable market, but below our expectations,” he added.

Overall net sales climbed to $596.2 million for the quarter from $495.1 million a year earlier. ($1 = 1.3879 Australian dollars) (Reporting by Tom Westbrook in Sydney. Additional reporting by Rashmi Ashok in Bengaluru; Editing by James Dalgleish and Muralikumar Anantharaman)

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