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James Hardie asbestos pledge ok, despite loss -

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James Hardie asbestos pledge ok, despite losses

Peter Ryan reported this story on Monday, November 23, 2009 12:26:00

ELEANOR HALL: The controversial building products company James Hardie says it does intend to put
more money into its asbestos compensation fund next year, despite reporting a significant loss
today.

James Hardie lost more than $100 million in the six months to September mostly due to the housing
slump in the United States. But company directors say they are cautiously optimistic about the
economic recovery in the US.

I'm joined in the studio now by our business editor Peter Ryan.

So Peter, firstly to the results. How hard did the housing downturn in the US hit the company's
profit?

PETER RYAN: Well, Eleanor, in Australian dollar terms, James Hardie lost $106.5 million dollars in
the first half and that compares to a profit of $169 million this time last year.

Now the company has been directly exposed to the worst housing slump since the Great Depression -
but also James Hardie has been hit by some very big legal costs from its loss in the directors
responsibility case brought on by ASIC earlier this year and of course the costs of maintaining its
asbestos compensation.

As a result, James Hardie won't be paying an interim dividend, but the company is more optimistic
given a $40 million profit in the most recent quarter. James Hardie also expects its full year
profit to be at the top of analysts' forecasts and that saw its shares surge 7.5 per cent this
morning.

Even so, James Hardie's chief executive Louis Gries says a recovery in the all-important US market
remains distant.

LOUIS GRIES: Right up until I'd say three weeks ago, people were getting more bullish in the
housing market. There has been a little doubt in the last two or three weeks. October starts were
down. I don't know if it is just a blip or it is an indication that the improvement trend is
unlikely to stay as good as most people thought it would so we just have to watch and see what
happens there.

You know, we haven't gotten any recovery even though we all think things are settling down, we
haven't seen that sign where things might start getting better. Even in a few markets, it hasn't
started yet.

ELEANOR HALL: That is the chief executive of James Hardie, Louis Gries speaking to analysts earlier
today.

So Peter, does this mean that James Hardie will continue to fund its asbestos compensation fund?
There's been a lot of uncertainty about this, hasn't there?

PETER RYAN: Well, that is right. They confirmed that they will be making the next payment and
remember James Hardie warned back in April that it might not be able to make contributions to the
fund because of the economic downturn and concerns about its long-term financial success.

Things have turned around significantly since that time and it does expect to make the
contributions in accordance with its funding agreement with the New South Wales Government.

During that period, the Federal and New South Wales Governments have provided $160 million each for
a stand-by loan to allow the fund to make up any of the funding shortfalls. But James Hardie's
chief financial officer, Russell Chenu says the company has a seat at the table but it's unlikely
to tap the loan facility.

RUSSELL CHENU: I think it's pretty unlikely that Hardie will be a signatory to the agreement
however because it impacts our results because we consolidate IACF and because it may have an
impact upon our existing facility arrangements, debt facility arrangements then we are involved in
the discussions. Beyond that, I don't think I can say anything much more at this stage because we
are still at a fairly early stage.

ELEANOR HALL: That is James Hardie's chief financial officer, Russell Chenu and Peter Ryan our
business editor with the details there.