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James Hardie cuts profit forecast for third time on demand woes, shares slump

By Jaskiran Singh

(Reuters) -James Hardie Industries cut its annual profit forecast for a third time on Tuesday, sending its shares down nearly 9%, as aggressive monetary policy tightening across the globe slows the housing market and dents demand for building materials.

Central banks around the world have jacked up interest rates rapidly since early 2022 to tame runaway inflation, squeezing consumer capacity to borrow and in turn impacting housing demand.

"It's a difficult period for companies tied to the real estate sector, with central banks continuing their aggressive tightening cycles," said Josh Gilbert, a market analyst at Israeli online brokerage firm eToro.

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"Not only are mortgage rates much higher than average, but inflation continues to eat into household budgets."

Dublin-based James Hardie now expects full-year adjusted net operating income between $600 million and $620 million, down from its earlier forecast of $650 million to $710 million. That compares with $620.7 million posted last year.

For the third quarter, adjusted net income fell to $129.2 million from $154.1 million a year earlier, missing Refinitiv estimate of $155.0 million.

Shares of the company slumped as much as 8.7% to A$28.975 in their biggest intraday drop since Nov. 8.

The stock, a star performer in 2021 on a housing market boom, has declined about 13% since mid-August, when the company first cut its fiscal 2023 earnings forecast blaming soaring operating costs and a cooling property market.

If inflation continues to cool down in the second half of this year and the U.S. Federal Reserve pivots to rate cuts, there is a possibility that it would boost consumer sentiment, affordability, and home builder confidence, Gilbert said.

"The bottom line here is that it's going to be a difficult few months for new CEO Aaron Erter to navigate, but there could be some positivity on the horizon in FY24," Gilbert added.

(Reporting by Jaskiran Singh and Sameer Manekar in Bengaluru; Editing by Shailesh Kuber and Subhranshu Sahu)